Our experts weigh in on how novice traders should start building their accounts
 
   
     
   
 
NOVEMBER 19, 2024
   

Hey y’all!

I’ve got an interesting topic today for our experts to discuss! And it comes directly from you, our readers!

Lisa M. wrote into our Q&A and asked: “How does a novice with $500 start investing?”

It’s a great question because, as I said in my newsletter yesterday, everyone has to start somewhere — and sitting on the sidelines forever won’t get you anywhere.

So I asked all our experts this question. Geof and Nate haven’t been able to get me their answers yet, so I’ll follow up with them and get those answers to you in the future!

Here’s what the others had to say: 
 
 

Hi Lisa! 

If you’re looking to generate income on $500, my best advice is to use risk-defined spreads, namely, debit or credit spreads with a .50 strike or 1.00 strikes so the cost is .50-.70 risk per contract.

Stick with the SPY, QQQ, or a favorite bullish stock play (like TSLA, NVDA, AAPL, GOOG, MSFT, AMZN). 

With risk-defined spreads, as the name suggests, you always know exactly how much you risk before you enter the trade. That way, you will never risk more than you can afford to lose (a good rule of thumb for all traders, $500 or $50,000). 
 
 

Let's be honest with ourselves... Are you new new to this, never done any trading?  

If so, you are going to be very sensitive to taking losses. 

A $500 account is very small in this game we call trading. I would not risk a loss of more than 1%.  

If you don't know what that means you need to spend more time educating yourself before you ever try to place your first real money order.  Paper trading/sim trading is a real way to go and I highly recommend you treat it just like real money.

If you are more toward the investing side, you should find 1-3 stocks that you like and buy a single share. How do you know what to like?  I use the Market Roadmap to find stocks likely to make a move higher in the next 3-5 months.
 

Jeffry’s Market Roadmap is a powerful tool that you can use on your charts. You can learn more about it here.
 
 

Hi Lisa! I actually answered this exact question in a class not too long ago. I think it would be helpful for you! 

Here’s the link
 
Graham’s class is super helpful and filled with a ton of great info! Hope you enjoy it! 

For what it’s worth, I started with an $800 account and built it slowly using Nate’s Automated Options strategy — exactly the kind of “risk-defined spread” that Chris talked about. It wasn’t long until I built it to over 3x bigger — although I took some bigger risks (i.e. wagered more of my account) than I would advise for others because I wasn’t risking my bottom dollar (the $800 was kind of “play money.”)

There are lots of ways to go about it. I return to my advice from yesterday: the best way to start is to start! 

Thanks for the question, Lisa, and if anyone else wants to share questions, you can submit those here.

To your prosperity,

Stephen Ground
Editor-in-Chief, ProsperityPub