How to Start Dividend Investing When You Have Little Cash

How to Start Dividend Investing When You Have Little CashIf you want to build long-term wealth, investing is one of the best options. To really super-charge your efforts, though, dividend investing can be a great option. With dividend investing, you have the chance to reinvest what you receive in payouts, essentially getting more shares for free. On top of that, later on, your dividends have the potential to become a significant source of income for you.

Dividend investing now can help you build your portfolio faster, and then when you are ready to retire, you can use dividends as income. Not only that, but dividends often receive favored tax status. As of this writing, in both the Canada and the United States, dividend investing comes with tax breaks. Any time you can see tax breaks for your investments, it’s a chance for you to grow your wealth even more efficiently.

But, even if you know that there are benefits to dividend investing, how can you take advantage of these opportunities? Many people think that they need a lot of money to make dividend investing work for them. After all, if a company is paying out 25 cents a share, you aren’t going to see a sizable payout unless you have the capital to buy a large amount of shares.

The good news is that it doesn’t have to be that way. Dividend investing can be done, even if you don’t have a lot of money. Thanks to dollar cost averaging and dividend reinvestment plans, it’s possible for you to start investing now, no matter how much (or how little) money you have.

Start With a Dividend Index Fund

When you have a small amount of cash, you aren’t likely to be able to buy a lot of shares of solid dividend stocks. This is where indexing can help you. Investing in an index fund gives you instant diversity, there are usually low costs, and you can take advantage of a general trend for the market as a whole to rise over time, in spite of short-term losses due to volatility.

A dividend index fund is one that follows a variety of dividend paying investments. You can choose from high-yield funds, aristocrat funds, or funds filled with dividend stocks from different countries. Most online discount brokerages offer access to dividend index funds. Not only that, but you can usually buy fractional shares if you set up an automatic investment plan.

The ability to buy a portion of a share of a dividend fund is very helpful to the beginning dividend investor of limited means. You can set up a plan that deducts $100 from your account each month and uses to purchase as many shares as possible at the current market price. So, if a share of the dividend investment fund costs $75, your $100 can buy you 1.25 shares. The next month, your $100 buys however many shares it can, and you keep growing your portfolio.

Dividend index fund shares, purchased using an automatic investment plan, is one of the best ways to start dividend investing when you don’t have money.

Automatically Reinvest Your Dividends

A dividend index fund will result in regular payouts of dividends to your account. One of the best things you can do is give your discount broker’s automatic investment plan the ability to automatically reinvest your dividends. Whatever dividends you receive will go toward buying more fractional shares of your fund.

As you continue to use dollar cost averaging to buy shares, and as your automatic reinvestment adds more shares over time, your dividend payouts will get bigger. And, as your payouts get bigger, you will be able to buy more shares with your dividend reinvestment. You can see how the cycle feeds on itself and continues to grow your portfolio.

Over time, as your income increases, you can put more money toward buying dividend investments. You can sell some of your fund shares to purchase individual equities, or diversify into REITs. As you progress, it’s possible to change up your strategy, slowing continuing to build your portfolio and your nest egg.

The most important thing is that you start as early as you can so that you have time on your side. With the accessibility of investments, and with the different options you have now, it’s easier than ever to start investing in dividends, even if you don’t have a lot of money.

photo by:

How Do Binary Options Make Money?

How Do Binary Options Make Money?Traders investigating binary options trading as a way to potentially make money need to gain an understanding of how they work. The can provide investors with an instrument for speculating against the price of an underlying asset; this kind of speculative activity can both succeed and fail.

These instruments give traders the ability to profit by speculating on future prices in a number of underlying assets – including commodities like gold, currencies pairs like EUR/USD and stocks like Microsoft. Traders succeed when they correctly predict the future direction of the price of the underlying asset within the specified time period.

How to win at binary options trading

Let’s consider an example. Imagine that you developed a belief that the price of Google’s shares will be higher at the end of today than it currently stands and you wanted to profit from that belief. A good way to capitalize on this view would be to enter a call with a broker. Calls are used to speculate that the price of the underlying asset will be higher at the time the contract expires. In contrast, puts are used to speculate that the price of the underlying asset will be lower at the time the contract expires. In both cases you only succeed if your prediction is correct.

If Google’s share price currently trades at $500 and you believe that Google’s share price will be $520 at the end of the day, to generate a profit you would want to enter into a Google call that expires at the end of the trading day. If Google’s shares at the end of the day are higher than they were at the time that you entered the contract, your contract will be ‘in the money’ and you will generate a positive return on your investment. Typically this return will be in the order of 70-85%.

How to lose at binary options trading

The example outlined above focuses on a set of positive outcomes – outcomes in which the trader succeeds. As with all forms of trading, binary options trading does impose risk, and there is a chance that after entering a trade you will wind up with less money than you started with.

Let’s consider a slightly different set of events to illustrate how you can lose at binary options trading. If Google’s share price currently trades at $500 and you believe that Google’s share price will be at $520 at the end of the day, and as a result of this belief you purchase a call option on Google stock, you will lose money if at the time the option expires Google’s stock price is lower than $500. Typically you will lose 100% of your investment when your binary option expires when the option is ‘out of the money’. So the trick to avoid failure in binary options is to always correctly predict the direction of the underlying asset that is being traded.

***

Although trading is not a risk-free way to generate profits – in fact, you can succeed or lose all of your initial investment – these instruments offer the potential for generating massive 70-85% returns within a very short timeframe. Before starting binary options trading it is highly recommended that you do careful research into the range of binary options brokers out there.