Stocks for Beginners will seek to answer some questions on how to get started in Investing with Little Money.
With Banks paying little to no interest on deposits at the moment, you may find yourself looking to make some extra money from all your hard-earned savings. You may have heard of investing, but have little experience with the matter or are worried that you need lots of money to get started. We try to squash some common myths to answer the question, How to Invest in Stocks for Beginners with Little Money?
What is investing?
Investing capital is simply the practice of forgoing short-term benefits namely liquidity or cash flow in the hope of achieving better financial gains, usually by taking on risk or losing liquidity or both.
Investing is short-term pain for long term gain. Such as buying a quality share or investment property and holding for a long period.
Invest In Stocks VS Trading?
Trading is a more short-term activity. It shares the same principle of investing is “buy low sell high” but does so on a more aggressive short-term basis. It is usually considered a riskier practice.
Trading involves constantly jumping in and out of positions trying to make money. It involved little if any consideration for the actual underlying company. Since the trade durations are short it mostly involves trading on momentum or investor sediment rather than actual company developments. Due to this, there is increased risk and it is very easy to lose money.
It is highly publicised that the majority of traders fail. With an estimated 96 per cent losing money. This is why our focus is on investing for the long run.
So how much to Invest with Little Money?
Micro-Investing platforms such RAIZ and Commsec Pocket have very low fees which makes any amount of cash a feasible place to start. Brokers charge a fee usually in the range of $10-20 for trades up to $5000. This means the smaller the amount you invest the more that investment must increase before breaking even. So, it’s very much about taking this into consideration and finding a trade-off that suits your needs and situation.
What is a Broker? CHESS Vs Non-Chess
Purchasing your shares through a CHESS Sponsored broker means YOU own the shares. There is a lot of confusion on the internet about CHESS-sponsored brokers with many trading platforms pretending to be CHESS sponsored. In our opinion, CHESS sponsored brokers are the best option for beginners. You can find our full list of CHESS sponsored brokers HERE.
Our Favourite Broker, Stocks for Beginners
MicroInvesting for Investing with Little Money Down
RAIZ Invest is the leading micro-investing platform in Australia. You can deposit small amounts of money and even nominate to round up any purchases you make on your card to invest into RAIZ.
RAIZ can help you get started with investing for very low amounts, you can turn on round up to say for instance round up your $4.6 morning coffee up to $5, meaning that the extra 40c that was rounded up will be invested into your RAIZ account for future you.
RAIZ has an effective model with low charges and no brokerage (no charge when you buy and sell).
Your investment is easily available and RAIZ does a lot of the admin for you. It is very easy to set up using our code for an extra boost to your account: JK89KR.
Once you deposit money you can choose a range of investment portfolios such as conservative, moderate and aggressive. Then it’s as easy as a set and forgets, add in deposits when you have the money or add auto-top ups and watch your money grow.
Behind the scenes RAIZ invests your cash following their investment strategies, they mainly invest in quality index funds, property, cash and different allocations across asset classes. For example, an aggressive account will have more exposure to equities than a conservative so the risk may be increased but the potential returns also increased.
nvestors should weigh up each option for their needs and risk appetite. We personally prefer a more aggressive model which still offers diversification but also exposure to higher returning equities.
Pearler is one of our favourite new brokers. They have released a decent investment platform with excellent intentions. They are CHESS Sponsored and Low-cost. Pearler has a good selection of brokerage free ETF products which will help you get started.
Sign Up Using Our Link HERE
How does it work?
- Create your Pearler account
- Choose, where you want to invest. You can pick any AU (and soon US!) stocks and ETFs
- Worry less, and automate your investments
- Set a goal and track your progress towards your financial independence.
Pearler Offers: Autodeposit, Autoinvest, Goal tracking, Shareable portfolios
|Brokerage Fee||$9.50 Flat-fee!|
|Brokerage Fee||Select Free ETFs|
SelfWealth has an extremely good product for what is one of the lowest fees in the brokerage market. SelfWealth is safe, holding funds under an individual’s HIN number and CHESS Sponsored. SelfWealth has a good community and benchmarking of an individual’s portfolio against other users.
SelfWealth provides one of Australia’s best low-cost online brokerage platforms. The flat-fee brokerage is a massive cost saver over the life of anybody’s share trading or investing career. This fee is nearly half the price of most traditional bank platforms. Over the investing timeframe, this saving in brokerage can amount to 1000’s of dollars saved.
The platform is slightly let down by the fact that they have limited charting or historical fundamental data. This product is likely not suitable for high volume day trading and is targeted more at the buy and hold investor.
|Brokerage Fee||$9.50 Flat-fee|
|Research Available||Sort Of|
|International Trading||Select US Only|
Why to invest in Stocks?
There are a lot of classes and subclasses and abbreviations and schemes you can invest in. Prophet keeps it simple. We consider three main groups: Equity, Cash, and Other.
Equity has a large group of components but simply put, involves investing in companies in exchange for ‘equity’. Cash is any money market account, these are generally low risk, high liquidity, but low returns- think a savings account or term deposit. Other is any other investment classes (property, bonds, etc.).
You can see that Australian Shares have typically performed better than holding property, cash and the Consumer Price Index (i.e outperforming inflation)
Here at Prophet, our focus is equities. This graph shows why:
Risk with Stocks:
Equities have a lot of different mechanisms of risk. You can lose your capital, or it may not perform as well as you were hoping. Ordinary shares are usually limited liability, this means if the company goes bankrupt, they can’t come after your personal assets and cash.
With some products you can lose further money than you originally invested, such as short selling a stock (selling a stock you don’t own) in this case the theoretical loss can be infinite as the price can continuously rise. Investors should read and understand all PDS of investments. Investors should understand what it is they are investing in and the implication of the product.
One general rule is not to invest more than you are willing to lose.
Overview Stocks for Beginners with Little Money
In Summary, there are lots of excellent options out there to help you get started in investing with little money. These include micro-investing app’s such as RAIZ Invest and other low cost brokerage options such as Pearler and SelfWealth.
We like CHESS Sponsored Brokerages, purely because the assets are held in your own name. As compared to being held in a nominee account which some brokers also like to do.
With interest rates at record low’s you can see why more and more people are looking to get started in the world of investing.
Please Remember all Articles Published on Prophet Invest are Opinion only
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