Investment Ideas for People with Little Money

You don’t have to have tons of money like Donald Trump to become investment savvy. You can be a normal, hard working American and still find ways to start saving and investing your money. You can start with that extra spare change you find in your pocket every day. You can even make some small sacrifices like skipping that coffee drink once in a while and you would have more spare change to add to your investment fund.

Here are a few simple ways that anyone can take advantage of and start building a better financial future for themselves.

1. Certificates of Deposits.

Most banks offer these. CD’s are a great way to earn some interest, without taking any risk. With a CD a bank will keep your money for a set term and add interest onto the principal. Generally, the longer you take out the CD (the term) the more interest you will acquire. Just remember if have to touch any of the principal of the CD, you will be penalize.

Most banks require that you have at least $500 to start a CD. But here’s a great tip. Check out internet banking at the ING site. The offer CD’s starting at a mere $1 dollar minimum. The link to there site is: ingdirect.com

2. US Savings Bonds

You may remember your grandfather talking about saving bonds. What is a savings bond? To put it simply you are loaning money to the government for five to thirty years. The government guarantees you’ll be paid back with interest at the end of the term. Bonds rates changes daily. The rate your bond will be set will be based on what it is on the day you buy the bond. You can start buying bonds at just a mere $25.00. Also a good note about bonds is that they are exempt from state and local taxes and you don’t have any Federal interest on them until they are cashed them.

You can learn more about bonds at: treasurydirect.gov

3. Mutual Funds

There is a potential risk involved with mutual funds. But you could get a bigger return out of them.

Mutual funds consist of various stocks, real estate investments, bonds or cash. Mutual funds are safer than plain stocks because the money is spread between many companies. This means if one company in the fund is doing poorly, you don’t automatically loose everything because the other companies may be having a great year.

Most mutual funds require a minimum investment of $2,500. But some companies (like T. Rowe Price) are now offering customers a chance to waive that minimum investment as long as they sign up for an automatic deposit of $50 into their account monthly.

To help avoid high administrative costs, you should always buy your mutual funds directly from the company instead of using a third party broker.

If your mutual fund is based of mostly or entirely of stocks, you should allow your fund to ride at least five years to give it a better chance to grow.

Individual Stocks

Buying shares of any company can be risky. Make sure you can handle the stress of watching the market go up and down, continually. You should also do plenty of research for every company before buying its stock.

If you want to learn more and maybe just begin dabbling in the stock market, here is a great way to start. Think about buying into dividend reinvestment plans (DRIP’s). For only $20 a month, you can buy a single share of stock that pays dividends. Your dividends are then automatically reinvested into more stock. Your holdings begin to grow. Many companies such as Yahoo and Avon offer DRIP’s. For more information on how to get started and how to buy them visit this site: directinvesting.com

Finally, don’t forget about investing in your retirement.

401K’s and IRA’s

401K’s are offered from many employers. A percentage is taken out of your salary. You can have as little as 1 percent taken out but most financial advisors suggest you have 10 percent taken out instead. Remember if you ever dip into this account before you retire, you will be penalized.

IRA’s is great for people who do not have any 401K’s. Most brokerage firms offers IRA’s but you usually need to invest from $200 to $2,000. If you don’t have that amount some firms (such as TIAA-CREF) are now not requiring an initial investment as long as you agree to have $50 automatically deposited into your IRA from your bank account each month.

By taking some of these simple steps now, you will have a much better financial future.

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