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Small Investments Can Produce Big Returns

Small investments can be quite profitable and can produce big returns in the long run.  Just because you do not have hundreds of thousands or millions of dollars to invest does not mean that you cannot take advantage of a wide variety of investment opportunities that are available to small investors.  A few hundred or a few thousand dollars invested carefully can produce big returns over the long run, especially if the money is parlayed into larger investments over time.  Even modest investments of as little as $50 per month can grow into sizable investments, if the money is invested wisely.  The key is to get the ball rolling and identify small investment opportunities that are worth investing in.

Small investments include investments in small businesses looking to start operations, small businesses that need capital to expand, or a business franchises.  They can also include small investments in stocks and other financial instruments, such as stock funds and options.

Ideas Regarding Making Money On Small Investments

Small investments mean different things to different people.  Small investments can range from:  a few hundred dollars for a person living paycheck to paycheck, to a few thousand dollars for someone with a little extra money to invest, or tens of thousands of dollars for someone who is looking to diversify their investments into smaller investments.  Investments just have to identify investments that are suitable for their investment capital levels and investment goals.

The following are some ideas about how to make small investments that can grow over time:

Consider Crowdfunding When Making Small Investments

One of the changes to the investment world that has been ushered in by the advent of the Internet is the concept of crowdfunding, which is the collective effort of people who pool their money to invest in business ventures proposed by others.  This has made it possible for investors with just a few hundred or a few thousand dollars to invest in small business ventures with other small investors and provide them a wider range of small investment choices.  The Internet has several websites that cater to small investors looking to invest their money via the crowdfunding route.

Invest In An Entrepreneurs’ Small Business

Everywhere you turn, there are entrepreneurs that either have new business ideas or are looking to expand existing businesses.  These entrepreneurs sometimes have trouble securing loans from traditional lending institutions, such as banks and credit unions, and therefore looking to small investors to provide them the capital they need to implement their business plans.  Since they cannot obtain money from mainstream sources, entrepreneurs may be willing to pay higher than market interest rates and promise to pay the loan back quickly from revenues generated by their business ventures.  Stepping in as a small investor to help entrepreneurs get their business ideas off of the ground can provide small investors lucrative investment returns.  There are many entrepreneurial business organizations on the Internet that connect investors looking to make small investments in entrepreneurs trying to start or expand a business.

Invest In Your Own Small Business

Instead of investing in another entrepreneur’s business plan, create your own small business plan and be an entrepreneur yourself.  There’s always some new business idea that someone has not thought of yet or a successful franchise opportunity that has not yet been explored in your area.  Get to work and come up with a good idea for a new small business and invest your money into it.  Consult entrepreneurial business organizations for assistance, tips, and financial support, including help with finding small investors to assist you.

Invest In High Growth Stocks

Investing in high growth stocks may not be the first thing that small investors think about investing their money in, because high growth the stocks are often rather pricey and can be risky.  However, even with a small amount of money, a small investor can buy a few shares of a high growth stock, and if they research it well, can see their investment grow nicely over time.  The key is to find companies that have realistic earnings growth projections in the 15% to 20%+ range for the next few years.  Wall Street usually rewards high earnings growth stocks with higher stock prices over time.

For Longer Term Small Investments:  Invest In Dividend Paying Stocks

If you are looking to make small investments and not touch them for a long period of time, then dividend-paying stocks may be good places to park small amounts of money.  Buying just a few shares of a stock that consistently pays dividends can grow into a decent amount of money over time.  The key is to have the dividends reinvested to purchase additional shares of stock, so that over time you increase the number of shares you own and increase the amount of dividends being paid.  Some companies offer free dividend reinvestment plans, which are great for small investors, since they allow them to avoid brokerage fees when they reinvest their dividends to buy additional shares.

Invest In High Return Funds

Some small investors might not be comfortable investing in stocks, which is understandable since they do not have a lot of capital to risk and have a small margin of error.  One type of small investment that might make sense for more conservative small investors is an investment in mutual funds or Exchange Traded Funds (ETFs) that pay a high rate of return in the form of dividends to their shareholders.  It is not difficult to find funds that pay 10% or greater to investors in their funds.  The dividends could be used to make other small investments, or to supplement current income, or be reinvested in the funds to increase long-term investment returns.

Use Options To Control a Larger Amount of Stock or Commodities

Learn how to trade options and use them to control a much larger amount of stocks or commodities than could be purchased with a small investment.  Although options have a learning curve that must be overcome, once a small investor is comfortable buying options, they can be quite an effective way to parlay a small investment into a much larger amount of money, since options allow you to control a block of stocks or commodities that is much larger than if you had the money to buy them outright.  A good way to get started with trading options is to do paper trades until you feel comfortable using real money.

