How to Turn Your Spare Change into a Fortune: The Secrets of Small Investments

You’ve probably heard the saying, “A penny saved is a penny earned.” But what if you could turn your pennies into dollars, and your dollars into thousands, or even millions?

Sounds too good to be true, right?

Well, it’s not. In fact, it’s possible for anyone to grow their wealth over time, regardless of their income level, by making small investments on a regular basis.

In this article, you’ll learn how to harness the power of small investments, and how to use them to achieve your financial goals. Whether you want to save for retirement, buy a house, start a business, or travel the world, small investments can help you get there faster and easier than you think.

But first, let’s define what we mean by small investments.

What are small investments?

Small investments are any amount of money that you can invest regularly, without affecting your budget or lifestyle. They can be as little as $1, $5, $10, or whatever you can afford.

The key is to invest consistently, and to let your money work for you over time. This way, you can take advantage of two powerful concepts: fractional shares and dollar cost averaging.

What are fractional shares?

Fractional shares are pieces of a whole share of a stock, ETF, or mutual fund. For example, if a share of Apple costs $100, you can buy a fraction of it, such as 0.1, for $10.

Fractional shares allow you to invest in any company or fund, regardless of the price per share. This means you can diversify your portfolio, and access high-growth opportunities, without breaking the bank.

For example, you can invest in Amazon, which has a share price of over $3,000, with just $10. Or you can invest in Tesla, which has a share price of over $600, with just $5.

Fractional shares also allow you to reinvest your dividends, which are payments that some companies make to their shareholders. By reinvesting your dividends, you can buy more fractional shares, and increase your returns over time.

Interactive Broker offers fractional shares if you are interested. It is also known for its powerful trading platforms and low commissions and fees, making it an attractive option for younger investors or those just starting out.

What is dollar cost averaging?

Dollar cost averaging is a strategy of investing a fixed amount of money at regular intervals, regardless of the market conditions. For example, you can invest $100 every month, or $25 every week, or $5 every day.

The benefit of dollar cost averaging is that it reduces the risk of timing the market, and it lowers your average cost per share. This means you can buy more shares when the prices are low, and fewer shares when the prices are high.

For example, let’s say you invest $100 every month in a stock that fluctuates between $10 and $20 per share. In the first month, you buy 10 shares at $10 each. In the second month, you buy 5 shares at $20 each. In the third month, you buy 6.67 shares at $15 each. In the fourth month, you buy 8.33 shares at $12 each. And so on.

After 12 months, you would have invested $1,200, and bought 100 shares, with an average cost of $12 per share. If the stock price is $15 at the end of the year, your investment would be worth $1,500, and you would have a 25% return.

However, if you had invested $1,200 at once, in the beginning of the year, when the stock price was $10, you would have bought 120 shares, with an average cost of $10 per share. If the stock price is $15 at the end of the year, your investment would be worth $1,800, and you would have a 50% return.

So, why would you choose dollar cost averaging over lump sum investing?

The answer is that you don’t know what the future holds. The stock price could go up, down, or sideways. You could miss out on a big rally, or you could buy at the peak of a bubble. You could lose money, or you could make money.

Dollar cost averaging eliminates the guesswork, and the stress, of trying to time the market. It allows you to invest with confidence, and to benefit from the long-term trend of the market, which is generally upward.

How to start making small investments?

Now that you know the benefits of small investments, you might be wondering how to start making them.

The good news is that it’s easier than ever, thanks to the availability of online platforms, apps, and tools that allow you to invest with low fees, or even for free.

Here are some of the options you can choose from:

• Online brokers: These are platforms that allow you to buy and sell stocks, ETFs, mutual funds, and other securities. Some of the popular online brokers are IBKR, TD Ameritrade, Fidelity, and Charles Schwab. Most of them offer fractional shares, dollar cost averaging, and dividend reinvestment options. They also have educational resources, research tools, and customer support to help you with your investing journey.

• Robo-advisors: These are platforms that use algorithms and artificial intelligence to create and manage your portfolio, based on your goals, risk tolerance, and preferences. Some of the popular robo-advisors are Betterment, Wealthfront, Acorns, and Stash. They charge a low annual fee, usually a percentage of your assets under management, and they handle everything for you, from asset allocation, to rebalancing, to tax optimization.

• Micro-investing apps: These are apps that allow you to invest your spare change, by rounding up your purchases, or by linking your bank account, credit card, or debit card. Some of the popular micro-investing apps are Robinhood, M1 Finance, SoFi Invest, and Public. They offer commission-free trading, fractional shares, and social features, such as following other investors, or joining communities.

How to succeed with small investments?

Making small investments is not enough. You also need to follow some best practices, to ensure that you maximize your returns, and minimize your risks.

Here are some tips to help you succeed with small investments:

• Start early: The earlier you start investing, the more time you have to grow your money, and to benefit from the power of compounding. Compounding is the process of earning interest on your interest, which can make a huge difference over time. For example, if you invest $100 every month, at a 10% annual return, for 40 years, you would end up with $632,331. But if you start 10 years later, you would end up with only $228,810. That’s a difference of $403,521, or more than four times your initial investment.

• Invest regularly: The more frequently you invest, the more you can take advantage of dollar cost averaging, and the more you can smooth out the market fluctuations. Investing regularly also helps you develop a habit, and a discipline, of saving and investing, which can improve your financial health and well-being. Try to invest a fixed amount of money every month, week, or day, and stick to it, no matter what the market does.

• Diversify your portfolio: The more you diversify your portfolio, the more you can reduce your risk, and increase your returns. Diversification means spreading your money across different types of assets, such as stocks, bonds, commodities, real estate, and cash. It also means investing in different sectors, industries, countries, and regions. This way, you can avoid putting all your eggs in one basket, and you can benefit from the performance of different markets and economies.

• Reinvest your earnings: The more you reinvest your earnings, the more you can grow your money, and benefit from compounding. Reinvesting your earnings means using your dividends, interest, or capital gains, to buy more shares, instead of cashing out. This way, you can increase your ownership, and your income, over time. Most online brokers, robo-advisors, and micro-investing apps offer automatic reinvestment options, which make it easy and convenient for you to reinvest your earnings.

• Review your portfolio: The more you review your portfolio, the more you can monitor your progress, and make adjustments, if needed. Reviewing your portfolio means checking your performance, your asset allocation, your fees, and your taxes, on a regular basis. This way, you can see if you are on track to achieve your goals, and if you need to rebalance your portfolio, to maintain your desired risk and return levels. You can also see if you are paying too much in fees, or if you can optimize your taxes, by using tax-advantaged accounts, such as IRAs or 401(k)s.

Conclusion

Small investments can have a big impact on your wealth, if you do them right.

By making small investments on a regular basis, using fractional shares and dollar cost averaging, you can access any company or fund, regardless of the price per share, and reduce your risk and cost per share.

By following some best practices, such as starting early, investing regularly, diversifying your portfolio, reinvesting your earnings, and reviewing your portfolio, you can maximize your returns, and minimize your risks.

Small investments can help you achieve your financial goals, whether you want to save for retirement, buy a house, start a business, or travel the world.

The power of small investments is in your hands. If you are keen to explore how options trading can fast track your investment journey, do sign up for the Options Trading Masterclass now! This is a course created by my good friend, Sean Seah, and it is suitable for beginner to intermediate investors who are keen to explore options trading.

For our readers, we have managed to snap a coupon code for you. Find out the deal we got for you by simply keying in “FWELLNESS” at the coupon code during check out. You will be amazed at what we managed to get for you!

Don't miss this opportunity to unlock your door to Options Trading Masterclass!