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Investing on a Shoestring Budget

penniesDo you ever run into situations where you find it’s the optimal time to start investing your money in the stock market, yet you are too afraid to part with the little savings you have been building up?  Many beginning investors face this same issue.  There are many conservative ways to begin investing in the stock market without causing you heartburn or anxiety due to the fear of loosing your hard earned savings.  Below are a few suggestions for those of you just starting out.

Mutual Fund Investing

Mutual Funds are great for beginners to start investing in the stock market with very little money.  The reason mutual funds are so beneficial to investors is because they help to diversify your money, and do not generally require large amounts of cash to purchase shares.

Mutual Funds are run by experienced financial managers that research, analyze and invest the mutual fund dollars into various securities including stocks and bonds.  When you purchase shares of a mutual fund, you are investing in all security holdings that mutual fund owns.  This automatically diversifies your investment dollars and reduces your overall risk.  Morningstar is a great website for researching, comparing, and searching for mutual funds that will meet your investment objectives.

Stock Management Sites

ShareBuilder is a stock management site that lets investors open an account and buy stocks in any dollar amount.  This way investors are not limited to stock share price, as exact amounts can be specified and invested.  This site also allows you to setup regular investment intervals such as weekly or monthly amounts you would like to invest if you desire.  You select which stocks, and they will automatically purchase the number of shares for you depending on what dollar amount you want to invest.  This is a great strategy for those new to investing as well as experienced investors looking for a simple way to purchase securities.

Share Laddering

Share laddering is when you purchase a small number of shares of a stock, and when the stock price appreciates, you sell enough shares to cover the profits, and purchase shares of another stock with that money.  For example, if you bought company XYZ at $10.00 a share, and purchased 10 shares, that would be $100.00 invested.  If XYP appreciates to $20.00 a share, you have doubled your money.  You would then sell 5 of your 10 shares (which equals your profit), and invest that $100.00 into a another stock.  This way you are using your profits to build equity into additional securities and also diversify your investment funds.

The above strategies are just a few simple methods which can be used by individual investors just starting out.   They are conservative strategies and help to diversify what funds you do have available for investing.


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