In 9 Ways to Invest $100 I gave suggestions on how to invest when you have just a few dollars.
In this article, I want to take it up a notch, which is to say how can you invest when you have more than a few dollars, but not the thousands that traditional investment vehicles usually require?
You can also check out my post on the best short-term investments for your money!
Before I started investing, I was under the same misunderstanding that you had to have thousands of dollars to get started, and my thoughts were how to invest $10K or how to invest $100k?
Well now I know more about the world of investing and I can help you out with these same thoughts and fears.
I was surprised – shocked really – that I could start investing in the stock market via mutual funds with only $50 per month.
And that’s exactly what I did. Even though I later found out that the mutual funds were okay at best, the fact that I started investing in myself was huge for me.
And for many, it’s that first step that prevents them from amassing wealth later on.
For our purposes here we are going to define small amounts of money as something more than $100, but not more than $1,000. Based on that parameter, here are 14 ways to invest small amounts of money.
Do you need help finding some extra cash to get started with your investment? Check out these tips on how to make money fast!
The 14 Best Ways To Invest Small Amounts of Money:
1. Automate Investing With Betterment ETF Portfolios
There are a number of “robo advisors“, online investment platforms that offer professional management of your portfolio with very low fees.
One of the best for small investors is Betterment.
You start by completing an online questionnaire that enables the site to determine what your risk tolerance is.
Based on that evaluation, a portfolio is created for you with an allocation that includes several different exchange-traded funds (ETFs). By purchasing ETF’s you’re essentially buying a diversified portfolio of stocks that you don’t have to manage.
Because of this allocation, your only responsibility is to fund your account – there is no need to concern yourself with investment selection, or with re-balancing your investments.
Currently they offer a variety of investing options with their Betterment Core, Goldman Sachs Smart Beta and Innovative Technology portfolios:
With these portfolios you’ll get access to familiar ETF’s with Vanguard and iShares, both popular in the investing community.
Betterment investments actually has no minimum initial account deposit requirement. And just case you missed that…
You can open up an account by committing to monthly contributions of as little as $100. The annual management fee to maintain your account is 0.25% of your account balance, on accounts of less than $100,000.
If you’re not ready to invest, they also offer a “No-fee” checking account that pays a competitive variable rate greater than what your bank is paying (currently 0.35%).
The management fee works on a sliding scale, and drops as your account balance grows.
2. Balanced Stock Portfolio with M1 Finance
M1 Finance has brought a great new perspective to investing. Like Betterment they allow you to automatically invest in various verticals, but the brokerage also allows you to trade both stocks and ETFs for free. That’s right FREE!
M1 Finance, by far, has the largest list of no-fee investments available through any brokerage.
M1Finance also lets you purchase fractional shares of stock. This means that if Apple stock is currently $400 a share, you can purchase $50 of Apple stock and own 12.5% of a share.
Finally, you can get a free financial analysis from M1 Finance, before you invest a single dollar.
3. Build a Real Estate Portfolio with $10
Fundrise makes investing in real estate a breeze.
This real estate investment trust allows you to invest in real estate without flipping houses or becoming a landlord. Fundrise is simple: your money is invested in real estate developments. Whenever they make money, you make money.
Just how much money, you might ask? Your returns will vary based on the project you invest in, but Fundrise investors garnered an average return over 11% last year, thanks to technology that pinpoints profitable real estate projects for you to invest in based on your goals.
Perhaps the best part of Fundrise is its low minimum. If you’ve ever tried your hand at real estate investing, you know that it isn’t cheap.
But Fundrise opens the door for investors who might not have thousands of dollars at their disposal. You can invest in Fundrise with as little as $10. Usually, you would need $1,000 to invest with them, but they are currently opening up the doors to smaller investors with their “Starter Portfolio”.
While Fundrise will invest in ideal projects for you, you can also take a more hands-on approach by selecting from a number of Fundrise’s projects to invest in.
