Certainly. There is a common misunderstanding among new investors that they require huge capital in order to become a successful investor in the financial market, which is not true. In many cases you can open an online trading account through any licensed broker $500 or less as your initial deposit. Though you might not be able to buy many shares with less initial capital, you can still become a successful trader if you invest wisely and also increase your capital over time.
In order to invest wisely and frugally, you should first learn about different categories of investment options available. You can gain fundamental knowledge about investing and several investment techniques by reading various blogs and investment guides that are available online. You can also approach financial advisors or market experts that can assist you in formulating your investment strategy and building your investment portfolio.
You should select your assets based on your budget, prevailing market conditions, risk/reward ratio and various other factors. The different types of investment options include bonds, stocks, mutual funds, exchange-traded funds (ETFs), money market funds, binary options and other derivatives etc.
Bonds are financial instruments that offer a pre-determined interest for certain time period based on your initial investment. When the bond expires, the investor will be paid back the face value of the bond. Bonds are considered to be less risky when compared to other forms of investment, since it guarantees fixed returns for a specified term.
You should diversify your investment portfolio in order to minimize the risk and get maximum returns. Stocks are the most common methods of investment but investing in stocks might be costly when you have less capital because you will be paying commissions for each trade you perform. Hence small investors might consider other forms of investment rather than stocks. Even if you plan to invest in stocks, you should split your investments across small-cap, large-cap and mid-cap companies as well as international stocks. You should invest in small portions regularly across various sectors rather than putting all your money in one particular stock. Savvy, frugal investors avoid putting all their eggs in one basket!
You can also think about mutual funds if you want to be frugal in planning your investments. Mutual funds are professionally managed financial instruments which are funded by its shareholders. Mutual funds generally invest in diversified assets such as stocks, commodities, bonds, market Indices etc. Another low-cost method of investment are ETFs which are more affordable to small investors. They generally have low annual expense-ratio when compared to open-ended funds. Another important advantage of ETFs is their liquidity which it makes it easier for you to buy or sell ETFs anytime depending on the market movements.
Asset allocation and diversification of portfolio are important techniques that investors should follow in order to minimize their risks. Another technique to reduce risk is dollar cost averaging, which involves purchasing fixed dollar amount of certain investment at regular time intervals. If you are looking for affordable ways of investing with predetermined risk, you can also think about binary options.
Binary options are investment vehicles which require very low investment capital. You can open a binary options trading account through any licensed broker with an opening balance as low as $500. Binary options are based on the speculation of price movement of underlying assets like commodities, forex currency pairs, stocks etc. Traders attempt to correctly predict the future price of an underlying asset and if their prediction is correct, they can gain as high as 80% returns on their investment. With binary options, the risk is predetermined since you will either win the trade (and gain as high as 80% profit) or lose the trade and your initial investment. Binary options are one option for investors and the risk/reward profile is much different when compared to traditional investments like stocks.