Small investments: strategies and trading opportunities online

Small Investments | Big Opportunities with a Small Outlay

A small investment is a broad concept, covering everything from putting money in a bank savings account to investing in a mutual fund that tracks stocks or trading stock indices. Indeed, the popularity of online trading platforms has widened the scope for small investments, given more opportunities to individuals and eliminating the need – and much of the cost – for traditional wealth managers.

Defining small investments is not easy, as it is really subjective to each individual. Investing £10 per month in an ISA is just as valid under the definition as spending fifty times that amount investing in the stock market. The key to developing a small or even mini investment strategy is to have some definable parameters and goals before starting.

Rising popularity of trading with small amounts

Technology evolves fast and improves almost everything, including finance. With the rising popularity of online trading, small investments have become extremely popular and accessible. Even traders who are new to investing can quickly enter global markets. However, it does not mean that skills are not required. Just the opposite: any kind of investments need smart strategies and well-defined financial techniques.

When well-prepared for small investments, they can bring you several advantages:

  • An easy introduction to financial markets;
  • Investments without account managers;
  • An easy-to-follow investment strategy;
  • Liquidity due to the small size of investments;
  • Faster growth numbers;
  • Encouragement for continuous investing.

Those who invest small amounts can respond to various market opportunities more quickly than those who prefer investing with a large sum. Especially with a short-term investment strategy, which fits perfectly trading with small amounts. Sure thing, long-term investments should not be neglected. However, they would not be that effective as short-term ones.

Also, the timeframe is integral to your investment plans. You should consider whether you wish to make a long-term investment, which can sometimes have higher profits but more risk to your capital, or if you wish to invest small amounts in short-term trading opportunities. Basically, it comes down to the choice between patiently waiting for future returns or aiming for quick profits.

 

Small investments can yield huge returns

How do long-term small investments work in practice? Consider if you bought shares in Google when it first went public on 19th August 2004. Buying a single share in Google – now trading under Alphabet Inc – back then cost about $54 (£42). As of the end of May 2019, Google’s shares were worth over $1,100 (£875) each, meaning each share has increased 20-fold over the 15-year period.

Of course, it’s not always guaranteed that the stock price will go up, and there are plenty of horror stories of spectacular falls like banking giant Lehman Brothers and camera specialist Kodak.

If you don’t fancy picking individual stocks, you can invest in stock market indices. For example, the Dow Jones has increased its value more than 10-fold in the 30-year period from 1989 to 2019. The FTSE 100 price has more than tripled in the same period, rising from around 2,000 in 1989 to 7,000 today (approximate figures; the FTSE 100 record high was 7,877.45, recorded in May 2018). Other popular options for small investments with long-term gains include mutual funds, government bonds (sometimes known as treasury securities) and ETFs (exchange traded funds).

Options to invest small for quick profits

However, investing a small amount of money does not necessarily have to involve waiting a long-time for profits. Cryptocurrencies are a good example of a trading opportunity where large profits can be made quickly in a relatively short period of time. The price of Bitcoin, for instance, has more than tripled through the first six months of 2019. Cheaper cryptocurrencies, like Ethereum (Ether), have also more than doubled in value in the first half of 2019.

Indeed, if you are interested in investing small, there are also plenty of opportunities to engage in activities like day trading online and trading CFDs (Contracts for Difference). The latter, a type of derivative, is usually settled over a matter of days and weeks, and even minutes and hours. CFD trading allows you to speculate on the price of something, with the difference to be paid at an agreed later date.

Other benefits of making small investments in CFDs is that you can enter the market for a short time, trading on the value of expensive stocks like Google or cryptos like Bitcoin without investing in the asset outright. Additionally, at Advisors like R1Investing, you can trade on margin with leverage, a way to get potentially more bang for your money, though, naturally, a greater potential for loss exists as well.

Initial deposits at R1Investing are just $250, so it might work in terms of your goals for making a small investment. Think trading CFDs might be for you? You can find out more in our education bank of articles and VODs, webinars, and courses. Or reach out to our customer support team to help you learn more about trading CFDs on stocks, indices, commodities, cryptos and forex currency pairs.


The information provided is for educational purposes only and should not be considered investment advice. Past performance is not reliable indicator for the future results.
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Written by:
Omer Aragón Godínez

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