How Can I Raise Money to Start Trading?

One of the problems many people have when trying to make money trading is a lack of money to begin with. One of the oldest sayings in the world is that it "takes money to make money," right? It's true. Ask any economist today about why the gap between the rich and poor has widened an they are sure to answer, "access to cheap money." In other words, the wealthy have limitless access to funding, which allows them to make more either by investing it in a business, or lending it out, or otherwise using it to create more wealth for themselves.

Unfortunately access to limitless capital isn't a problem most of us have, in fact, most of us starting out as investors or day traders have none at all. How then are average Joes like you and me supposed to get a start then? As poor people, our limited methods of raising capital (from least to most expensive) come down to how much we can earn and save, how much we can get from selling what we already have, and how much we can borrow.

Can You Earn Money Sitting on the Couch?

The sad thing about any of these three options is that each have a price tag associated with them. The first method involves the least efficient way to raising funds - trading our time for money. Let's face it, this is a lousy way to raise funds, because employers and customers want to pay as little as possible for whatever you have to offer - presuming they want what you have to offer in the first place (not a given in this economy)! The trouble is, many of us have a lot of time on our hands - which we then spend playing video games or watching TV. Since some of have way too much time on our hands, is there any reason we couldn't use that time to make a little money instead? As odd as it may seem, while employers and customers may not want your labor efforts, many times those same people want your opinion! Even funnier there is a way to earn extra money while sitting on your lounge chair if you have internet access and are opinionated: online surveys (see here for example). Don't laugh - it's hard to imagine a lower skilled, easier way to make money with your time.

Do You Have Something of Value to Sell?

A second way to raise funds is to sell things we already own. For many people the most valuable asset they own is a car. Would you trade your car (and all the expenses that go with it - gas, parking, tolls, registration, etc.) for some cash to put in the stock market? I've heard worse ideas honestly. Most people don't actually own very much that is worth selling, but you can usually raise a few dollars on that old pair of skis by selling consignment or via craigslist, or eBid. Again, it comes down to how bad you want to raise money for trading. I saw one ad today from eBay promising $100 for your used electronics goods if they don't sell. With just a couple of old iPhones you could easily raise enough cash ($200 to $500) to start trading binary options.

Are You Willing to Borrow Money to Invest

Early on when I began investing I was having a conversation with a friend about my troubles raising cash for investing. He said, "Steve, you have access to tons of credit, why not borrow on that credit and invest it?" I thought about it for a few minutes, and a few days later I did just that - and that's how I got my start options trading. I don't actually recall which credit card I used to get started, but there are certainly no shortage of banks out there willing to lend large amounts on cash advances with zero or very low introductory rates. My first dabble was on a 9-month 3.9% interest offer. These days card companies offer 12 months or more at zero percent!

How to Start Trading Stocks with Little Money

A few people have asked me how to start trading stocks with little money. I suppose the easiest answer would be to tell them small capital investing is best done in venues other than the stock market. We'll take a few moments to explore how you can make money investing with little money to start and why the stock market probably isn't your best overall option.

Why the Stock Market Isn't the Place to Begin as an Investor

Everyone will tell you that investing in the stock market is risky, but that is not the reason the trader / investor just starting out shouldn't start here. All investments carry some for of risk, and in general the rewards earned from an investment should be proportional to the risk taken on. The reason why a person with a small amount of capital shouldn't start out trading stocks is the basic mechanics of the market. Trading stocks has specific costs which immediately eat into profits. As a result, the cost/profitability hurdles (in percentage terms) are much higher for a person with $1000 to invest than the person with $1000000. Typical daily returns on stocks are less than 1% per day, yet transaction costs on a $1000 investment typically would be at least 5% (getting into and then out of the stock). A day trader with just $1000 capital is likely to lose their entire stake over time just to transaction costs... and that doesn't even bring the cost of the bid/ask spread into the discussion. People wanting to know how to invest in the stock market as beginners really need to think about simplifying their investment choices. Making money trading stocks is more complicated than the new investor can be expected to handle in today's fast-paced market.

How Much Money Does It Take to Make Money in the Stock Market

I don't think there is an easy answer to this one, but as best I can tell based on today's yields I think it's safe to say a half a million dollars would be a minimum starting point to make decent money in the stock market. I tend to focus on how much money would a trader have to have ready to commit at prevailing top yields (for moderate risk) in order to make a median wage. A person with enough time to research could probably find a few investments earning 6-7% yield which (on a half million dollar investment) would earn income of $30-35K annually. That's a far cry from the median wage of upwards of $45K, but you could at least pay a modest size mortgage with that level of earnings.

How to Start Trading Stocks with Little Money

I imagine most people reading this column won't have close to the half-million dollar figure but still have a passion to make money investing in the stock market. So where does one go to learn how to start trading stocks with little money? I think the answer to that question lies with what investments are out there that pay high yields but have low transaction costs and can be made in small increments? The answer to how to start trading stocks with little money involves finding a way to invest small capital amounts in a way that offers a high enough yield to actually be worth the time and risk involved. It is for this reason when people demand, "Teach me to trade," I point them to a binary options trading system. It has all the elements needed for a beginner day trader: the contracts are simple, are traded in tiny dollar increments, and transaction costs are not a factor.

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