One of the first ideas that people have about the stock market is that to be able to invest their money, you have to have a lot of money. This goes in the continuity of the famous idea that one must be rich to become rich. This is totally false. You can invest small amounts on the stock market, for example 500$ or even less.
Moreover, the development of the Internet has, over the past few years, resulted in making the scholarship much more accessible to a much larger number of people. Nowadays, everybody can try their hand on stock market, whether you are a beginner or you already have some knowledge or experience in this field.
Trading websites and other online banks are also redoubling their imagination to continually tailor their offerings to a growing demand. But what is the point of investing small amounts in the financial markets? What are the advantages of investing only 500$ ? Here are 6 reasons to invest a small amount on the stock market.
Reason # 1: Learn
Investing a small sum is the ideal way for any beginner to grasp the world of the stock market. This is especially true if you want to invest in self-education, without the help of a financial expert, and you have little or no experience in this field. By investing a small amount, in other words, an amount you can afford to lose, you will be able to learn the different investment strategies specific to the stock market, learn how to apprehend this market and predict changes, test the techniques you will have Learn, learn from your mistakes etc.
Investing a small amount, whether it's 500$ or less, will simply allow you to "get your hands" before you possibly invest a larger sum to actually draw substantial profits.
Reason # 2: Manage Risk
Investing a small amount also limits your risk taking. In this article, I take the example of 500$, but this "small amount" will not be the same for everyone. Someone with a capital of 100,000$ will probably consider 5,000$ as a small amount. By small amount, I mean mostly small part of your capital. Whatever the "small amount" you decide to invest on the stock market, the fact that it is low will allow you to limit the risk of loss of capital.
The stock exchange contains many types of assets, such as equities, UCITS, indices, commodities, etc. Not everyone has the same level of risk, but they are all risky in general. The stock market is known to all as a volatile market, where only financial experts can forecast changes. This is partially true. Everyone can be interested, provided they learn and acquire the necessary knowledge. But even the best brokers can sometimes be mistaken; The error is human, and the financial markets always contain a small part of unpredictable.
Thus, the reasoning is simple, the lower the amount invested, the more risk-taking will be. The golden rule on the stock exchange is to invest only money that one can afford to lose, that is to say an amount which, in case of loss, will not put you in financial difficulty .
Reason # 3: Multiply Opportunities
This may seem paradoxical, but small amounts provide access to a greater number of opportunities in the various markets linked to the stock market. If a small amount like 500 $ will not give you access to some shares whose title at a much higher cost, it will open you up other opportunities. For example, you can access securities with a value greater than your investment amount via a savings subscription, which will give you access to assets. With a small amount of investment, you can invest in the Forex market, where you can buy and resell currency pairs, but also commodities and stock market indices.
Recently, some Forex trading websites even offer the opportunity to buy certain stocks such as Google shares, Coca Cola, Apple etc. While many banks or brokers require a minimum investment amount to access the stock market, with small amounts and thanks to the internet, you will have other investment opportunities.
Reason # 4: Earn money by saving your savings
Choosing to invest a small amount can also allow you to do so without having to start your savings. Depending on your means, and perhaps tightening your belt a month or two, you can unblock immediately a small amount like 100, 200$ or 500$. So you can make this money grow by always having your savings available when needed, and without losing that savings if things go worse than expected. On the other hand, you can, for example, add your capital gains to your existing savings, and then receive additional interest at the end of the year, for example! Investing a small amount therefore makes it possible to diversify its investment portfolio, thus multiplying the possibilities of management and profitability while limiting the risks.
Reason # 5: Build Up Your Savings
As I said above, the first small starting amount is relatively simple to unlock, knowing that you will also determine it according to your possibilities. If you do not yet have savings, or want to build up a precautionary savings, life insurance or other, investing a small amount on the stock exchange is a quick and effective way to build up A savings, which you can then eventually place on conventional banking products, or invest.
Reason # 6: Win more with less
The Stock market has the advantage of making more money by investing less money. By investing a small amount on the stock market, you will be able to earn more money by placing, for example, twice that amount on any savings account.
This is all the more true as interest rates on passbooks, but also on other savings products, have been falling for several years. The booklet A rate, which gives the "la" on the trend of other savings products, has recently dropped to only 0.75%! Needless to say, it is high time to turn to other solutions to make its money grow.
The only disadvantage of the stock market is its share of risk. Apart from that, investing in the stock market has only advantages. This allows us to build up capital more quickly, that we can then save, invest, or why not simply spend. However, this share of risk is not to be neglected, and investing a small amount, at least initially, also has advantages. Overall, this will allow you to progress gradually, learn the strategies but also the pitfalls to avoid, free to you then increase the amount invested in order to earn even more money.