Investing in the stock market is a great way to generate wealth, but it can be expensive. Individual stocks can cost hundreds or even thousands of dollars per share, and not everyone can afford to invest that much money.
Penny stocks have gained popularity as a way to invest inexpensively. These stocks trade for less than $5 per share, making them an attractive option for investors on a budget.
However, penny stocks can be incredibly risky. Generally, the companies that offer penny stocks are smaller businesses, which tend to be more volatile than larger corporations. It can be difficult to determine whether these companies are solid investments when they don’t have long track records, and penny stocks often experience extreme price swings.
For these reasons, it’s best to avoid penny stocks. However, there are a few other cheap investments that are just as rewarding, yet carry much less risk.
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1. Fractional shares
Like penny stocks, fractional shares are some of the most affordable investments out there. They allow you to invest in individual stocks for as little as $1. The difference between penny stocks and fractional shares, however, is that instead of investing in small companies, you can invest in big-name stocks like Amazon(NASDAQ:AMZN), Tesla(NASDAQ:TSLA), or Apple(NASDAQ:AAPL).
With fractional shares, you invest in a small portion of a single share of a stock. If you want to invest in Amazon, for example, but you don’t have $3,000 to buy a full share, you can buy a fractional share for however much you can afford — whether it’s $500, $50, or even just $5.
Besides affordability, the other advantage of fractional shares is that it’s easier to build a diversified portfolio. When you’re investing in individual stocks, it’s wise to invest in at least 10 to 15 different stocks across various industries to limit your risk. Buying 10 to 15 full shares of stock could easily cost thousands of dollars. But with fractional shares, it’s much more affordable.
2. Index funds
An index fund is a group of stocks or bonds that’s designed to track a particular stock market index. Broad market index funds track major stock market indexes like the S&P 500, the Dow Jones Industrial Average, and the Nasdaq. Other index funds track niche sectors of the market if you’re interested in investing in a particular industry.
Index funds are generally low-cost because they’re not actively managed. They mirror the indexes they follow, so they don’t require a portfolio manager to decide which stocks to include in the fund.
This type of investment is perfect for someone who wants to take a low-risk, hands-off investing approach. Each index fund can contain dozens or hundreds of stocks (or more), so your portfolio is instantly diversified. You also won’t need to choose individual stocks or decide whether to buy or sell investments. All you need to do is invest in your index fund, and let it take care of the rest for you.
3. ETFs
ETFs, or exchange-traded funds, are very similar to index funds. They’re collections of stocks grouped together into a single investment.
The biggest difference between index funds and ETFs is how they’re sold. Index funds can only be bought or sold at the end of the trading day, while ETFs can be traded throughout the day like stocks. This difference mainly affects people who trade regularly, however, not long-term investors.
In some cases, ETFs can be cheaper than index funds. Although index funds are low-cost, they still have some administrative and operating expenses. ETFs charge fees as well, but they are sometimes lower than what you’d pay with an index fund. Some brokerages also offer lower minimum investment requirements with ETFs than with index funds, making it cheaper to get started.
Investing doesn’t have to be expensive, and there are ways to limit your risk while keeping your wallet happy. By avoiding penny stocks and investing somewhere safer, you can maximize your rewards without breaking the bank.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
