What investment options are available for moderate to low-income people?

For a person who has moderate to low income what investment options are available for them? I have heard of penny stock, and other bonds that a person who may makes between 10k-20k can invest their money. Is there truth to this statement?

It鈥檚 hard to be in such a position.

Risk = Return

Low income individuals need high returns to catch up in the wealth game, but are least able to take on the risk necessary to achieve these returns. Such is the origin of the saying that a poor person should never gamble, and a rich person should do nothing but gamble.

That being said, if there is a will, there is a way. The key to a successful investment plan is to know what kind of risk you are capable of withstanding. Remember that investing is a 鈥渓oser鈥檚 game鈥?

In a 鈥渓oser鈥檚 game鈥? the side that stays in the game the longest by making the fewest mistakes ends up the winner. Investing is a marathon, not a 100 meter dash. Avoiding costly mistakes will get you more than 陆 ways there.

Before you start, you must consider the following questions:
1) Your risk preference; or how much money you are willing and/or be able risk losing?
2) Your return objectives; or what is the required expected return that will most likely allow you to meet your goals (you must first articulate your goals)?
3) What are your constraints:
3.a Time 鈥?how long can you invest the money for?
3.b Tax 鈥?how much are you taxed?
3.c Liquidity 鈥?do you need the money in the mean time?
3.d Unique circumstances 鈥?are you buying home, having a child, getting married, etc?
3.e Legal/Regulatory issues 鈥?typically not a concern for individuals, but included there for completeness.

The typical individual is easily overwhelmed by this, but such is the complexity of investing properly.

Of good financial sense is to first of all, keep a 鈥渞ainy day鈥?fund. This should be one half to one year of living expenses. If you don鈥檛 even have this much saved up, then you should not be investing in anything else other than principle guaranteed products such as money market funds, stable value funds, and US government savings bonds such as the Series I bond. The key to the rainy day fund is its liquidity, or the readiness of this asset to be converted to cash. I did not Mention CD鈥檚 due to their liquidity constraint. Pay attention to the liquidity terms of the products: I Bonds, for example, must be invested for a minimum of one year, with a marginal penalty for redemption in less than five years. A rainy day fund with a good return takes time to build, and is made up of multiple products in the mean time. Start with money market funds, and methodically migrate to I Bonds.

If you have your liquidity fund, then start to invest in passive index funds that track the broader market, Such as the SP500 ETF (SPY). These index funds consistently outperform 75% of the actively managed funds available today. The implication is that investing in index funds guarantees that your results will be better than 75% of all investors, all the time (which could mean that 75% lose 20%, you lose only 19%).

Finally, the generic rule to follow is to keep100 minus your age in equity, and the rest in bonds. So if you鈥檙e 30, a good, generic portfolio to hold is 70% in an equity index fund that tracks the SP500, and 45% in a bond index fund that tracks the Lehman Ag.

Good investors, rich or poor, resists the call of greed and stays their course. Low income inventors should stay away from penny stock and those who suggests them. Yes, penny stock does have the potential of massive returns - 50% is common. However, the key word is "potential" - penny stocks carries with it even more massive risk, and is most likely to end up worthless. Penny stocks are not for low income individuals, they are for people who have money to burn.

I don't recommend penny stocks. They are very hard to get rid of and you lose a lot of money with sales fees. If you get an online brokerage account from firstrade, scottrade, etc, some have no minimums for investing and they have lower transactions fees than any in person trading company.

IRA's and Money market accounts are a good places to start. Call "financial advisors" to get a free consultation.

Many programs have plans were you can deposit as little as $5 a month to start. Just really read the fine print and make sure your annual fees are not more than your annual contributions.

We all have to start somewhere. You can just open a savings account and then when you cash your paycheck deposit $5 every week into the savings. Do not carry the book or the ATM card around with you. Once you get three or four hundred dollars you can then open IRA's or even some CD's to get a better return on investment.

And you can always buy government savings bonds, talk to your bank about savings bonds, cd's and iras

Good luck

Invest wisely and Beware of Investment Scam!!!
http://www.sec.gov/investor/pubs/cyberfr...

Someone on a moderate to low income would probably not be able to take much risk. Penny stocks are usually worthless. Thats why they trade for pennies. Mutual funds are probably even too risky and tie up money which a low to moderate income earner may need quickly. The funds may be down when the money is needed. You want a short term investment so the money is easy to get to and safety so you dont lose any of it in the short term when you may need it..The best options would be savings accounts, money markets, CD's and government notes and bonds. Once you get a cushion of safety then go for something longer term, with a little more riske, like mutual funds. Any money you can put into an IRA is a good idea, if you can do without that money. That should be a priority.

Open a brokerage account at Zecco and buy Microsoft, Sony and Nintendo. (At least one share each week)

Penny stocks are a bad investment for anyone. I recommend the mutual funds at Excelsior, the URL is below. $500 opens an account. I like their Excelsior Value and Restructuring Fund. It has out performed the market for years. They have no load no fees. I encourage you to open an IRA with them.
Also please follow the URL to the savers tax credit. You can put up to two thousand in per year into an IRA and get 50% of the money back from the IRS. That is a good deal. Best of luck to you.