by Simon Wright

Created on: May 24, 2008

It is often assumed that stock market investment is something that is only possible for people who are lucky enough to have large sums to invest. However, the good news is that it is possible to make investment work for you even if you only have fairly modest sums to invest. This article looks at how you can maximise your returns through regular investment of small sums of money.

Before we go on to look at investment strategies for small investors, though, it's worth pointing out something in relation to this article's title. It is not possible to invest if you have no money as investment is defined as To commit (money or capital) in order to gain a financial return'. I will focus therefore upon instances where individual have some money available to invest, with the assumption being that they will be able to add a little money each month.

The principles that come into play for the small investor are largely the same as those that even the likes of Warren Buffet need to observe. However there are some aspects that will have particular importance for the investor who has less money to play with.

The steps that you should go through are as follows:

1. Determine whether you can afford to invest?
All of us need to maintain a safeguard pot of instant access savings. You can call this a rainy day fund and it is the money that you may need to fall back on if an unforeseen cost or problem emerges.

For the investor with less cash, maintaining this rainy day fund may be more challenging. It may be tempting to do without it and instead put all your money into buying shares. This however is an extremely risky strategy and certainly not one that any financial planner would advise you to take.

2. Choose how you are going to purchase shares?
Assuming that you have enough money, over and above your rainy day savings fund, your next decision is how you are going to buy shares? Very rich investors may prefer to have a stock broker who will place their orders for them. Smaller investors may prefer to opt for Internet purchases as the costs tend to be lower.

It is, however, still important to do some research before deciding which Internet broker to choose, as there can be big differences in the costs quoted. Typically, there is a fixed cost for each trade. For example, Internet broker A may charge you $20 per trade and Internet broker B may charge you $30 per trade. It's easy to see how this will especially affect smaller investors. $20 may be a small consideration on a $10,000 trade

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