

Q: Can I invest in more than one stock if I have $500?

A: Investors just starting out or those with small initial balances are at somewhat of a disadvantage. But there are investments that can keep those drawbacks to a minimum if investors know where to look.

Keeping fees low and diversifying are two top goals of investors. But keeping fees down and creating a well-balanced portfolio can be difficult when you're playing with $500. For instance, most online brokers charge about $10 to buy or sell a stock. That's pretty reasonable for someone with a $100,000 portfolio, but that's 2% of a $500 portfolio.


That's why investors with just $500 to invest are best served avoiding individual stocks until they can amass more money. Instead, these beginning investors should buy exchange-traded funds, or ETFs. ETFs are stocks which own claims to a wide array of investments.

The ETF solves both of small investors' problems. First, most ETFs come with incredibly low fees. That allows you to keep more of your returns rather than sharing them with an investment company. Some ETFs are available for $0 commissions at select brokerage firms. Secondly, buy buying a single ETF, your money is spread across many stocks. For instance, if you buy an ETF that invests in the Standard & Poor's 500, in just one transaction, your money is invested across 500 different stocks.

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