Don’t think you can invest with just $50?
With just $50, you may be asking how you can invest in the stock market. Even with today’s prices, $50 only gets you two shares of Microsoft, hardly anything to show for your money after commissions and fees.
Mutual funds are a convenient way to pool your money to buy a variety of stocks that may be too expensive to purchase on your own. By combining many people’s $50, together all of you can buy many different stocks and put together a complete portfolio. This allows you to achieve the all important diversification, all your eggs aren’t in one basket, and you can keep costs low. Many mutual funds however require minimum investments of at least $500 to $3,000. However, some big companies like T. Rowe Price will let you invest for only $50 in any of their funds if you contribute regularly each month. There are at least two benefits to this. First, if you want to take advantage of this crisis and invest in the market but don’t have a lot of money, saving and contributing $50 a month is probably the easiest way to participate. Second, investing in regular intervals is good because it helps smooth out the volatility of the market on your portfolio. This method is called dollar-cost averaging. By buying into the market in regular intervals, you average the price you’ve paid for your stocks, allowing you to take advantage if the market drops in price.
Even with convenient products like this that allow you to invest for just $50, always remember to do your research before you pick which funds to invest in. Morningstar.com is a good place to start and will cover some of the basics: the risk profile of the fund, historical performance, and stewardship and management of the fund. If you want to know other ratios and factors you should look at, you can read my blog or my book: www.YoungInvestorsGuide.com or The Young Investor’s Guide to Retiring Young.
~ Monte Malhotra, Student Investment Expert, Campus Calm