Here's This Wall Street Expert's Tip to Buying Stocks for $5 (2024)

It's an option that's probably available to you.

Building a diversified portfolio is one of the most important steps you can take as an investor. If you load up on a wide range of companies and assets in your brokerage account, you can not only grow a lot of wealth over time, but also protect yourself in the face of stock market turbulence.

But what if you're not exactly overflowing with available funds to invest? Between your rent or mortgage payments, car payments, utility bills, and food costs, you might run into a situation where you're down to your last $5 from that month's paycheck.

The good news, though, is that you can actually do a lot with $5. Just ask Vivian Tu of Your Rich BFF.

When $5 can really go far

In a recent video, Tu explained that buying broad market ETFs is a great way to branch out and build a solid portfolio. But broad market ETFs can trade for over $200 a share, which may be beyond your investing budget. That's not a problem, however, thanks to fractional shares.

As Tu said, "We no longer live in the Dark Ages." And while investors, in years past, were forced to buy shares of stocks or ETFs in whole increments, these days, that's not a requirement. That's because most major brokerages now let you invest in fractional shares.

Here's how that might work. Let's say there's a stock or ETF you want to own that trades for $200 a share. If you only have $5 to put into an investment, a full share clearly won't be feasible. But the good news is that you can buy just $5 worth of whatever company or fund you're looking at.

Now, you may be aware that some companies pay dividends to shareholders. If you're wondering how that works in the context of fractional investing, it's simple. If you put $5 into a stock that trades for $200 a share, it means you own 1/40 of a share. If the company pays a quarterly dividend of $40, you'd get $1. Everything is simply proportional.

Similarly, let's say you buy 1/40 of a share of stock whose value increases by $100. That means you'd be looking at a $2.50 gain if you were to sell your fractional share of that stock.

Money doesn't have to be a barrier to diversification

It's hard to load up on different stocks when you're limited in the amount of money you have to invest with. The great thing about fractional shares is that you can buy bits and pieces of different stocks and ETFs so that all told, you're assembling a diverse investment mix.

In fact, if you really want to branch out to cover the broad stock market, look at buying shares of total stock market or S&P 500 ETFs on a fractional basis, or in full if you can swing it. That gives your portfolio exposure to different companies and market sectors without having to burden yourself with researching dozens of businesses.

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Here's This Wall Street Expert's Tip to Buying Stocks for $5 (2024)

FAQs

Can I buy stocks with $5? ›

Instead of buying a whole share of stock, you can buy a fractional share, which is a "slice" of stock that represents a partial share, for as little as $5.

What is the 5 rule in the stock market? ›

The rule suggests that you should not invest more than 5% of your portfolio in a single stock. The idea behind the rule is to minimize the risk of losing a significant portion of your portfolio in case the stock performs poorly.

What are the hottest penny stocks right now? ›

Most Active Penny Stocks
  • GGB3.800.19% Gerdau S.A.
  • NYCB3.530.16% New York Community Bancorp, Inc.
  • DNA0.960.09% Ginkgo Bioworks Holdings, Inc.
  • PLUG2.740.29% Plug Power Inc.
  • TLRY2.100.08% Tilray Brands, Inc.
  • OPEN2.210.18% Opendoor Technologies Inc.
  • PTON3.430.29% Peloton Interactive, Inc.
  • AMC3.300.17%

What is a stock that sells for $5 or less per share called? ›

Penny stocks are those shares that trade below $5 per share, and as low as a few pennies per share. Many penny stocks are traded via over-the-counter (OTC) platforms such as the OTCBB or Pink Sheets, as they do not meet the listing requirements of major stock exchanges.

How much can $1 get you in stocks? ›

Investing $1 a day can turn into tens of thousands of dollars over a long period of time. You can get started by opening a brokerage account and researching low-cost index funds.

