They say it takes money to make money, and that holds true within the realm of investing. After all, you can't build a portfolio without money. Once you do, however, you'll have the potential to grow your money into a much larger sum over time.
But what if you only have $1,000 to start off with? If that's the case, you'll want to make the most of your limited funds. Here's how.
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1. Load up on S&P 500 ETFs
It's important to maintain a diverse investment portfolio. Doing so could protect you during stock market crashes, while setting you up to profit during periods when the market is strong.
It's hard to buy a whole bunch of different stocks when you only have $1,000 to work with. But one thing you can do is invest in the broad market by buying S&P 500 exchange-traded funds (ETFs).
With ETFs, you get to own a bucket of stocks with a single investment. And if you buy S&P 500 ETFs, you'll effectively be getting a piece of the 500 largest publicly traded companies in the market today.
2. Buy fractional shares
If you're limited to a $1,000 investing budget and there's a company you want to own with a stock price of $500 a share, you don't have the makings of a very diverse portfolio. Even if you limit yourself to a single share, you'll still have half of your assets tied up in one company.
A better bet could be to look at fractional shares. As the name implies, fractional shares allow you to buy a portion of a share of stock if a full share is too expensive. And fractional shares are a great way to assemble a more diverse investment mix if money is tight.
In this example, you might choose to spend $125 on a quarter of a share of your favorite company's stock instead of forking over $500 for a full share. That would, in turn, leave you with more flexibility to branch out.
3. Purchase some dividend stocks
Dividend stocks have the potential to gain value over time, just like stocks that don't pay dividends. But by collecting dividends, you'll pump more money into your portfolio -- money you'll then have the option to reinvest as you see fit. In fact, you can generally arrange to have your dividends reinvested automatically so you don't have to think about it.
Make the most of a limited budget
You might assume that you won't get very far as an investor if you only have $1,000 to work with. But actually, that $1,000 may go further than expected -- especially if you play your cards right and build out your portfolio strategically.
It's worth looking at S&P 500 ETFs, fractional shares, and dividend stocks when money is limited. And remember, while you may only have $1,000 to work with now, that could change over time. Loading up on these investments could set you up with a solid foundation to build on.
