Here's how to invest with just $2,000

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Investing does not require a lot of money. But while it is possible to start with just a few hundred dollars, it might not be comfortable for those who have started working only recently, according to Hazelle Soon, co-founder of The Joyful Investors.

Launched six years ago, the company specialises in growing personal investment portfolios. Hazelle and her team have worked in wealth management and financial market trading and offer a proprietary moneyball investing methodology (watch how it works on their YouTube video here).

Here, she advises on some strategies according to what you have available.

$2,000: Go slow  

If you are a novice investor and would like to build up the investing skills at a slow and comfortable pace, consider broad-based exchange-traded funds (ETFs). An ETF is an investment fund comprising a basket of securities that trade on a stock exchange. For example, in the US market, we have the DIA ETF that tracks the Dow Jones index and the SPY ETF that tracks the S&P 500 index.

With $2,000, it may not be most ideal to invest in individual stocks given that your hands are pretty much tied. One factor you need to consider is the lot size of stocks in the various markets.

For example, one lot size on SGX is 100 shares; 1 lot size on the US stock exchanges is one share, and one lot size on the Hong Kong stock exchange varies from 50, 100 to even 1,000 shares. Hence you may not be able to purchase shares of certain companies with an initial capital of $2,000.

Further, you cannot strategise portfolio construction. This is because it may not be cost-efficient to execute multiple transactions for just a capital of $2,000. Here’s an illustration: if you plan to build your portfolio with five stocks, a total commission fee of $20 out of an initial cost of $400 stands at 5 per cent already! That’s going to eat into your profits!

$5,000: Do your homework    

Start investing if you have not! Besides ETFs, consider stock picking. Though you are still limited by capital size, you can start honing your skills for stock picking.

This better prepares you to invest in the future with a bigger capital. But there is nothing wrong to still stick with ETFs as the stocks you are going to buy may be overly concentrated in certain sectors if we are looking at only two or three stocks.

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$10,000: Balance your portfolio

It is time to take action! This is a good amount to work with as it is sufficient for four to five stock holdings. Don’t incur opportunity cost by leaving this money idle in your savings account! If you have no investing experience, it would be good to kickstart your investment by sticking to an initial capital of between $10,000 and $20,000.

Make effort to sharpen your investing skills and build up your financial knowledge before trying to manage a larger investment capital. During this time, understand your risk profile and master an appropriate set of investing strategies.

This article was first published in Her World Online.