Stocks to Buy if You Are Poor

Investing in stocks is a great way to grow and preserve wealth. However, investment advice typically comes from millionaires and billionaires. They’re often out of touch with what it’s like living check to check and being financially poor.

And income inequality is increasing during the pandemic – global billionaire wealth increased by $3.9 billion from March 18 through the end of 2020. The World Bank also estimates around 100 million people became poor in 2020 with another 50 million estimated people entering poverty in 2021.

This leaves a lot of people needing to climb up to a higher wealth bracket. That begs the question: which stocks to buy if you are poor.

Thankfully, it doesn’t take a lot of money to get started with investing in stocks. There are multiple ways to go about it, and this article focuses on how to get started with little money to spare. We’ll cover the risks and rewards of these strategies while explaining how to get started.

Safe-Haven Stocks

It’s easy to see stories of 10x multiples and think you’re going to replicate that success. The reality is that even the people who earn those windfalls don’t do so often – more often than not, they lose on speculative investments.

Avoid speculation and look for companies with proven track records, like Apple Inc (NASDAQ:AAPL), Netflix Inc (NASDAQ:NFLX), Alphabet Inc (NASDAQ:GOOGL), Microsoft Corporation (NASDAQ:MSFT), and Berkshire Hathaway (NYSE:BRK.A).

These are proven businesses that are more focused on slow and steady growth over a fast 10x turnover. This is why they are often included in retirement plans, both through the S&P 500 and directly. Safe-haven stocks are non-cyclical stocks that preserve wealth during volatile market conditions, which the 2020s qualify as.

Remember that even the ultra-wealthy have investments in safe-haven stocks as part of their diversified portfolios. It’s done to ensure a portion of their wealth is safeguarded against a recession or other depreciating markets.

And even as a poor investor, you can diversify your portfolio by mixing in fractional shares.

Fractional Shares of Top Stocks

Fractional shares are a relatively new way to invest and open the market to people who normally wouldn’t have the financial means. Shares of top-performing stocks like Amazon (AMZN) or Google (GOOG) cost thousands of dollars – one share of Berkshire Hathaway costs more than the average home!

With brokerages like Robinhood, you don’t have to secure a mortgage just to invest. Instead, you can buy fractional shares with as much money as you have. Brokerages like M1 Capital automate fractional shares into pies, so you can create the equivalent of a mutual fund or ETF.

As the name suggests, a fractional share is less than a whole share. This isn’t possible on the open market, but offering this is one of the ways newer brokerages helped democratize finance. Fractional shares let average people own a portion of a company and reap the monetary benefits without breaking the bank.

Many brokers also let you create a recurring investment of a small amount, like $50 per month. This way you buy $50 worth of the same stocks each time without concern for how much of the company you’re buying. Over time, it can add up to a full share and more, so long as you pick the right investments.

There’s a relatively easy way to do that too – invest in what you know.

Invest in Brands You Consume

The hardest part about investing is choosing your investments, and an easy hack for that is to stick to companies you use yourself. If you wear Nike (NKE) shoes, invest in that. If you buy them on Amazon (AMZN), invest in Jeff Bezos’s company. If you’re eating McDonald’s (MCD) a lot, buy shares of the food conglomerate.

Looking around your house, you can see where you already spend your money. That’s the starting point of where you should be looking to invest your money, because you’re already a customer. Every dollar you spend on that company as a customer helps you as an investor and vice-versa. It’s a win-win scenario.

Be aware that just because a company makes quality products doesn’t mean it’s a great investment though.

Sometimes companies you know and love can struggle through hard times. We saw that happen a lot during the pandemic. Make sure you do your research on the companies you invest in, so you understand what’s going on with them.

Reading market charts and business news regularly can help you to better understand where to put your money. Before turning any savings into investments, be sure you can at least name the company’s CEO and give a 30-second pitch as to why you’re invested. Imagine you had to sell a friend on why the firm is a good investment.

There’s another investment rule to know before you get started.

Dabble with Money You Can Lose

It’s very tempting to want to be included on that next big stock that’s expected to skyrocket. Sometimes they do, and sometimes they fizzle out. Market speculation can be profitable, but it’s more likely that you’ll lose or barely retain your initial capital. FOMO (fear of missing out) is a real thing, and chasing those wins can become an obsession.

Be smart with your money and only invest capital you can afford to lose.

When you’re poor, that’s going to be a small dollar amount but it could be a chunk of your net worth. But it’s still possible to invest. There are small lifestyle adjustments you can make to free up at least $100 per month, even if it’s not comfortable.

But the point isn’t to get rich quick. That’s never a realistic goal, and overnight success isn’t likely to happen until you put in thousands of nights in advance of that night.

Instead, play it conservatively and invest the small amounts you’re willing to lose. Instead of buying lottery tickets, buy fractional shares in top companies you spend money on already yourself. Over time, you’ll see the benefits and be glad you did.

---

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.