Some services will let you start investing for as little as one dollar. But realistically speaking, how much money do you need to start investing in stocks?
How much money do you need to start investing in stocks? It wasn’t that long ago that we could give you a reasonably specific number. Before the advent of online investing apps and services, you pretty much had to go through a broker if you wanted to invest. Of course, this is still an option. In fact, if you just want to invest and not think about where your money is going, a professional broker can be a good option.
Going back to the time before apps, however, you had to pay commissions to your broker for each transaction. So every time you wanted to buy or sell stocks, you would need to spend enough that it was worth the time and effort for your broker to carry out the trades. Because of that, many brokerage firms did have minimum investment and transaction amounts. While that amount could vary depending on the broker, you could expect that you would need at least $1,000 to open an investment account.
Just to give you a different example, however, TD Ameritrade currently offers a managed account with a $25,000 minimum. And the robo-advisor Wealthfront has a $500 minimum account balance. So even today, the amount can vary a bit. But before you turn away dejected, times have changed. There are dozens of online investing sites and apps, and many of them don’t require a minimum balance, they don’t charge commissions on most trades, and they’re almost as easy to set up as an account with your favorite streaming service.
All good, right? But how much money do you need to start investing in stocks?
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How much money do you need to start investing in stocks? Not much!
Since many online brokerages don’t have minimums or charge commissions, you can, in theory, start investing for the price of one share of stock. That could be quite a bit if you want to buy some of the biggest names on the market, but there are a lot of shares available for well under $15.
Some newer investing apps also offer fractional shares. For example, SoFi and Public both let investors buy part of a share. Public even set up their app so that you don’t buy shares; you buy dollar amounts. If you invest $25 in a company, you get $25 worth of stock, whether that’s a fractional share of a stock like Apple (AAPL) or several stocks of a less expensive company.
So...how much money do you need to start investing in stocks? Quite simply, not much. A more helpful approach, for our purposes, might be to look at how to start investing with different amounts of starting money, like $50, $500, or $1,000.
One word of advice, however, is that you should determine ahead of time what “kind” of investing you want to get into. You can be entirely hands-off with a robo-investor like Acorn. You simply set up the account and direct money into it. In turn (and for a small monthly fee), they adjust your portfolio based on how aggressive or conservative you want to be. Typically, these investments are a selection of ETFs (combo-plates of stocks and bonds, usually). It’s as close to “set-it-and-forget-it” as you can get with investing.
If you’re a more hands-on investor, you can open an account with one of the beginner investor apps listed here, or with a larger broker, such as Charles Schwab or E*TRADE. From there, you select which stocks, bonds, ETFs, etc. you want. You’re responsible for keeping an eye on them and buying and selling your investments. It’s like driving a stick shift vs. getting an Uber.
That’s the hard part (although it’s not all that hard). The rest, whether you start investing with $50 or $50,000, is about allocation and determining the amount of risk you want to take on.
How to start investing with $50
How much money do you need to start investing in stocks? Yes, you can get started for just a few bucks, but somewhere in the $50 range is when you can really open up your options. Now, you could take your $50 and throw it into a cheap but risky stock. The problem is that these stocks are usually cheap for a reason. We won’t say don’t “ever” put some money into risky stocks, but you probably don’t want to pile your first investing dollars into something with a lot of volatility.
What should you do instead? If you want to lower your risk, look at ETFs that focus on blue-chip stocks, like the T. Rowe Price Blue Chip Growth ETF (TCHP). As of this writing, you could get one share for under $50 and gradually add to your portfolio as you contribute. This specific ETF is too new for us to make any comments on, but their top holdings include big names such as Microsoft (MSFT), Mastercard Inc. (MA), Amazon.com (AMZN), and Alphabet Inc. (GOOG).
Alternatively, you could also buy individual stocks in some of the companies we recommend in our advisories or on this website.
How to start investing with $500
With $500, you have a bit more room to play, and you can start diversifying your portfolio. If you want to limit your risk, you can still opt for ETFs. For example, the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) includes a minimum of 40 stocks (currently 53) that have increased their dividends for at least 25 years straight. These companies aren’t going anywhere, and even in times where the share prices aren’t increasing, you can still enjoy steady dividends. Will you get rich by putting money into NOBL? Since the ETF first came to market in October 2013, the return is a mere 123%, trailing the 141% return in the S&P 500 in that same span. So you might not get rich, but at least it’s reliably steady.
You could also mix things up with a few blue-chip stocks and a few small-cap growth stocks. Again, though, diversification is critical. Stocks don’t just increase in value, they also can go down in value. Spread your money out, and not just within one industry, like solar power or auto manufacturers. Get some consumer staples in there like Proctor & Gamble (PG) or Walmart (WMT), some tech, like Square (SQ), and maybe a few more adventurous companies like electric vehicle maker Fisker Inc (FSR) – bearing in mind that adventure and risk are linked.
How to start investing with $1,000
All of the above applies here, too. Don’t dump your money into one company or industry, or sector. Get broad exposure to the market, either through ETFs or shares from a variety of a dozen or so stocks. Mix a few blue-chip dividend stocks in with some growth stocks.
And remember to have patience. As you gradually add to your portfolio, you can invest more heavily and watch your profits rise. It will take some time, so you might as well enjoy the process.
Now then, how much money do you need to start investing in stocks? Chances are, if you have a few bucks in your pocket, you are good to go.
One last bit of advice is to follow us here at Cabot Wealth Network. It’s our job to give you the information you need to make smart investing decisions. There is a lot of free advice on our website and several free reports you can download and read. And when you’re ready, we also offer a wide range of award-winning investment advisories where we share the latest investing information and tips.
How much money are you planning to start investing with? We’d love to hear about your experience in the comments below.
