3 Tips For Buying Stocks With $5 Or Less

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Buying Stocks With $5 Or Less

There are a lot of questions about the when and the how of getting into the stock market, and one of the most fundamental questions is how much in investable assets you need. Most experts have usually recommended having $500 to $1,000 in an investment account to get started, especially because account managers usually add in fees in most traditional brokerages. But there are other ways to purchase stocks in which you can bypass minimum investment requirements and get started even with as little as $5.

Investing Using Dividend Reinvestment Plans (Drips)

If you already have substantial investments in blue chip stocks or are a preferred shareholder in a highly valued NYSE listed company, you can usually pick up more shares even with less than $5. Some companies offer what’s known as a dividend Reinvestment plan (DRIP) where you can put any dividends you earn back into the stock. This amount can be any amount including less than $5, and can include the purchase of fractional portions of a share. It’s worth considering if you are fairly confident in your investing knowledge.

Investing Using Robo Advisor Platforms

There are new investing platforms that have emerged in recent years that allow you to begin investing with sometimes as little as $1. These platforms have artificial intelligence bots and algorithms that monitor the market and make suggestions on which companies you may want to invest in, and they usually charge way less in broker fees and commissions than human agents. These platforms are often referred to as robo advisors and they’re usually open to just about any investor 18 or older. Whether you want a fractional purchase of shares or want to gain exposure to the ETF market or bond funds, you’ll usually have basic funds you can invest in to get started; but you may be a lot more limited in your investment choices than what bigger brokerages offer.

Investing In Penny Stocks

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If you invest in penny stocks, you actually are investing in stocks that are under $20 a share with no splits. You have to be careful about these stocks because the exchanges you find them listed on often have much less regulations than the NYSE or NASDAQ. It’s also usually harder to find financial statements about these companies, so you have to be wary when you buy any of their shares. According to Money Morning, “Our 10 best penny stocks to buy in 2020 could gain as much as 181% no matter what happens.

The good news is there are penny stocks that have started out small and actually turned into blossoming companies and eventually made it to the big exchanges. Here are some tips for buying penny stocks:

  1. Stick to penny stocks listed on the Over-the-counter Bulletin Board (OTCBB) because they do have some SEC filing requirements
  2. Consider a few of these stocks at low price:

-Colony Capital (CLNY) which is based in the growing 5G telecom segment

-KushCo Holdings (KSHB) if you are interested in the cannabis industry

-Kosmos Energy (KOS) which is one energy sector stock that may be a bargain price

In summary, there are a lot of different ways to get started on the cheap in investing. You just need to equip yourself with the right broker service and make sure you get all the information you need to make informed decisions and minimize your risk.

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