I’ve been investing with Fundrise for over 4+ years and have been more than pleased with my returns. You can learn more about my Fundrise returns here or watch the video below.
4. Paying Off Debt
There are two reasons to pay off debt. The first is that you shouldn’t invest if you have debt, especially unsecured debt.
The second reason is that paying off debt is the best way to lock in an above-average and guaranteed rate of return on your money.
This is especially true if the interest rate is in double digits – there are no places available to the average investor to get double-digit returns that are guaranteed.
Let’s say that you have a credit card with a balance of $1,000 with an interest rate of 15.99% per year. By paying that card off, you’ll lock in a nearly 16% rate of return on your money, virtually forever!
If you have debt with a high-interest rate, you may consider taking out a personal loan with a lower interest rate and using that money to pay off the debt with a higher interest rate.
There’s a company called Fiona that lets you compare personal loans, credit cards, savings accounts, and student loan refinancing options for dozens of lenders. All in just a few seconds.
5. Savings Accounts
To be sure, you won’t be able to earn much money on your investments at the bank.
However, the advantage that banks offer is that you can invest very little money in a savings account, earn a little bit of interest, and have zero risk of loss.
Let me be honest, savings accounts are not the most exciting investments
The best purpose for a savings account is to use them as a place to accumulate a larger amount of capital for higher risk/higher reward type investments later on.
Some of the investments in this list will require $500 or $1,000 to get started. While that is not a ton of money, if you are getting started with a smaller investment, your best bet might be to take your time to build up a little cash and expand your investment options.
Learn more about my picks for the best highly competitive online savings accounts.
6. Your Employer-Sponsored Retirement Plan
This is probably the easiest way to invest small amounts of money, or even if you don’t have any money at all. That’s because it’s generally set up as a payroll deduction so that you can allocate a percentage of your paycheck to go to the retirement plan.
You can designate just about any amount of your paycheck that you choose – as low as 1% to 20% or more, depending on the rules established by the employer plan.
In this way, you don’t even need to have a large nest egg to invest. You can just add small amounts to your account with each paycheck, and then begin investing in any types of investments that your available capital (and the employer plan) will permit.
Best of all is the tax benefits! Not only are your contributions tax-deductible, but the income earned on your investments will not be subject to income tax until you retire and begin withdrawing money.
In addition, if your employer offers a matching contribution, it will be like you get free money just for saving a little.
No matter how much money you have to invest, investing in your employer-sponsored retirement plan should be one of the first steps you take.
7. Get a Roth (or Traditional) IRA
If you don’t have an employer-sponsored retirement plan, you can almost always set up your own retirement plan. All you need to qualify is earned income.
The two best plans for most people are either a traditional IRA or a Roth IRA. Much like an employer-sponsored retirement plan, any returns on investment that you earn are tax-deferred until you begin withdrawing the funds in retirement.
Also, contributions to a traditional IRA are generally fully tax-deductible.
Roth IRA contributions are not tax-deductible, however, withdrawals will be free from taxes as long as you are at least 59 ½ at the time the withdrawals are made, and you have participated in the plan for at least five years.
And though there is no employer matching contribution (since there is no employer), a self-directed traditional or Roth IRA can be held in a brokerage account that offers nearly unlimited investment alternatives.
You can contribute up to $6,500 per year to either a traditional or Roth IRA ($7,500 if you are age 50 or older), which means you can build up a substantial portfolio in just a few years.
Also with the best Roth IRA providers, there is a very low entry cost. Of the investment ideas we’ve offered so far; Betterment, M1 Finance and Fundrise all offer Roth IRA accounts. This is huge for all the small investors out there!
8. Prosper
Prosper works much the same as Lending Club.
You can invest as little as $25, so you can spread a few hundred dollars across many different loans. There is also a state-by-state minimum net worth requirement here as well.
Prosper reports that the average annual return on a note approaches 16%, which is an incredible return on a fixed-rate investment.
In the case of both Prosper and Lending Club, there is a risk of loss to your principal in the event that one or more loans you’re holding go into default.
