Don’t Have a Lot to Invest? Here’s How You Can Easily Diversify

Even if you can’t afford to buy Amazon.com, Inc. (NASDAQ:AMZN), there are still ways you can include it in your portfolio.

If you’re new to investing, chances are you might feel overwhelmed with deciding on what to invest in. The biggest challenge is if you don’t have a lot of money to invest and don’t want to put all your money into one stock. Regardless of the quality of the stock, all it takes is a bad earnings report or a bad news day and the stock could go over a cliff.

For that reason, diversification is important, but investing in many different stocks will require a lot more money. If you have several small investments, it’ll also be hard to make a strong enough return to offset all the commissions you’ll incur along the way.

The best way to get around this is to look at exchange-traded funds (ETFs). With an ETF, you can hold several, perhaps dozens, of stocks without having to own each individually. You also won’t get hit with big fees either. If I were starting to invest, then that’s certainly the route I would take today.

ETFs offer a good way to invest in stocks that aren’t listed on the TSX

If you don’t want to convert your funds into U.S. dollars and still want to invest in stocks that are only on the NASDAQ or NYSE, ETFs can help you do that. The iShares NASDAQ 100 Index Fund Canadian Dollar Hedged (TSX:XQQ) ETF provides you with a great way to mirror the top stocks on the NASDAQ.

With a tiny management expense ratio of just 0.39%, the small fees to manage the fund won’t chip away at the strong capital appreciation that you will earn. It’s a bargain price to pay to effectively have a portfolio of the brightest stars on the NASDAQ. The ETF’s top five holdings are made up of Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), Facebook Inc. (NASDAQ:FB), and Alphabet Inc. (NASDAQ:GOOGL)(NASDAQ:GOOG), which make up over 40% of the total portfolio.

As you can see, you can generate a wide distribution of tech stocks fairly easily that could achieve significant growth. Amazon alone would cost you north of $1,500 to own, and this way you can benefit from its increase in value without having to put all or most of your money into that one stock.

The one negative is that you’re putting your money all into tech stocks. However, there are many different types of ETFs that you can choose from. For instance, if you want to earn a good dividend and invest in Canadian REITs, the BMO Equal Weight REITS Index ETF (TSX:ZRE) is a great option that will pay you 5% per year.

You’ll also have a broad spectrum of REITS, ranging from industrial investments like Pure Industrial Real Estate Trust (TSX:AAR.UN), which makes up the largest holding, to Northview Apartment REIT (TSX:NVU.UN), Dream Global REIT (TSX:DRG.UN), and many others, which will help round out your real estate portfolio, while contributing some solid income along the way.

Bottom line

There are many different ways for you to diversify, even with a small amount money. Gone are the days where you need to buy several stocks to minimize your exposure to the market. Low-fee ETFs offer you a great way to invest in what you want without having to incur significant fees along the way.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. Fool contributor David Jagielski has no position in any of the stocks mentioned. David Gardner owns shares of Alphabet (C shares), Amazon, Apple, and Facebook. Tom Gardner owns shares of Alphabet (C shares) and Facebook. The Motley Fool owns shares of Alphabet (C shares), Amazon, Apple, and Facebook and has the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, short March 2018 $200 calls on Facebook, and long March 2018 $170 puts on Facebook. Dream Global is a recommendation of Dividend Investor Canada.

More on Tech Stocks

think thought consider
Tech Stocks

Is CGI Stock a Buy Even With No Dividend Yield?

CGI stock may not have a dividend to speak of. But does that necessarily mean you should ignore this top…

Read more »

A robotic hand interacting with a visual AI touchscreen display.
Tech Stocks

Why Now Is the Time to Invest in Canadian AI Stocks

Are you looking for one of the most solid Canadian AI stocks out there? This one is probably your best…

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

Why AI Stocks Should Be in Every Canadian Investor’s Portfolio

AI stocks continue to be one of the best options out there for long-term investing, especially when considering Canadian options.

Read more »

money goes up and down in balance
Tech Stocks

1 “Magnificent 7” Stock I’d Buy Over Nvidia Right Now

Here's why Meta Platforms stock is a better choice for Canadian investors compared to Nvidia in November 2024.

Read more »

A data center engineer works on a laptop at a server farm.
Tech Stocks

3 No-Brainer Data Centre Stocks to Buy With $500 Right Now

Data centres are going to be a huge growth opportunity in the next decade. And these are the top buys.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

OpenText stock has fallen in the last few years, but that could mean this top tech stock remains an undervalued…

Read more »

AI microchip
Tech Stocks

Celestica Stock: Buy, Sell, or Hold?

Celestica's stock price has rallied 950% in the last five years. Will the AI boom send it even higher in…

Read more »

data analyze research
Tech Stocks

2 Ridiculously Cheap Growth Stocks to Buy Hand Over Fist in 2024

Well Health Technologies is a cheap growth stock to buy for its record-breaking results, massive revenue growth, and profitability.

Read more »