Precautions When Making Small Investments

Most investments come with some risk to the capital used to make the investment, and small investments are no different.  To protect your investment capital when making small investments, it is critical to do proper due diligence in any business or financial instrument you care considering investing in, and to understand all of the risks.  If possible, get some sort of collateral or financial assurance from an entrepreneur to secure a loan you make to them.  If you are thinking of making small investments in financial instruments, such a stocks, options, or funds, make sure you fully understand what you are investing in and what the risks are associated with the investments.  With proper due diligence and precautions, small investments can produce big returns over time.

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Small Investments Over a Lifetime Can Provide Big Returns

It is important for investors to understand that small investments in the stock market made over long periods of time can provide big returns.  Even small investments, as little as $25 per paycheck, that are invested consistently in stocks over many years can grow into significant investments, if they are made on a regular basis and kept in stock market investments to grow in value over time.

An Example Regarding How Small Investments Can Provide Big Returns

How would you like to turn small investments of $25 per paycheck into over $235,000 during forty years of working a regular job, so you have a nice nest-egg when you are ready to retire?  This can actually be accomplished by making small investments of $25 per paycheck in the stock market over forty years.  Not bad for a long term small investment strategy that is relatively modest.

Going back to the year 1900, the stock market has returned approximately 9% on average per year when both stock gains and stock dividends are factored into the annual returns.  These gains have not been consistent, with some years booking double-digit gains, and some years booking losses.  However, over many decades, the stock market can be expected to return approximately 9% on an annual basis.

Assuming one gets paid twice per month, a $25 per paycheck investment in the stock market would be $600 per year.  If the money invested in the stock market earns 9% and for calculation purposes the interest is compounded on a monthly basis, the total invested and earned after forty years would be $235,821.51.

Of course small investments mean a lot of different things to different people.  A $600 per year commitment to the stock market is a rather small amount of money to invest in the stock market each year, but the long term returns on that small investment is a good example of how even a person with a modest income can effectively invest in the stock market, earn a good rate return over a long period of time, and wind up with a sizeable amount of money.

Many people invest $3,000 per year in the stock market via Individual Retirement Accounts (IRAs).  Relatively small investments of $3,000 per year in the stock market with compounded 9% returns over forty years would grow into $1,179,107.54 after forty years.  Wall Street professionals were not lying when they said that IRAs could turn many people into millionaires.  The key is to keep making small investments in the stock market over many decades and to keep the money invested in the stock market until you are ready to retire.

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Gathering the Money to Make Small Investments

If you live paycheck to paycheck, you might not think that you have enough money to make small investments in the stock market. Investors who are able to work with large amounts of capital are able to live comfortably in spite of the financial turmoil of the last several years, but it can seem as if you would require a fortune to make a significant difference in your income level. Fortunately, you can make a splash in the market with smaller investments, but you have to find a way to set the money aside. Although this can be difficult if you find yourself struggling with money, there are simple ways for you to make the capital available for investing.

Budgeting and Saving for Future Investments

If you are like most people, you probably fail to examine your budget thoroughly on a regular basis. As a result, you probably spend money on things that you simply don’t need. By budgeting effectively, you can find money that you didn’t even know you had. By doing so, you can channel extra money into a fund that is set aside for making small investments. Even if you are only able to earmark a few dollars per week for investing, the money will accumulate quickly. Then, you can begin investing as a means of making your money work for you instead of allowing it to slip away.

Small Investments can Help You Turn Your Life Around

If you are having trouble with money and you see investing as a pipe dream, you can make some simple changes to help you gather the funds you need to make small investments. By budgeting wisely and setting aside small amounts of income, you can build your initial investment bankroll much more quickly than you might realize. Once you have gathered enough income to make small investments in the stock market, you can begin to turn your life around and see how money can work for you.

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How Small Investments Can Grow into Huge Rewards

Many of the most successful investors in the world turn to small investments for large returns. Although popular wisdom may have us think that larger investments will lead to larger rewards, this is not necessarily true. If you consider the hundreds of top companies that have seen their stock plummet overnight, you will see that large investments can often result in even larger losses. By investing in a smaller company, you can spend less money on your initial investment. This means that even if the company goes under, you will not lose much. Additionally, small companies that are just starting out are known to be volatile. They may drop off the face of the earth, but they are just as likely to experience unprecedented growth. By placing small investments with new companies, you have the chance to jump on board a winner before it has found success. You can be one of the ones who are there from the very beginning, reaping the continued rewards of the company’s success.

 Which Small Investments Should You Add to Your Portfolio?

Choosing the right small investments can be a bit tricky. Since most small companies are new, you may have little information to go on when you make your decisions. If you want to cut your risks and increase your chances of earning large returns, however, there are a couple things you should do. First, you should do as much research as you can. Find out who runs the companies and learn about their financial histories. Research what different companies do and go with those that seem to have sound business models and accessible products and services. Second, you should diversify. Because small investments can be risky, you do not want to put all of your money in one basket. Once you have seen one of your companies start to grow, you may want to make a slightly larger investment. At the beginning, however, it is generally wise to vary your small investments and to keep them as diverse as possible.