There is no FDIC insurance protecting your investment the way it would with bank investments. I also did Prosper reviews for both borrowers and lenders. You can get full details of the platform there.
9. US Treasury Securities
If you are looking for a more conservative investment, one where your principal is protected from market swings, you can invest in US Treasury Securities.
These are debt obligations issued by the United States Treasury Department, to fund the national debt. Securities have maturities ranging from 30 days to 30 years (longer-term maturities do involve a risk of principal if you sell before maturity).
You can invest in these securities through the US Treasury Department’s portal Treasury Direct. By using the portal, you’ll be able to buy US government securities in denominations as low as $100.
You can sell your securities there as well, and there are no early withdrawal penalties for doing so.
You can also use Treasury Direct to buy Treasury Inflation-Protected Securities (TIPS) too. These not only pay interest, but also make periodic principal adjustments to account for inflation based on changes in the Consumer Price Index.
10. Investing in Your Own Skills
Are there any skills that you could acquire that could bring you up to the next level in your career? Think in terms of learning a new computer application, a foreign language, or taking a public speaking- or sales course.
It’s possible that you could acquire certain career-enhancing skills that would enable you to either get a promotion in your current job or even transfer to a new, higher-paying position with another employer.
A few hundred dollars is often all it takes to take a course to learn that kind of skill.
11. Dividend Reinvestment Plans
Better known as DRIPS, these are plans that allow you to invest small amounts of money into stocks of companies that pay dividends.
Many large companies offer DRIPS, so if you want to invest directly in stocks, and you like certain companies, you can invest in those companies – usually without having to pay any kind of investment fees.
DRIPS typically allows you to build your investment over time by making periodic contributions. Often, this can be done using payroll deductions.
This can also be an excellent way to dollar cost average your way into large investments in major companies. And when you earn dividends, the money will automatically be reinvested to buy more company stock.
12. Low Minimum Investment Mutual Funds and ETFs
Different mutual funds and ETFs have different initial investment minimums. Many do require that you have several thousand dollars to open an account, but there are some that allow you to start an account with far less.
An example is the Schwab Total Stock Market Index (SWTSX). With a required minimum that is that low, you could spread $1,000 across 10 different funds.
You can check with any large mutual fund families, and even some investment brokerage firms, to see which funds are available with a minimum initial deposit of $1,000 or less.
You may find index funds to be your best bet since they represent the best play on the entire market.
13. Online Brokerage Firms
It can come as surprise to many small investors that you can actually open up an account with an online brokerage firm for $1,000 or less.For example, the minimum initial deposit to open an account with Charles Schwab is $1,000 but even that can be waived if you set up an automatic monthly transfer of $100 through direct deposit or Schwab MoneyLink or open a Schwab Bank High Yield Investor Checking account linked to your brokerage account.
In addition, you can open a brokerage account with TD Ameritrade with no minimum initial deposit.
The advantage of investing through a brokerage firm is that will provide you with a wider variety of investment choices than you can generally get through direct investments alone.
Check out some of our great investment brokerage reviews for your reference: E*TRADE Review and TD Ameritrade Review.
14. Your Own Business
I’ve discussed investing in other businesses so far, but if you’re looking to invest small amounts of money, investing in your own business could prove to be the best choice of all. After all, who better to invest in than yourself?
For example, for a few hundred dollars you can buy a decent lawnmower, and start cutting lawns to generate income.
With that few hundred dollar investments, you could have more than five thousand dollars to invest in no time.
You could also start a website, dedicated to selling a certain product line. Or you can start a blog and use it to create affiliate sales arrangements.
If it’s something you might enjoy doing, you could go to garage sales, estate sales, flea markets, and thrift stores, or buy unusual goods and sell them at a profit on eBay or Craigslist.
With advances in technology and the growth of the Internet, it’s easier than ever to start your own home-based business on a shoestring.
If you only have a few hundred dollars to invest, investing in starting your own business could be the most profitable venture of all. Many business owners start out by picking up a part-time job or side hustling to make extra cash to get their business up and going.
