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| Can you invest in the stock market if you have little to no money? |
So you want to play in the stock market but you don't have Warren Buffett's retirement fund to work with. Brother, I feel your pain. And let me tell you, there isn't much available in the way of a solution for us yet. But I have scraped together a few ideas that I want to share here. We can be investors without having to be rich and super wealthy.
First, let's talk about what a portfolio is. It's the full list of your investments. To have a portfolio you have to have a list. Now I am sure you're thinking, "Yeah, I can write up a list" but I think you need to do more. I have a little folder I keep where I put in a sheet of paper for each investment I make. It summarizes what I am investing in, how much money I have put into the deal, and what I expect to make back on it. I even put a little goal statement on each sheet.
I have three investments in my portfolio right now. And don't laugh but they are all $25 stakes. I figure I should practice doing this first before I get serious. And keeping to that kind of discipline should help me as I scale up my investments.
Now, let's talk about what you can actually invest in. Let's start with the simplest investment first: a savings account. Don't walk away in disgust. Let me explain why that is important.
You need a safe place to keep your uninvested money. A savings account earns a tiny bit of interest and so it won't lose value as fast as just keeping that money in your wallet. This is the liquid part of your investment portfolio. When my wife and I decided we would start making some investments we set aside $200 in a savings account. We will only use that money to buy investments. If there is no money in the savings account we won't invest anything.
We have also committed to putting $25 per month into the account. That way we are constantly making contributions to our portfolio. Our bank help us set up the savings account with an automatic deposit. The $25 goes in there every month.
So now I have a portfolio list and a savings account to work with. What am I going to invest that money in? I did some research and found that there are several things you can do without mush hassle.
Investment Option 1: Buy savings bonds. Don't groan. It's an obvious choice and you don't have to put a lot of money into them. But think about it. The super millionaire guys buy bonds all the time. They must think there is value in bonds. I know they are buying $10,000 Treasury Bills but with only $200 to work with I decided that savings bonds are a good start.
Investment Option 2: Personal Loans to Friends and Family. Did you know you can lend money to people you know? I'm not going to get rich doing that but if I have a friend who needs to borrow $100 and he'll pay me back $105 in two weeks, why not make the loan? It's cheaper than a payday loan for him and I'll make a little bit of interest on a quick turnaround. You're supposed to claim that as income on your taxes, so don't turn into a loan shark overnight.
Investment Option 3: Buy stocks directly. I got this idea from an article I read in Forbes. There are big companies that sell stock directly to the public. It costs you nothing and with many of these plans you can spend as little as $25 a month. I realize that if I am only contributing $25 a month to my portfolio I won't be able to buy a lot of shares in many companies, but I can make 1-time purchases with some plans. We're doing some research into this.
Investment Option 4: Micro investments. I have occasionally heard about these kinds of investments. They are also called microloans. The idea is to lend a little bit of money to a small business somewhere and over time they pay you back. Your $25 investment is just part of a larger pool of cash that is loaned to the small business. But there is a problem with microfinancing that is starting to come to light.
The extremely poor people who get these micro finance loans are being driven deeper into poverty by the high interest rates. The idea behind micro finance is that you lend enough money to someone to help them start a small business, usually a home-based business. But the loans charge such high interest that the borrowers become trapped in debt.
Many of these people live in countries that do not have proper bankruptcy laws. And the banks pursue them aggressively for payment on the loans. I don't want to make investments like that, so I am researching the micro financing opportunities to find lenders who understand that high interest plus aggressive collection only makes people's lives miserable.
I want the loan payments to be affordable. But I also want the lending organizations to help these people find customers and learn how to manage cash flow. Maybe that is asking too much.
There is some good news on that front. As the micro finance markets grow, governments around the world are starting to regulate them more. This should be good for everyone because as an investor you want the people you invest in to succeed.
Investment Option 5: Product flipping. We're not convinced this is a good idea for us. The way it works is that you find an outlet mall with a big season-end sale. You go in and buy as much low-price merchandise as you can (like designer purses). This stuff is sold for 75-90% off the original retail price.
Then you wait a few weeks to a few months and you sell that merchandise on eBay for twice what you paid for it. It still looks like a great deal to the people who buy it and the profit should cover your costs.
But with only $200 in our savings account we would be able to buy one high end purse and we don't want to tie up our money like that. We're going to wait until we have more money to work with.
So those are my easy investment ideas. I hope you find them helpful.
