How to Invest in Stocks with Little Money
There are many small investors who wish to learn stock investing for decent gains. Most people believe that you need a lot of money to make stock investments. However, this isn't true. you've the freedom to buy stocks as per your budget and risk-taking ability. There are, however, some things which you need to keep in mind, before investing your hard-earned money.
Investing in the Stock Market with Limited Funds
Conduct Detailed Stock Research
A primary goal of the FASB's continuing project on
not-for-profit (NFP) accounting is to reduce the inconsistencies in
accounting methods used in the various NFP sectors. To that end,
Statement of Financial Accounting Standards (SFAS) 116, Accounting for
Contributions Received and Contributions Made, standardized NFP
accounting procedures for contributions and SFAS 117, Financial
Statements of Not-for-Profit Organizations, established a minimum level
of financial reporting and disclosures for all NFPs. The latest chapter
of the FASB's NFP project is SFAS 124, Accounting for Certain
Investments Held by Not-for-Profit Organizations. This standard provides
accounting and reporting requirements for all NFPs with certain types of
investments. Prior to SFAS 124, accounting guidance for investments of
NFPs was contained in four separate AICPA audit guides which resulted in
diverse practices among the different NFP sectors.
In general, SFAS 124 applies to investments in equity securities
(i.e., stock) with readily determinable market values and all
investments in debt securities. The standard became effective for fiscal
years beginning after December 15, 1995, with earlier application
encouraged. This article addresses the main points of SFAS 124,
including the special problems surrounding accounting for endowment
Accounting for Investment Gains, Losses and Income
SFAS 124 bears a striking resemblance to SFAS 115, Accounting for
Certain Investments in Debt and Equity Securities, which establishes
reporting requirements for business enterprises' investments. That
similarity is the use of fair value accounting. A primary difference
between the two investment standards is that there is no requirement
under SFAS 124 for investments to be categorized as either
held-to-maturity, available-for-sale or trading. Under SFAS 115,
investments must be classified in these groups, with different reporting
requirements for each group. SFAS 124 simplifies investment accounting
for NFPs by requiring all investment securities under its scope to be
accounted for at fair value.
As previously mentioned, SFAS 124 applies to an NFP's
investments in equity securities that have readily determinable fair
values and to all investments in debt securities. Equity securities are
considered to have readily determinable fair values if any one...
Researching stocks is vital for all investors, irrespective of the amount of money they wish to put in. Such research can be useful to identify potential investment opportunities and make investments at the right time. It involves knowing company fundamentals, company promoter details, past performance history and growth rate over the years. Investors can think of buying stocks, provided all these things are positive for any company.
Understand the Intrinsic Value
Understanding the valuations of stocks is very important. For this, investors need to take the market capitalisation, price-to-earnings ratio, peer comparison of profits. Market capitalisation into account. Investments in fundamentally strong stocks, chosen through sound technical analysis can help in generating superior returns over the years.
Buying at the Right Price
Stock market investments can provide brilliant returns if the buying price is attractive enough. So, you need to invest your money on corrections, instead of a continuous rally of several points. Studying technical charts helps in determining the support points and resistances effectively. You can take help from professional technical analysts if you've any kind of doubt in your mind.
Avoid Overexposure to a Particular Sector
When you're investing with low amounts of money, you should avoid overexposure in any particular sector. Diversified investment strategy provides handsome profits, as per the opinion of senior stock analysts. You need to choose two or three sectors which are performing consistently and invest your money in them carefully. Try to analyse the performance of these sectors and take decisions to increase your investment in any one sector or decrease it.
Book Profits at the Right Time
Profit-booking at the right time is extremely essential for all small investors. Since the funds you've are quite limited, you need to get out of stocks, making a decent profit. Re-invest your profits to maximise your returns. This will naturally increase your total capital gradually. Make sure that you don't sell your stocks and incur losses, as this will cause erosion of capital.
Have Stop Losses at Right Levels
Stop losses are essential to lock your profits at the right levels and to minimise your losses. Once the current market price reaches the stop loss point, you can exit your position and re-enter the stock again at fair or just valuations. This technique is most useful for day trading purposes.
DISCLAIMER: This article is just for reference purposes and doesn't recommend any stock market investments.