A great side hustle is to become an Uber driver, you can create your own schedule and just sit back and drive and earn extra cash to throw at that dream of yours!
So here you have 14 ways to invest small amounts of money, so there’s nothing stopping you from investing in something. Investing is one of those activities where the most important step is getting started, and here are the ways you can do it.
The Bottom Line – How to Start Investing With Little to No Money
In conclusion, starting to invest with little to no money is possible through a variety of options such as opening a brokerage account, participating in your employer’s retirement plan, or utilizing a robo-advisor.
While it may seem intimidating to start investing with a small amount of money, the most important thing is to start as soon as you can. By investing even a small amount consistently over time, you can potentially see your investments grow through the power of compound interest.
Remember to do your research and seek the advice of a financial professional before making any investment decisions.
FAQs on Investing with Little Money
Can I invest as little as $100?
Yes, it is possible to start investing with as little as $100. There are a few options you can consider:
Open a brokerage account: Many online brokerages allow you to start investing with small amounts of money, including as little as $100.
Try microinvesting: There are several apps that allow you to invest small amounts of money, often through the purchase of fractional shares. This can be a good option if you have a hard time saving up enough to make a traditional investment.
Participate in your employer’s retirement plan: Many employers offer 401(k) or other retirement savings plans that allow you to invest a portion of your earnings. This can be a good way to start investing with little to no money, as your contributions are automatically deducted from your paycheck.
Consider a robo-advisor: A robo-advisor is a digital platform that uses algorithms to build and manage a portfolio for you. Some robo-advisors have low minimum investment requirements, including as little as $100.
Keep in mind that while it is possible to start investing with a small amount of money, the investment options available to you may be limited. It is important to do your research and carefully consider your investment goals and risk tolerance before making any investment decisions.
Can I invest if I’m broke?
It will be challenging to invest if you are broke, as you’ll need to have some savings or disposable income to put towards investments. If you are unable to set aside any money for investments at this time, then focus on improving your financial situation. This could include finding ways to increase your income, reducing your expenses, or paying off any outstanding debts you may have. Once you are in a better financial position, you can consider investing.
This article originally appeared on GoodFinancialCents.com and was syndicated by MediaFeed.org.
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50 investment phrases, decoded
Any new endeavor — from rock climbing to investing — means getting familiar with new words and phrases. Some investment terms may seem complex, but this list will take the mystery out of the most common investing terminology, so you can feel even more confident as you start your investing journey.
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Alpha is used to gauge the success of an investment strategy, portfolio, portfolio manager, or trader compared with a relevant benchmark. You may also hear alpha defined as “excess return” in that it refers to returns that can be attributed to active management, over and above market returns.
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An asset is anything that holds value that can be converted to cash. Personal assets might include your home, a car or other valuables. Business assets might include machinery or patents. When it comes to investing, assets are typically the securities you invest in.
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An asset class is a group of investments with similar characteristics that is likely to perform differently in the market than another asset class. Types of asset classes include stocks, bonds, real estate, currencies and more. Given the same market conditions, stocks and bonds often move in opposite directions. Most financial advisers recommend you invest in multiple asset classes in order to have a well-diversified portfolio and minimize risk.
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An asset allocation fund is a diversified portfolio consisting of various asset classes. Most asset allocation funds have a mix of stocks, bonds and cash equivalents. These types of funds can be popular as some advisors stress the importance of having diverse portfolios to minimize potential losses.
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Beta refers to how risky or volatile a security or portfolio is compared with the market overall. Calculating the beta of the stocks in your portfolio can help you determine how your portfolio might respond to market volatility. You can also gauge the beta of a stock to help determine how much risk it might add to your portfolio.
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A bear market occurs when the market declines, typically when broad market indexes fall 20% or more in two months or less. Bear markets can accompany a recession, but not always. They often signal that investors feel pessimistic about their investments’ ability to make money and the market’s ability to rebound.
