The following post is a guest post.
One of the excuses many use when it comes to investing is this: “I don’t have enough money.” It’s a poor excuse. Here’s why.
There are options for investing, even if you are on a budget. The key is understanding what’s available to you. There are two main strategies that can be used when investing on a budget: dollar cost averaging and penny stock investing.
Dollar Cost Averaging
The advent of online discount brokerages has made it easier to engage in the investing practice known as dollar cost averaging. With dollar cost averaging, you invest what you can invest in partial shares. Some companies will allow you to invest as little as $25 or $50 at a time. If you can only invest $50 a month, you arrange to add that to your investment account. If a share of a fund or individual stock costs $100, your $50 buys you half a share.
With dollar cost averaging, your regularly invested amount keeps your portfolio growing. When the share price drops, your $50 buys more. This is a way to build up the number of shares you have. Later, as the price rises, you have those shares at the higher price.
Investing in Penny Stocks
Another option is to invest in penny stocks. Many people think of penny stocks as those that trade for $1 or less, although some penny stocks may trade for as much as $5 or more. In most cases, penny stocks come from small companies that have small market capitalization. Often, the shares are considered speculative and might be somewhat illiquid. However, they are very inexpensive, and if you are investing on a budget, they can be attractive stock picks.
With the right strategy, you can buy several shares of penny stocks for a low price, and then sell them later at a higher price. Because of the volume you can purchase, even relatively small changes in price can result in pretty good profits. You should study penny stocks before investing, though, since as with all investing there is the risk of loss. You need to be prepared for the possibility of losing money.
There are other opportunities for investing on a budget, such as micro-lending and social lending. The idea is to find an opportunity that fits into your budget, and then invest with consistency. Soon, you are likely to see your portfolio’s value grow.