by Juan Leer

Created on: May 24, 2008   Last Updated: January 25, 2009

Without exception, people would love to get started with investing. It's the road for the "common" man to become wealthy, as investing allows a person to build wealth slowly and consistently over time. However, there are generally two things holding people back from actually getting started with investing: 1) they don't know how and 2) they don't think they have the money to do it. But the truth is, it just takes a little money to get started with investing, and it's not that hard.

Lots of people think investing means buying and picking individual stocks, which is an intimidating proposition. But stock picking is not a way to get started with investing, especially if you have just a little money to spend. With just a little bit of money, you will not be able to get a diversified portfolio picking stocks, and you'll be facing far too much risk.

So the first thing that you need to focus on is a mutual fund or an index fund. Both of these things are perfect for investing with little money. Why? Because they allow you to diversify your portfolio, protecting you against the risk that is inherent in the stock market. A mutual fund buys lots of different stocks (large companies, small companies, international, etc.) and assembles them into one portfolio. An index fund buys stocks and tries to track the market. Both of these things will help to protect against risk.

So we have established that mutual funds are the best tools for investment if you have just a little bit of money available. They are the best investment tools for properly diversifying your portfolio even with a small bit of money. You can usually go to any type of brokerage website (Vanguard and Fidelity are the two that I would recommend), and it would be pretty easy to set up.

However, while I would certainly recommend starting to invest even if you have just a little money, you can't just put it in there and forget about it. One thing to consider, if you have the means, is to set up an automatic investment plan. For example, you could invest something like $50/month into an investment plan. This allows you to continue investing with just a little bit of money, and it will help you slowly start to build up your investing portfolio. It will also help fight against the urge to try and time the market, because you will be investing every month (or whatever time frame you choose) regardless of how the stock market is doing.

So it's very important to start investing, even if you have just a little bit of money to do it. If you invest your money into mutual funds and ideally set it up automatically, over time you can grow a nice-sized, well diversified investing portfolio.

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