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A bull market is the opposite of a bear market, meaning prices are rising or are expected to rise for extended periods of time. Bull markets usually mean security prices are rising for months or even years at a time.
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Blue chip companies are generally thought to be well-established, financially sound, and therefore high-quality investments. Blue chip stocks are typically large companies, and many of them are household names. In some cases, blue chips may be more expensive to invest in since they can be considered relatively stable and likely to grow.
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When governments or corporations need to borrow money they issue bonds. Investors who buy the bonds are effectively loaning that entity cash, which will be repaid according to the terms of the bond (e.g. a 10-year bond with an interest rate of 3%). Bonds are often considered to be relatively stable, lower-risk investments compared with stocks.
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An investment broker, whether a person or a firm, acts as a middleman to help investors buy and sell securities. Brokers may be necessary because some securities exchanges only allow members of that exchange to make an investment order. A broker’s primary function is to help clients place trades, although many brokers also help clients with market research and investment planning.
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You’ve probably heard that you should aim to have a diversified portfolio. That means investing in a range of asset classes that are likely to behave differently under different market conditions, in order to mitigate risk. A portfolio of only stocks, for instance, could be more vulnerable to market volatility than a portfolio that also included bonds, real estate, commodities and so on.
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When a company shares their profits with investors, these are called dividends. Dividends are often paid in cash (although they can be paid in stocks). Some companies — e.g. many blue chip firms — pay dividends, but not all companies do. Ordinary dividends are taxed differently than qualified dividends, so you may want to consult a tax professional if you own dividend-paying stocks.
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Also called fractional share investing, dollar based investing is a way for investors to buy partial shares of stocks. Instead of buying shares of a company, you instead invest a dollar amount. Dollar based investing is a great way for smaller investors to buy into popular companies that they may otherwise be priced out of.
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EBITDA is a way to evaluate a company’s performance that is considered more precise than simply looking at net income. EBITDA stands for: earnings before interest, taxes, depreciation, and amortization. To calculate EBITDA, use the following formula: Net Income + Interest + Taxes + Depreciation + Amortization.
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EBIT is a simpler way to calculate a company’s profits than EBITDA, as it’s only one part of the EBITDA equation (literally!). It stands for “earnings before interest and taxes.” It’s calculated using this formula: Net Income + Interest + Taxes.
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EPS stands for earnings per share, which is a common way investors measure how well a stock is performing. EPS is calculated by finding a company’s quarterly or annual net income and dividing it by the company’s outstanding shares of stock. Increases in EPS can be a sign that the company’s profit performance is on the upswing, whereas a decrease can be a red flag for investors.
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Exchange-traded funds, or ETFs, are similar to mutual funds in that the fund’s portfolio can include dozens or even hundreds of different securities, and investors buy shares of the fund. Unlike mutual funds, ETF shares can be traded like stocks throughout the day (mutual fund shares are traded once a day). Most ETFs are considered lower-cost, passive investments because they track an index, although there are actively managed ETFs.
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An expense ratio is an annual fee investors pay to cover the operating costs of mutual funds, index funds, ETFs and other types of funds. Fees are typically deducted from your investments automatically (you don’t pay a separate charge), and they can reduce your returns over time so it’s wise to shop around for lower fees. Expense ratios are calculated using this formula: Total Funds Costs / Total Fund Assets Under Management.
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Free cash flow is the money a company has after it has paid its expenses. This number is important to investors because it can show them how likely it is that a company could have extra cash for dividends or share buybacks. A continuous decrease in free cash flow over a few years can also be a red flag to investors.
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Growth stocks are shares in a company that’s growing faster than its competitors, typically showing potential for higher revenue or sales. Growth stock companies may be considered leaders in their industry.
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Hedge funds are usually managed by an LLC or limited partnership that invests in securities and other assets using money from multiple investors. Hedge funds tend to be more risky and expensive than mutual funds or ETFs, which often makes them accessible to more wealthy investors.
