How to Invest in Stocks With Little Money
Although investing in stocks isn’t right for everybody, careful stock market investing can help you meet your long-term financial goals such as saving for retirement or a college education. While traditional stock brokers and full-service investment firms typically require substantial sums of money and hefty fees to buy stocks, many companies allow you to invest in stocks starting with just a little money. You can find a wide variety of discount brokers and financial service firms that offer low-cost investing just by doing a simple Internet search. Make sure to choose a reputable company, and one that meets your financial needs.
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Instructions
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Look for a discount broker or investment firm that allows you to open an account with little or no minimum balance. Some firms require $500 or more, while others let you start with any whole dollar amount.
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Find out if the company requires a minimum balance to maintain the account. Some firms charge extra fees for accounts with small balances, or those that drop below a certain amount. These fees can eat into your investment profits.
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Decide if you want to invest in individual stocks or mutual funds that invest in stocks. Mutual funds allow investors with little money to invest in a much wider variety of companies than they could otherwise own, which can help diversify the money and reduce risk, and simplify investing, while individual stocks allow investors more control over their investments.
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Choose an investment firm with low-cost trading options. Most companies charge a fee every time you buy or sell a stock, and these fees range from a few dollars to $20 or more. If you only have a little money to invest in stocks, low fees are especially important. For mutual funds, check out the expense ratio and any transaction fees.
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Check out a company that allows you buy stocks in whole dollar amounts, if you want to buy individual stocks. Many brokers only sell stocks in shares or lots, and charge extra if you buy partial lots or shares. Other companies, like Sharebuilder, allow you buy $50 of a particular stock, even if that stock sells for $75 per share. This can greatly increase the types of stocks you can buy, and simplify your investing.
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Consider investing in stocks with a company that has an automatic investment plan. This allows you to contribute a set dollar amount every month to your stocks or mutual funds, and build your portfolio at a time. Many firms offer discounted fees or lower minimums if you sign up for an automatic investment plan.
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Make sure you understand all the terms of opening an account, and ask questions if needed. Once you open an account, research your investment options carefully, and select the stocks or mutual funds you want to invest in.
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Tips & Warnings
Some companies offer even lower minimum opening balances or fees if you buy stocks in a retirement or educational account.
Stocks and mutual funds are not federally insured investments, and may lose value. Be sure to understand the terms of opening an account, and the risks involved, before buying stocks.
