How to Invest in Stocks with Little Money
Shortcut: If you are really eager to start investing with little money, one of our recommended choices is Ally Invest. You can start to invest with $0 account minimum. It’s a great choice for beginners and the app is very easy to use.
Start Investing, Even With Little Money
It’s easy to talk yourself out of investing when you don’t have much money to put up. But even a few dollars can go far.
If you’ve been sticking to savings accounts, you’re not doing yourself any favors. These accounts offer next to nothing in interest, making them nothing more than a place to park your money.
Investing in stocks helps you save for the future. The average historical stock market return is 9.2%. The earlier you start, the more time you have for money to grow. Don’t miss out on this just because you don’t have a ton of spare cash.
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Here are our tops picks for investing when you have little money.
The Myths About Investing
Your misconceptions about investing may be holding you back from saving for your future. Here are some common investment myths – and the truth about them.
- Myth #1: You have to be rich to use a brokerage account.This is the most common myth. The truth is, there are now many brokerages with no minimum investment (or just very little). You can open an account with as little as just $1 and start investing.
Brokerages like Robinhood, Ally Invest, and Stash all have no minimums to start. And apps like Acorns even let you invest your spare change.
- Myth #2: You are restricted to penny stocks unless you have a lot of money. As a new investor, you DON’T want to invest in highly risky penny stocks.
Penny stocks are stocks trading for less than $5. But they’re priced low for a reason – the companies behind them may not last for much longer or they’re just starting out.
But, established company stocks are a lot more expensive. How can you afford Netflix at $500 a share, or Amazon at $3,000 a share?
Enter fractional shares. This means you can buy just a tiny piece of a share if you don’t have enough for a full share. Robinhood lets you buy stocks starting from just $1. You can buy just $10 worth of Amazon stock if that’s all you have.
This lets you invest in well-known companies that you love and support. These companies are less risky and have a long history of steady performance.
- Myth #3: You have to have enough money to buy a diversified portfolio.A diversified portfolio means investing in lots of different stocks. This reduces your overall risk because you don’t have all eggs in one basket. But you may think that buying lots of stocks will require lots of money.
This is not true. Again, with fractional shares, you can buy stocks from lots of companies. If you have $50, you can invest $1 in 50 different companies.
Another great option is to invest in ETFs (Exchange Traded Funds). ETFs are a collection of stocks, sometimes up to hundreds in one. You can take $50 and invest in one ETF and instantly be diversified in hundreds of companies.
ETFs are purchased just like stocks on the open stock market. All brokerages offer ETFs.