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Index funds are a type of mutual fund that invest in securities that mirror a particular index, such as the S&P 500 Index or the MSCI World Index. Indexes track many different sectors, from smaller U.S. companies to big global companies to various kinds of bonds. Each index acts as a proxy for how that market sector is performing; the corresponding index funds reflect that performance.
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The interest rate is the amount a lender charges to borrow money — and it can also mean the amount your cash earns in a savings, money market or CD account. The baseline interest rate in the U.S. is set by the Federal Reserve. This rate in turn influences savings rates, mortgage rates, credit card rates and more. Generally, when the Federal Reserve lowers interest rates, the stock market tends to rise.
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A large-cap company has $10 billion or more in market capitalization. These companies are often considered industry leaders, and are relatively conservative, low-risk, and safe investments. A company’s stock may be considered large cap, mid cap or small cap.
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Market capitalization, or market cap, is the value of a company’s total outstanding shares. It’s often used to measure a company’s value and build a diversified portfolio. You can calculate market cap by multiplying the number of outstanding shares by the current price per share. Companies with lower market caps usually have more room to grow and usually are associated with newer companies, meaning they can also be riskier.
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Mid-cap companies are usually between $2 billion to $10 billion in market capitalization, putting them somewhere between small- and large-cap companies. Many mid-cap companies are in a growth phase, making them attractive to some investors who believe the company may grow into a large-cap over time, although this is not guaranteed to happen.
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Mega-cap companies are the largest companies you can invest in, with a market value of $1 trillion or more. Mega-cap stocks are typically industry leaders and household name brands, like Apple or Microsoft.
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Mutual funds may invest in stocks, bonds and other securities — or a combination of these (e.g. a blended fund). Mutual funds can also be industry-specific (such as a mutual fund consisting only of energy stocks, green bonds, or tech companies and so on).
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When talking about investing, net income usually refers to how much a company makes (or its total losses) after it has paid all its expenses. Net income is therefore usually calculated by subtracting a company’s expenses from its revenue. Investors may want to know a company’s net income because it can help determine how profitable the company is, although EBITDA (defined above) is another measure.
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Not all stocks are publicly traded. These “private” stocks, often called over-the-counter stocks, usually have to be traded through a broker. Companies may offer OTC stocks if they don’t meet the requirements to be traded publicly. Such companies are often startups or other small companies. So, while these companies may eventually grow to be able to trade publicly, investing in them also carries the risk that they may fold or even engage in fraudulent activity since the market is far less regulated than publicly traded markets are.
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Investors commonly use P/E or price-to-earnings ratios to gain insight into how profitable a company is compared to its stock price. In other words, price-to-earnings ratios can help investors decide if the price of a stock is worth it when compared to how much a company is making.
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Banks are likely to offer their best customers — those with the best credit histories and the lowest risk of defaulting — a prime interest rate for a loan. The prime interest rate is generally the lowest rate the bank will offer. A bank’s criteria for determining their prime interest rate may vary, but most banks consider the federal funds rate when setting any interest rate.
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Portfolio management simply refers to how you select and manage the investments in your portfolio. There are many different management styles, such as active or passive, growth or value. Additionally, you can elect to manage your own portfolio or hire an individual or group to manage it for you.
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A preferred stock means investors own shares in a company and get scheduled dividends, similar to how bond interest payments work. Preferred socks may not fluctuate in price like common stocks do, meaning they are often less volatile and risky.
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You probably know what profit and losses are, but do you know how to read a company’s P&L or profit & loss statement? It can help you determine a company’s bottom line, as it can show you how well a company is doing compared to its peers in the same industry. If you’ve never read one before, this article about profit & loss statements could give you some tips on what to look for.
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Companies that offer stocks, bonds and mutual funds to investors are required to file a prospectus with the Securities and Exchange Commission that provides details about the investment they are offering (e.g. the expense ratio, the constituents of a fund and more). Investors can use the prospectus to better understand a given security and how it might fit in their portfolio, or not.