Is $5 a penny stock? ›

In the past, penny stocks were considered any stocks that traded for less than one dollar per share. The U.S. Securities and Exchange Commission (SEC) has modified the definition to include all shares trading below five dollars.

What are Warren Buffett's 5 rules of investing? ›

Here's Buffett's take on the five basic rules of investing.
  • Never lose money. ...
  • Never invest in businesses you cannot understand. ...
  • Our favorite holding period is forever. ...
  • Never invest with borrowed money. ...
  • Be fearful when others are greedy.
Jan 11, 2023

What is No 1 rule of trading? ›

Rule 1: Always Use a Trading Plan

You need a trading plan because it can assist you with making coherent trading decisions and define the boundaries of your optimal trade. A decent trading plan will assist you with avoiding making passionate decisions without giving it much thought.

What is the golden rule of stock? ›

2.1 First Golden Rule: 'Buy what's worth owning forever'

This rule tells you that when you are selecting which stock to buy, you should think as if you will co-own the company forever.

Which stock will boom in 2024? ›

Best Stocks to Invest in India 2024
S.No.Top 5 StocksIndustry/Sector
1.Tata Consultancy Services LtdIT - Software
2.Infosys LtdIT - Software
3.Hindustan Unilever LtdFMCG
4.Reliance Industries LtdRefineries
1 more row

What stocks are a penny? ›

A penny stock is a share that trades for $5 or less. While some investors consider penny stocks as trading for amateurs, Wall Street analysts and other experts follow these low-price stocks. Many penny stocks are from new companies with a micro market cap of under $300 million.

Which penny stock is best to buy? ›

Best Penny Stocks: Definition, Features, Types & Top List of Penny Shares
  • Sunshine Capital Ltd.
  • Standard Capital Markets Ltd.
  • G G Engineering Ltd.
  • Globe Textiles (India) Ltd.
  • Growington Ventures India Ltd.
  • Aakash Exploration Services Ltd.
  • Debock Industries Ltd.
  • Kenvi Jewels Ltd.
Apr 10, 2024

Where to invest $5 right now? ›

Stock Movers
TickerCompanyBuy Stock
OPIOffice Props ITBuy/Sell
CNTXContext TherapeuticsBuy/Sell
HSDTHelius Medical TechBuy/Sell
OBIOOrchestra BioMed HldgsBuy/Sell
36 more rows

What is the cheap stock rule? ›

A key financial reporting concern is often referred to as “cheap stock,” which is when the value of the underlying stock at the grant date is significantly less than the estimated IPO price or the fair value implied by the SPAC merger transaction.

What are the best stocks under $10? ›

Compare the best stocks under $10
CompanySectorMarket Cap
Clarivate PLC (CLVT)Technology$4.76B
iQIYI Inc. (IQ)Communication services$4.79B
PagSeguro Digital Ltd. (PAGS)Technology$4.00B
Fisker Inc. (FSR)Consumer cyclical$52.82M
2 more rows

Is $10 enough to invest in stocks? ›

Stocks trading under $10 can be attractive for investors looking to scoop up some cheap shares. Unfortunately, quality stocks trading for less than $10 are few and far between. Stocks priced at this level can be a red flag for investors that something serious is wrong with a company.

What is the lowest amount you can buy stocks for? ›

There is no minimum order limit on the purchase of a publicly-traded company's stock. Investors may consider buying fractional shares through a dividend reinvestment plan or DRIP, which don't have commissions.

What is the minimum amount to buy stocks? ›

There is no minimum amount that you need to trade in the stock market. India has two main stock exchanges—the Bombay Stock Exchange and the National Stock Exchange. Stock prices range between ₹1 to ₹75,000. You can buy any stock in any quantity.

What is the minimum you need to buy stocks? ›

While there is no minimum order limit on the purchase of a publicly-traded company's stock, it's advisable to buy blocks of stock with a minimum value of $500 to $1,000. This is because no matter what online or offline service an investor uses to purchase stock, there are brokerage fees and commissions on the trade.

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