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Tips on Investing Small Amounts of Money
There are many different suggestions about how you
should invest your money. Most of the advice that is given is based on
professional experience and opinion. If you are new to investing, and if
you have only a small amount of money to invest then you need to select
an investment strategy that will maximize the value of your small
investment capital and that will also minimize your risk.
Diversify Your Portfolio
One of the most commonly given piece of advice about
investing is to diversify your portfolio. Diversification helps to
reduce the risks of losing all of your money if a single industry takes
a turn for the worse, or if a single company takes a turn for the worse.
The easiest way to diversify your portfolio when investing in small
amounts is to buy mutual funds. Mutual funds come pre-diversified.
Know Your Investment Style
Knowing your investment style is another important
factor that you will want to take into consideration when investing your
small investment capital. If you want to play it safe then you may want
to consider investing in bonds. On the other hand, if you want to take
more risks with your investment capital then you may want to try
investing in penny stocks.
Find Affordable Investment Methods
In addition to taking into consideration the type of
investment that you should make, small time investors also need to find
an affordable method of investing. Most brokers and online investment
services require minimum orders and charge commissions or per trade fees
that exceed $15 per trade. These fees can really cut into your
investment capital, especially when you may only have $100 to work with
at any one time. If you will be investing in small amounts then you will
want to use an online investment service like Sharebuilder that doesn’t
require a minimum account balance, and that also charges a reasonable
per trade fee.