Expert: Gina Boykin - 3/16/2008

Question
Hello,

I do not have much money to invest 500-1000 and would like to invest this in order to get quick returns, how best can I do this and with whom?

Would you recommend the stock market to buy and do a quick sell?

Answer
Anything you invest in to get "quick returns" could possibly result in you losing most or all of your money.  So make sure that anything you invest in this matter is money you can afford to lose.  With that being said, there are three investing methods I can suggest that do not require a lot of money – mutual funds, stock options and forex.  

Nowadays, mutual fund programs are geared toward people with small investments.  You can invest as little as $50 at a time in a mutual fund – without commissions (assuming you only invest in “no load” funds).  Stay away from load funds.  A load is just like a commission, and historically load funds don’t do any better than the no load ones.  This is not a get rich quick method of investing, but it is a way to invest for the long-term.  To learn more about mutual fund investing, go to www.investopedia.com or look at sites for individual brokers, such as Fidelity, Vanguard, and Charles Schwabb.

Purchasing individual stocks with the amount of money you are talking about means that the stock will need to go up quite a bit to recoup just your commissions. Remember that you can pay $10-$30 to your broker each time you buy and sell a particular stock.  If you purchased an "option" to buy or sell the stock instead, it requires less money.  You're not purchasing or selling the stock, you are buying the right to purchase or sell stock.  Buying and selling options is really a complicated subject, so you will need to do a lot of research first.  You can start by learning about basic investing terms at www.investopedia.com and www.fool.com.

Forex is another advanced trading strategy.  This one involves buying and selling foreign currency (like the dollar or the yen).  As I’m sure you’ve heard on the news lately, the dollar has been decreasing in value.  If you owned another currency like the Euro, it would be worth more dollars right now than a year ago.  To learn more about forex trading, go to ww.babypips.com.  

If you decide to do forex investing or stock options, trade with a “virtual” account for at least a few months first.  There are brokers that offer this service for free.  As I said, these are advanced trading strategies and you don’t want to lose all of you money because you rushed into it.