When people think of attaining wealth, a sum as small as $25 doesn't sound like a good place to start. On the contrary, $25 is a great amount to begin your quest for wealth. You just have to know where to start. The path that is open to everyone to accumulate wealth is to build an investment portfolio of stocks or mutual funds over time. The average person views investing as a risky proportion and something to be avoided. The fear of losing all your money is what keeps the average person from investing in stocks. However, you shouldn't look at investing as risking your money, rather as an investment in your future financial stability. The returns in the stock market over the last few years have outpaced all other investments. Investors make money with an investment in the following ways:
1) A company produces a profit and shares those profits with you in the form of a dividend
2) The price of the stock rises.
Saving money in the bank doesn't lead to wealth. Sure, saving money in a bank account is very safe and has no chance of your money being lost. But, investing has the potential for your money to grow into wealth.
Investing your Money
Financial advisors will often tell you that $2,000 or more is needed to invest in individual stocks or mutual funds. They will also tell you that your money is being put at risk with these investments. Both are only partially true. The truth is, investing in stocks or mutual funds doesn't carry the same protection of your money as bank accounts. If your bank goes out of business, your money is insured against loss, up to $250,000. If the individual company goes out of business or even files for bankruptcy, there is a possibility you can lose all your money. However, there are ways to protect against the loss of your money. One of the best investments to make historically, with minimal risk to your money and constant long-term growth over the last 40 years, is a low fee S&P 500 index mutual fund. This fund tracks the top 500 U.S. companies that are both profitable and managed well. Unfortunately, outside of your 401k, this fund requires a $500 to $3,000 investment by most mutual fund companies and discount brokers that offer this fund. They don't make it easy to invest in mutual funds. So, what are you to do if you only have $25 to invest? There are some great places to start to build wealth.
Charles Schwab is one the oldest and best rated discount stockbrokers. They have excellent customer service, low fees and good research tools that are easy to understand. (Full disclosure: I have been a Schwab client for over 24 years). To open a brokerage account there are 3 options: 1) deposit yes, $1,000 or 2) you can agree to deposit $100 a month for 10 months, that breaks down to $25 a week for 40 weeks or 3) open a Schwab Checking account and link it to your new brokerage account. There is no monthly fee and there are 4 low fee index funds that allow new investment for $1 and $1 for additional investments. There are many mutual funds to choose from, however the following funds are the easiest to invest in with a small amount of starting funds. The S&P 500 Index Fund, which invests in the top 500 largest and profitable U.S. companies with an average return of 8% over the last 30 years, this one the safest investments available. Small Cap Index Fund, this fund invests in profitable smaller companies in the Russell 3000, Total Market Index Fund, invest in a weighted average of all the companies available in the U.S. and Schwab 1000 Index Fund. All these funds are managed by Schwab, which keeps the costs low. The cost to invest in individual stocks is just $4.95 per trade. Your $25 deposits will allow your balance to increase for future investments in strong dividend paying stocks with the dividends reinvested into more shares, your wealth will grow.
Robinhood is an app that allows you to invest in only individual stocks for $0 fees and no minimum initial investment, as long as you buy the stocks using the app. You simply link the app with a bank account and start depositing $25 a month until your balance allows you to invest in dividend stocks, such as Wal-Mart, AT&T or Intel. The quarterly dividends are deposited into the account.
Stockpile is an online discount broker that allows investors to buy stocks using dollar amounts instead of whole shares, for a $.99 fee. These trades are made everyday. The account has no monthly fee or minimum investment.
For example: If you invest $25 minus the $.99 fee into Intel Inc. trading at $37 a share, you will have .64891 ($24.01/$37) shares of Intel deposited into your account.
This method will allow you to accumulate shares of stock without having large sums of money up front.
Building a stock and mutual fund portfolio one dollar at a time is a proven way to accumulate wealth over time.
Your money is at risk, but not great risk. With carefully made investment decisions with proven companies and mutual index funds you will grow your money over time. Remember, keep fees low and investing is about future wealth.