I’m sure most of you are wondering the best way to get started investing with a small amount of money. Well, I have some great tips for you!
It is possible to trade shares with a small budget as long as you use leverage and keep your margin under control. Furthermore, we should mention the compounding effect by making a small investment every month.
The traditional way of investing in stocks is to commit large sums of money upfront, but this method can be difficult for those who have limited funds. By using strategies such as leveraging or trading on margin, it’s possible to make investments with only a small initial outlay from your pocketbook.
Start Small, Grow Big
Saving money in order to invest is a great idea. Saving small amounts regularly will not take you long, and can be done in fewer little steps.
You can start with a broker that allows low minimum deposits. There are brokers that allow investing in Stocks or Stock CFDs from as little as $1. Although that starting THAT small is not recommended, it’s still doable.
Compounding interest is the process of earning interest on your initial investment plus any previous earnings. It’s a strategy that allows for small amounts to grow into large sums over time. When you make an initial investment, this money earns some kind of return whether it be from dividends or growth in price which then earns more and more as time goes by with compounding effects.
A common way people take advantage of compounding interests is through “dollar cost averaging” where they invest $x each month regardless if the share prices are high or low – so long as their portfolio has space available to buy shares. This reduces risk because even when the market falls, people will still be acquiring shares at lower prices than before. Once the share price increases, the returns are greater.
Use Leverage
Some investors may be more inclined to “leverage” their investments in order to magnify potential gains.
However, you need to consider the risks and your financial goals following such a choice.
As much as we’d like our risk-adverse clients to leverage investments on every trade, it does not meet all of their goals or tolerance for risk.
What is leverage?
Leverage is “borrowed” money that can be used to trade on margin.
Margin is an investment vehicle that magnifies returns, but the risk of loss is also higher than a cash position without leverage.
To learn more about leveraging your investments, check this article: What is Leverage and how it works.
Use Social Trading
Social trading is both the ability to observe an investor’s portfolio without actually having a share in it, or to follow their trades without doing any of the work.
Social Trading can help you make a small investment work for you by following the trades of other traders with larger accounts and allowing their results to compound on your account. It’s like putting money in a savings account but instead, it’s invested into an active portfolio that follows what someone else is doing.
Platforms and Brokers that Offer Social Trading:
Many online stock trading platforms offer social trading. This allows the trader to copy the trade of a successful trader for a small fee (also known as spreads) without having to take any risk or make an initial investment themselves.
Some of them are:
Etoro – is one of the most reputable social trading networks on the planet. You can start investing with as little as $100 and trade stocks, commodities and currencies.
- Trade shares (stocks) for just $0.90 per transaction
- Invest in cryptocurrencies such as Bitcoin or Ethereum to potentially make big gains
- Leverage up to 300:300 – meaning that if your account value is £5000 then you have up to £150000 worth of buying power; perfect for smaller investors who want to play at high stakes using minimal capital
ZuluTrade – one of the best ways to start investing with a small amount of money
- ZuluTrade offers the opportunity for traders to trade shares and ETFs in forex, commodities and indices.
- You can even use leverage on your trades which means you can increase your profits or limit losses if prices move against you.
- Furthermore, trading with ZuluTrade is commission free (you only pay when making withdrawals) so no matter how much time or money you have available it’s the perfect platform to begin investing with a small budget.
Other reputable Investment Brokers offering Social Trading:
- AvaTrade
- Pepperstone
- IC Markets
- XM Group
- Exness
- FXTM
- Etc
Summary
The most challenging part of investing is getting started. With limited capital, many people do not know where to turn for help or what steps to take in order to invest.
There are ways that you can start investing even with small capital.
As a starting point, you will need to choose a broker that is legitimate and offers you the tools that you need to succeed.