How to Invest in Low Cost Stocks with Little Money
This article is about how to cheaply and easily invest in low priced stocks and where to buy them from cheaply.
Things You’ll Need
- A little cash
3 Steps to Invest in Low Cost Stocks with Little Money
1. The first thing you will need to do is open a discount brokerage stock account with sharebuilder.com.
The application is very simple and similar to applying for a checking account. It takes 5-10 minutes and almost everyone is approved, there is no minimum dollar amount to open your account last I checked. There are no recurring fees as well.
2. After getting approved for your sharebuiler account you are going to want to link your checking account to your sharebuilder account.
A very simple process explained on sharebuilder. Then you are ready to pick you brokerage investing plan, they have three to pick from. The plan I am suggesting for my system to work in the Advantage plan which costs $20/month and can be cancelled anytime you want without being charged for a new month of $20.
The plan works as follows you get 20 free stock purchases to invest(so your $20 in the advantage plan works out to $1/stock buy) any stock buys after 20 that month will cost an additional $1/stock buy. So your paying $1/stock buy. Example: you invest $10 in ATT(stock ticker- T).
If ATT is selling at $20/share you will buy .500 of a share or half of 1 share. Sharebuilder lets you buy partial shares unlike most discount stock brokers. So you can create a order of 20 stocks or just 1 stock in the same amount of money.
3. Now that you have the right investment plan from sharebuilder in place all you need to do is put in a stock order and your done.
I find my stocks in the research section of sharebuilder which is free to use. I concentrate on lower priced stock(selling at under $10/share). Alot of companies you have heard of are selling at such low prices. Example: C(citigroup)-$4.50,CROX(Crocs)-$6.60,EK(Eastman Kodak)-$5, etc.
Buy buying these low priced companies they usually can go up due to being takeover target by bigger companies, merging with other companies, improving the sales, earnings, or specualation, etc. From my over 15 years investing some of my portfolio like this and I have come out well ahead even after factoring in the losers.
Tips and Warnings
- The key to this plan working is keeping the cost very low(using the Advantage Plan from Sharebuilder-$1/trade) and buying low priced stocks(under $10 but never under $2), as they are then considered penny stocks and are at risk for bankruptcy thus you lose your investment in them.
- This is not a 100% certain plan to make money however it has worked for me an amatuer investor.