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A recession is a period of economic contraction. The National Bureau of Economic Research (NBER) defines a recession further as a decline in monthly employment, personal income, and industrial production. As an investor, a recession may indicate a drop in the value of your portfolio, although this may be temporary: When looking at the history of U.S. recessions, the stock market has typically rebounded after recessions.
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Real estate investment trusts (REITs) are a way that investors can further diversify their portfolios. Instead of having the responsibility of managing an investment property yourself, you can invest in REITs, which are generally large-scale real estate projects that investors can help fund in exchange for partial ownership. Most REITs are publicly traded and pay dividends to investors.
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When looking for a company’s net income statement, you may come across the term “retained earnings,” also sometimes called unappropriated profit, uncovered loss, member capital, earnings surplus, or accumulated earnings. In general, retained earnings is the amount of money a company keeps and potentially reinvests after it gives its investors a dividend payout.
As an investor, knowing whether a company had positive retained earnings can help you determine how much money it has to continue growing. If its retained earnings are negative, that could be a sign the company is in debt and may not be a good investment.
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Return on equity, sometimes called return on net worth, can help investors compare how well companies are managing their stockholders’ contributions. You can calculate it using this formula: Net income/Average shareholder equity. A higher return on equity can signal to investors that a company is managing its money efficiently.
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Return on investment (ROI) is just that: the return you get after making an investment in a stock, bond, mutual fund, and so forth. Investors generally hope for a positive ROI, meaning that their investment has made a profit. While a good ROI will vary depending on the type of investments you’re making, some investors look to the historic return of the stock market (about 7%) as a barometer.
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A small-cap company usually has a market cap of $250 million to $2 billion. Investors may be attracted to a small-cap company because they believe it has growth potential or may be undervalued.
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SPAC stands for special purpose acquisition company. SPACs are shell companies that list shares on an exchange to raise money so they can merge with a privately held company. Once the merger between the public SPAC and the private company is complete, that company is now in effect a public company — which is why a SPAC is sometimes called a backdoor IPO. Many companies may elect to use SPACs instead of traditional IPOs because they are often faster and less expensive.
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If you’ve made it this far, you probably know what a stock is. To review, a stock is a way to buy a piece of ownership into a company. You can buy and sell your stocks depending on whether you anticipate your stocks will decrease or increase in value.
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A stock exchange is the place where you buy, sell, or trade stocks. Common U.S. stock exchanges are the New York Stock Exchange (NYSE) and the Nasdaq.
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A stop-loss order can help investors have more control over their stocks. When a stock reaches a certain price that you choose, your broker will sell, buy, or trade that stock. Having a stop-loss order can help you limit how much money you make or lose in the stock market.
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A target date fund is a type of mutual fund that includes a mix of asset classes to provide investors with a portfolio that adjusts over time to become more conservative as they age. Target date funds are often used to help investors plan their retirements. Target funds are typically constructed around various target retirement years (e.g. 2030, 2040, 2050) so investors can pick a date that corresponds with their hoped-for retirement.
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A value stock is a stock that investors believe is undervalued and/or inexpensive compared to its past prices on the stock market or with its competitors. Investors may consider a stock’s price-to-earnings ratio to help them determine if something is a value stock.
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Venture capital is money a startup uses to grow its business. This money usually comes from private investors or venture capital firms. Investors may elect to invest venture capital into startups they believe have the potential to be profitable with time.
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Yield is another way of referring to the return of an investment over a set period of time, expressed as a percentage. You may hear the term in relation to bonds (e.g. high-yield bonds), but yield is more accurately a measure of the cash flow an investor gets on the amount they invested in a security during that time period, and is different from total return.
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Getting familiar with a few key investing words and phrases can go a long way in helping you gain confidence when you’re new to investing. Getting fluent with investing terminology is like any other pursuit — there’s a learning curve at first, but the terms will feel more natural as you move forward and start investing regularly.
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This article originally appeared on SoFi.comand was syndicated by MediaFeed.org.
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