Investors Can Diversify Their Portfolios With Little Money in 4 Ways
Diversification is one of the easiest and most effective ways to maximize the return in your portfolio for a given amount of risk.
Typically, a diversified portfolio consists of a number of different types of securities across various market sectors. For example, a well-diversified investment portfolio might consist of large- and small-cap stocks, international stocks and bonds, commodities and various income investments, like preferred and/or dividend-paying stocks.
Traditionally, diversified portfolios required large sums of money to buy all of these different types of investments. However, these days, a diversified portfolio can be had without much cost at all.
Explore Next: Money Expert's Guide for Beginners on How To Invest $1,000 in 2026
For You: Start Growing Your Net Worth With Smarter Tracking
Here’s a look at four ways you can diversify your portfolio without spending a lot of money.
1. Use Low-Cost ETFs
Commissions aren’t the only obstacle to low-cost portfolio diversification. Some mutual funds and ETFs may have low or no commissions, but charge high internal expenses. These hidden fees are rarely known to the average investor, but over time can significantly eat away at returns.
When you are diversifying your portfolio through a zero-commission broker, one option to look at is low-cost ETFs. The proliferation of low-cost ETFs means you can own nearly any sector of the market that you would like, including global stocks, micro-cap stocks, real estate investments or commodities. You can plug these ETFs into your broader portfolio to fill certain diversification gaps, or you can buy all-in-one ETFs that cover a diverse range of securities in a single investment. Many broad-market ETFs charge expense ratios of 0.03% or less.
2. Buy Fractional Shares
One of the most groundbreaking revolutions in the brokerage industry in the past few years, in addition to the move towards zero commission, is the ability for investors to purchase fractional shares of stock. When you buy fractional shares of stock, the individual share price of a company doesn’t matter. All that matters is the dollar amount you wish to purchase.
Shares of Amazon, for example, trade at a lofty price. For many investors, it would take time to save up enough money to buy even a single share of Amazon or other high-priced stocks that once required thousands of dollars per share. However, with fractional-share purchasing, you can put $5 into Amazon, $5 into Facebook, $5 into Google, and $5 into whatever other available stock you’d like, offering the potential for immediate diversification at a low cost.
3. Buy an S&P 500 Index Fund or ETF
The S&P 500 index isn’t perfectly diversified — it focuses on the largest companies in America — but it remains one of the simplest, lowest‑cost ways to gain broad exposure to the American stock market. Many S&P 500 index funds and ETFs offer extremely low expense ratios, allowing investors to keep more of their returns over time. Coupled with commission‑free trading, these funds provide an efficient way to diversify a portfolio while minimizing fees.
4. Buy US Treasuries Direct From the Government
If you’re looking for a low-cost way to balance out the stocks in your portfolio, there’s no better option than getting U.S. Treasuries direct from the source: the U.S. government. Via the government’s Treasury Direct website, you can buy Treasury bills, notes or bonds without paying any fees or commissions.
U.S. Treasury securities are generally considered the safest and most liquid investments in the world. They are great diversifiers for the riskier parts of your portfolio.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion: