How Minimum Wage Earners Can Own Stocks
Nobody plans to retire poor, but lots of poor retired people failed to plan. When it comes to financial planning, the best friend a working man or woman has is time. It is possible to create a sizable nest egg by investing in quality stocks, even if you are working for minimum wage, so long as you start early and stay focused.
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Make a Budget
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Every successful financial plan begins with a budget. Making a budget doesn't have to be a convoluted process; just list all of your monthly income on one side of a sheet of paper and all of your monthly expenses on the other side. Subtract your expenses from your income. Whatever is leftover is your disposable income. This is money you can use to save or invest in stocks.
Retirement Accounts
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Check with your employer to see if they offer a company-sponsored retirement program such as a 401(k) or SEP IRA. Company-sponsored retirement plans typically allow employees to contribute a percentage of their wages into a range of investments, including stock-based mutual funds. Even if your company does not offer a sponsored retirement program, almost any taxpayer who has earned income can have an individual retirement account (IRA). IRA accounts can hold a wide variety of investments including stocks and stock-based mutual funds. Many mutual fund companies offer IRAs with a reduced minimum investment, which makes it easy for even minimum wage earners to invest.
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Mutual Funds
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Stock-based mutual fund companies gather a pool of money from a large number of investors and invest those pooled funds in the stocks of different companies. This provides investors with the twin benefits of professional management and diversification of assets. Some mutual funds require a substantial initial investment, which puts them out of the reach of minimum wage earners. Some mutual funds offer programs that allow investments as low as $25 to $50, provided the investor agrees to make regular monthly investments, usually through an automatic bank draft. This can be a good way for minimum wage earners to accumulate a position in the stock market.
Direct Investments
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Stock purchases are traditionally made on major stock exchanges through stock brokerage firms. Some companies allow investors to purchase stock directly from the company without the need to go through a brokerage firm. These programs are call direct stock plans or direct reinvestment plans. These programs typically permit individual investors to open an account directly with the company and invest a specific dollar amount, rather than commit to purchasing a specific number of shares of stock. The company usually pays all brokerage fees, and the stock is purchased on a specific day at the going market rate.
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