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If you think you need lots of money to invest, think again. Investment apps, which typically offer commission-free trades and have little or no minimum investment, have ushered in a new era that makes investing small amounts of cash viable.
The Penny Hoarder recently surveyed nearly 2,000 people in the US who regularly use investment apps and found that most users are investing relatively small amounts. Nearly 70% have bought stocks for $5 or less. People ages 35-44 were the most likely age group to buy cheap stocks, with nearly 75% reporting they had bought stocks for $5 or less.
How Can You Invest With Just $5?
Investors who want to invest a small amount of money have more options than ever. If you’re seeking to invest a few bucks using an app, you could:
Buy Penny Stocks
Traditionally, a stock that traded for less than $5 was known as a penny stock.Many trade for $1 or less.
Penny stocks look appealing because they trade at rock-bottom prices, but they’re incredibly risky. The companies behind them are often unproven or financially troubled. While investors are often drawn by the potential to make big gains off a small investment, you’ re a lot more likely to lose all your money when you invest in penny stocks.
Buy Fractional Shares
In the past couple of years, fractional shares have become a game-changer for people without much money to invest. Fractional shares let you invest small amounts in virtually any stock you want. As the name implies, you get a corresponding fraction of a share.
For example, let’s say you want to invest in Amazon. As of this writing, Amazon shares were trading for just above $3,000. So if one share of Amazon costs $3,000 but you only have $5 to invest, you can invest just $5. You’ d get 1/600th of a share.
Compared to penny stocks, fractional shares are a much safer option for investors who want to choose their own stocks and exchange-traded funds (ETFs).
Use a Micro-Investing App
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