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Margin Investing: How to Invest Without Money

You know what they say: "You need money to make money". So how is this even possible?

By FlexInvestPublished 3 years ago 3 min read

There is an old saying that says “You need money to make money”. Well, let us tell you something: That’s right for the case of investing in the stock market.

It is actually impossible to invest in stocks without money. Investing literally means spending money hoping to get profit out of it!

Now, when you think about investing, you’re likely to imagine huge amounts of money buying a bunch of stocks. However, if you want to invest without money, there are strategies you can apply to make great investments with just a portion of your savings. In fact, one of them can actually let you get profits using someone else’s money.

How is this possible? With a tool used by many professional traders, called margin investment.

What is margin investment?

We get it, you might be thinking: “How can I purchase a portion of a company without using my money? Isn’t that worth hundreds or thousands?”. Well, that’s exactly what margin investments were created for.

Margin, also called leverage, is a tool that helps investors have more buying power and use less of their own money in the total amount of an investment. In simpler words, a trader asks for a loan from their broker, so they only pay a certain percentage of the full value of the deal.

How does “investing without money” actually work?

Let’s take a look at an example...

You want to start selling sandwiches in your neighborhood. All the assets you need are bread, ham, cheese, mayo, napkins, and a stand with signs. You’ll need a total of $80 to buy this stuff. The problem is that you are currently saving to build up an emergency fund, so you only have $40 to spend from your savings account. Therefore, you ask your best friend to lend you the other half of the investment. Your friend thinks it’s a wonderful idea, so you get that loan right away. Very excited, you buy all the things you need and the business starts running.

After a week of selling sandwiches at your new stand, you’ve earned $130. You go back to your best friend and return the $40 they lent you at the beginning and put your initial $40 to your savings account. Checking your final balance, you find a total profit of $50!

There it is. You needed $80, but you only invested $40. You can basically say you invested without money.

You made a profit from your sandwich stand using only a small amount of money from your savings. As you can see, if you know how to use them well, margin investments might be a right choice for you.

Small investments in big companies

If you qualify for a loan, margin investments could be a great option for you. If not, you can try a different method to invest without money (at least without hundreds or thousands), such as fractional shares.

Fractional shares are nothing but pieces of a full stock with the same benefits of a full security, like dividends. They give you the chance of owning a portion of a company by paying only a small percentage of the full stock price.

Keep in mind that if you pay more money for the fractional share, you can get bigger profits from it.

Amazon, Apple, Facebook, Netflix… With fractional shares you can invest in the company you want. Let’s say a full stock costs $200. Platforms with the option of fractional shares let you pay as little as $5 and get the same benefits proportionally. You can skip your daily cup of coffee for one week and you’ll have more than enough to start. It’s that simple.

To sum it up

When we talk about investing without money, we really mean investing in big companies using only a small amount of your own capital. Always remember: you need money to make money.

If you already have some experience in the business world, you can use the margin lent by your broker and invest in stocks to get good revenues from it.

However, if you are a beginner investor, or if you have a tight budget, opting for fractional shares could be a good way to gain experience in the stock market, grow financially, and take care of your money at the same time.

Make sure to take a look at the rest of the articles in our blog to learn more investment strategies and some cool tips to take care of your personal finances.


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    FlexInvestWritten by FlexInvest

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