This article will aid inexperienced investors in getting started with just $1,000 saved toward maximizing their returns while minimizing costs. When you are still new to the business, it is important choose wisely on what to invest and how to go about investing.
Account minimums: All financial institutions have requirements for minimum deposit. If you have only $1,000 to start with, understand that some firms will deny you in opening an account.
Stocks: Choosing a compatible stockbroker is important, and they usually come in two types: discount and full-service. Someone with a $1,000 investment amount has the option of the discount broker. Though they have low fees, you do not get as much service or investment advice. Other options include direct stock purchase plans (DSPPs), which have over $100 to $500 minimum investment restrictions and online brokers that have low or no minimum deposit restrictions but do impose higher fees for specific types of trades.
Mutual Funds and Bonds: If you are interested in mutual funds, you can purchase through brokerage firms or through the local bank. If you fancy government bonds, which feature a minimum purchase ranging from $100 to $1000, you can go to TreasuryDirect.
Investment Costs: Know the costs attached to an investment. Every investment you purchase will cost you money in commissions. When you trade frequently, you will incur trading fees that range from $10 to $30. Mutual funds have the management expense ratio (MER) charged by the management team annually. For the newbie investor, mutual funds are advantageous because of dollar cost averaging (DCA) where fees remain the same regardless of the amount of investment.
Diversification: Another important thing to consider is diversification. With a $1,000 deposit, getting a well-diversified stock portfolio is difficult and risky. Go for mutual funds instead since they tend to include a large number of stocks within the fund.
