Fri Dec 8, 2017 8:50pm EST
5 Ways to Invest in Stocks with Little Money
5 Ways to Invest in Stocks with Little Money

/Lydia Wanjiru/ -- Stock investments are a lucrative opportunity that anyone can venture into even with little money. Investors looking for cheap stocks to buy today can consider buying these 5 stocks:

1.    Buy a mutual fund
A mutual fund is an investment platform that is funded by the shareholders that trades in diversified holdings usually run by an asset management company. A mutual fund pools money from various investors to purchase securities such as stocks, bonds and more. Shares of a mutual fund are bought and sold by a fund family like the Fidelity, Vanguard or Charles Schwab. Buy a mutual fund with the lowest possible fees.

2.    Buy a stock exchange traded fund (ETFs)
A stock fund allows investors to exchange his or her holding of a single stock for multiple units in a portfolio of investments otherwise called “swap fund”. It is an easy way for investors to diversify their investments holdings and defer tax payment until they sell the fund’s units. There are both publicly and privately traded funds. An ETF helps you to follow your daily transactions, how much and the exact companies or assets you own in the stock exchange. ETFs have a high liquidity, low cost, are diverse and tax efficient.

3.    Buy a stock index
A stock index fund is a type of mutual fund whose portfolio is constructed to be equivalent to the components of a market index. You can invest in a low-cost index fund and be able to track popular stock and bond market indexes. An index mutual fund provides you with a broad market exposure, low operating expenses and a low portfolio turnover.

4.    Buy a target date fund
Another low-cost stock is a target date fund. A target fund is a collective investment strategy that is designed to provide an investment solution through a portfolio of securities whose asset allocation mix becomes more conservative as the target date which is mostly retirement draws closer. It is also called a lifecycle, dynamic risk or age-based funds. It is usually designed as a mutual fund or as a collective trust fund. They are offered by both mutual fund and exchange-traded funds. The fund manager shifts allocation according to a selected time frame usually your retirement date. For example, if you intend to retire 20 years from 2017, then you invest in a target fund called retirement 2037.

5.    Buy a penny stock
A penny stock is another low-cost stock and has a small market capitalization. Initially, penny stocks were traded for less than a dollar per share. It has evolved and Securities Exchange Commission (SEC) has modified it to include shares trading below $5. Penny stocks are traded over-the-counter (OTC) but there are some large corporations that trade below $5 per share on the main exchanges. A good example of a penny stock is Curis Inc. is listed on NASDAQ. Penny stock is highly volatile, illiquid and speculative. They are most suitable for the investors who have a high tolerance for risk. Investors should have a stop-loss order investment strategy since it will enable them to exit the market if the stock is not performing well. Buy penny stocks that are listed on the American Stock Exchange (AMEX) or NASDAQ as they are fully regulated by the SEC.