Best Ways to Invest Small Amounts of Money

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The best way to invest small amounts of money is to develop a diverse portfolio of real estate, bonds, stocks and mutual funds. Consider investing small amounts of money on a monthly basis to build funds with advice from an investment consultant in this free video on investments.

Part of the Video Series: Personal Finance & Money Management
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Video Transcript

Hello, my name is Roger Groh. I'm with Groh Asset Management, and we're here this morning to talk about the best ways to invest small amounts of money. Now, investing small amounts of money may be not a whole lot different from investing big amounts of money. The rule of thumb is, that in an investment portfolio, that it makes sense to have some real estate, some bonds, and some stock, and maybe some other stuff, too. Maybe some commodities, or gold, for instance, if you wanted to do it that way. But, the big thing is the mix between them, because that will determine how much down-side you have in your portfolio. In today's environment, if you already have money in stock, you know what it feels to have your stocks go in half. Are you prepared to have that happen again? One rule of thumb: it's best to own as many bonds as a percentage of your total portfolio as you are old. So, for instance, if you're fifty, perhaps having fifty percent of your portfolio in bonds makes sense. If you're seventy, perhaps having seventy percent or more of your portfolio in bonds makes sense. High quality bonds, without down-side, and without risk. The reason is that they'll cushion your portfolio during periods of bad stock market performance. Okay. And the rest, the other twenty, thirty, forty, fifty percent, whatever it might be, you can invest in stock, commodities, whatever. Now how do you do that? Well, number one, you can always use mutual funds. Many of the fully tax free, and commission free funds are terrific for small amounts of money. But, don't expect to put in money right now and to have it go up immediately. One of the smartest ways to do it, is put in a little bit today, a little bit in a month, and go on a monthly plan, where you continue to contribute over a very long period of time. The same would hold true for the bond side, the same would hold true for the commodities side. Another way to do it would be to use ETFs. They're sort of mutual funds, but they trade like stock. And, again, you can put very small amounts of money in there, and you can buy those from your brokerage firm or directly from banks that actually market them. You might go to Schwab, for instance, to do it, or to Merrill Lynch as a place to buy those types of things. So, those are some ways. Look at mutual funds, look at ETFs as a great way to invest small amounts of money. You can buy stock, you can buy bonds, you can buy commodities, you can buy real estate, whatever you might like. I'm Roger Groh with Groh Asset Management.

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