Saturday, May 6, 2017

No Money to Invest?

        When it comes to investing, a lot of people say they cannot afford to invest.  I think people can not afford NOT to invest. What do I mean by that?  Investing means putting your money to work.  If a person spends on their income, they will not get anywhere in life. People often say you need tens of thousands of dollars to invest. The modern day potential investor has a lot of advantages over someone years ago.

       Years ago before the birth and rise of discount brokerages meant that investors had 2 options. They could call up the brokerage and purchase shares or units at high commission. This made it harder to pick entry points.  Also investor's were not able to see real time quotes like they do today.

        The investors of today have another method still at their disposal.  The real old method of purchasing shares is directly through the transfer agent. In Canada, can purchase shares through the transfer agent directly.  Before using the transfer agent, often times the potential investor has to buy a share from another person.  In Canada, this can be done through the website  An individual would then go to the Share Exchange board and put a message on the board saying they are looking for a share in a certain stock. A share certificate is then sent to the transfer agent by the seller and the buyer would receive the share in a few days or so.  When an investor purchases shares through the transfer agent, they have no control of the purchase price of the new shares. Purchasing shares through the transfer agents means investors do not pay commissions and the entire dividend is reinvestment or paid out.  Some of the companies have a DRIP discount on shares purchased with re-invested dividends.  This method of investing do not require a lot of upfront costs.

     Nowadays, investors pay low commissions via discount brokerages. These discount brokerages have commissions of $10 or under compared to full brokerages which have commissions of $30 or more.  Unlike a full brokerage, an investor using a discount brokerage has to  pick their stocks on the own after doing their own research.  Currently, Dan of Sharpe Trade is proving a way this can be down.  You can read about this project, called the Sharpe Income project on Sharpe Trade and search for Sharpe Income or click on the Sharpe Income label.  Their entries on Monday provide a link to the start of the project and also a link for a spreadsheet.

   For disclosure, I have no affiliation with Sharpe Trade LLC or any of its products on their website. 

      A few of the discount brokerages off commission free ETFs for purchasing only or for both purchasing and selling. The fees associated with the purchase or selling is a ECN, or electronic exchange network, fee which is usually very small.

      Exchange Traded Funds, aka ETFs, are cheaper than mutual funds when it comes to fees and trade like a stock on the stock exchange.  Investment fees eat into returns, so an investor should keep their fees as low as possible.

      The power of DRIPs is shown in the following video.

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