Investing in the Stock Market on a Shoestring

Edna B. Shearer

Investing in the share market has never been as easy as it is today thanks to share market platforms where mum and dad investors can invest as little as $10 at a time. Compare that to investing through a share broker where fees make this uneconomic unless you are able to invest a few thousand dollars at a time. Problem with this is that unless one had tens of thousands of dollars to invest then diversification where money is invested in a variety of companies is out of the question.

The solution to this is mutual funds, often called managed funds where your money is pooled with those of other investors. The fund manager invests on your behalf. The advantage of this for the ordinary man and woman is that the fund manager who has experience in the financial markets is working on your behalf for a minimal fee.

Your money is invested in a variety of companies and industries in order to minimize risk. Wealth, and Invest Now

Sharesies is a popular trading platform in New Zealand but is certainly not the only one; Hatch, Kernel, and Invest Now are others. In the US, Robin Hood is a popular trading platform.

There are so many benefits of getting involved in the share market in this way with the main one being that it improves the financial literacy of participants. It is all very well just reading books of a financial nature but knowledge comes from action otherwise what you may have learned on paper is just information.

There are several strategies you can use to drip feed money into the markets using online platforms.

I will tell you what I do. I focus on one particular company per year and invest money in this same company regularly, usually every two weeks. That way I will purchase shares at the lower price when the shares are down. If an investor just simply bought shares in one company with just one lump sum then there is the possibility that the share price was high which means it will have to rise further to maintain the value of the investment when inflation and fees are taken into account.

The share I have been buying this year is Spark, a New Zealand phone company. Last year it was Genesis Energy. I have not yet decided which company I will go to next year.

If you are prepared to invest more money you can choose more than one company. So long as you invest regularly you will take advantage of the low points in the market.

If you so wish you can just invest in managed funds. Sharesies has a range of options for this with varying degrees of risk. The golden rule is the higher the return the higher the risk. An astute investor will take this into account when deciding what to invest in.

The basic rules of investing still need to be adhered to such as not placing all of your eggs in the one basket and investing according to your goals. If you require the money in the short-term then investing in growth stocks which are high return but with higher risk is not a suitable investment because chances are that the stock price will be down at the time when you need the money.

Micro investing is an excellent way to get involved in the share market. It helps to build your financial know-how, not to mention your wealth. It can be part of your wealth building strategy so what are you waiting for?

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