So how much money do you need to
start trading stocks? It depends on your target returns and most importantly
the amount of money you are willing to risk for that return which is the first
thing you would have to consider above all. Trading securities without first
assessing risk is a sure way to lose a significant portion of your investment
fund especially if you are using leverage to boost your buying power. Looking
at the positive side, stocks do provide higher returns than bonds, or your money
on a savings account in the long term. In order to trade stocks you would have
to open a brokerage account or purchase the shares directly from the company.
Brokerages provide advise and accessible information about the stock you are
interested in buying or selling so it is a preferred way to trade stocks. Now
how much money do we really need for us to be able to profit significantly,
lets take a closer look.
A lower priced stock results in a higher profit even with just a point move up, since we can accumulate more shares even with just a small amount. In an event of a two dollar move or more, that +2.00 or more movement would be multiplied by the number of your shares, and the total will be added as dollar amount to your capital to determine total profit.
For some stocks priced under $1.00, gains are amplified as we can accumulate more shares than buying a $4.00 stock. A $500 investment would buy an equal amount of shares, which could translate into a 100% gain should that $1.00 stock doubles its value to $2.00, but this strategy is risky than trading a high profile, well managed company stock trading at a much higher price. Now lets see how our three accounts would fare on a stock trading at a range between $40 to $80 on the next page.