How to Invest in the Stock Market With Little Money
As I’ve shared before in my stock broker confessional, I had the pleasure of helping people from various walks of life and investing situations while they were trying to invest in the stock market. I got to see the full range of individuals from those just who were starting out to some who were sitting on very expansive and lucrative investment portfolios. Of all these investors, the ones I found most frustrating speaking with were those who believed they couldn’t afford to invest in the stock market.
To be fair, I would be dealing with not all the pertinent information, as I could only go off of what they told me, but I found it difficult to believe that such a big block of professional individuals could not afford to be investing in stocks at some level. I think some of it might go back to lack of investment education, or an unwillingness to make changes, but I’m sure that is not always the case.
As this is a part of my how to invest in stocks series, please feel free to check out some of the other posts in that series as each one builds on previous articles:
- How to Invest in Stocks When You Don’t Know Where to Start
- Is Investing in the Stock Market Really That Easy?
- When Should You Start Saving for Retirement?
- Investing in Stocks: Are You a Trader or an Investor?
You Can Invest in the Stock Market With Very Little
A common misconception among many is that they need to have thousands upon thousands of dollars to invest in the stock market. While more is certainly better, big bucks is not a pre-requirement to investing. Opening an online brokerage account is often the best way to get started investing, especially if you do not have access to a 401k through your employer.
If you’re looking for an online broker, you can check out my online brokerage page to find brokerages that I either personally use or have extensive experience with. Assuming you’re going the route of using an online brokerage, many have minimal requirements, or none at all, in terms of balance to open an account with. Many start out with a minimum opening balance of as little as $500 which is not bad at all. While investing in mutual funds may not be the best option, as many involve a minimum to get started, you can start investing in stocks with no minimum at all. Granted it may not be many shares to start with, but at the very least it allows you to invest in the stock market and not sit on the sidelines.
Related: If you’re looking for a low cost online brokerage, then check out my Scottrade review for a possible option for your investing needs.
Automation Can Be Your Best Friend
One of the most common excuses I heard from those saying they could not afford to invest in the stock market was that they commonly forgot to deposit money into their account. I understand that, life is busy and it’s easy to forget things, especially if it’s not a priority. This is where automation can be such a huge asset to those just starting out and those who have been investing for years alike.
Many online brokerages will allow you to set up an electronic transfer between your account with them and your bank account. You can either transfer money in individual situations, or set up a regular transfer. Using this feature allows you to build a pile of cash that you can invest in the stock market. Unless you’re transferring a large amount over, try to avoid buying stocks with each transfer as it’ll only cause you to spend more money in fees and commission.
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A Quantifiable Goal Can Be Your Best Friend
A common issue I saw with those saying they could not afford to invest in the stock market was they had no ownership of it. They had no skin in the game and thus did not see the need to begin investing. Regardless of what it is in life, if you don’t truly want it, it’s going to be difficult to work towards. Investing in the stock market is no different. Saving for retirement can be such a nebulous thing to those three to four decades away that they can easily put investing in the back of their mind and lose sight of time.
This is why I find it so helpful to have something to work towards to help incentivize myself to push me to reach whatever goal I have. I did this two years ago when Mrs. Frugal Rules and I wanted to go on a cruise for our tenth anniversary. We wanted to spare no expense and thus needed to save like crazy for it. It may sound silly, but I put a picture of the ship we’d be on at my desk. Whenever I wanted to give up or not work to get a bigger bonus I’d look at the picture and I’d be motivated to start working for it again because I wanted it. If you’re struggling with wanting to invest in the stock market because a lack of funds, look for ways to not only motivate yourself but push yourself to find ways to find the cash to invest.
Don’t Give Into the Excuse of Lack of Funds
I purposely left this issue to the end of the post. Too many times to count, I would ask individuals why they were not investing in the stock market and was told they had lack of money. I’ll cede the point that there are some who find themselves in that case and I do not bemoan that by any means. That said, many were professionals, making a very decent salary but choosing (I am largely guessing here) to not make investing in the stock market a priority. Worse yet, they were using the belief that they had no money to spare as an excuse to not invest in the stock market.
Ultimately, I think it comes down generally to a lack of priorities and not thinking about the future and instead only thinking of the present. If you’re in this situation, I ask you to look at your spending habits and look for ways to cut your expenses. I’ll spare the list, as it has been rehashed here many times before, but look for ways you can trim the fat from your spending and put that money to work for you as opposed to being enslaved to it. It may seem like a small amount, but finding something as simple as even $40-50 per month to invest in the stock market will do you wonders in the long run. Please take action to do that today as you don’t want to look back years from now wishing you would’ve started earlier.
What excuse have you used to not invest in the stock market before? At what income level is not investing a justifiable excuse?
Photo courtesy of: StockMonkeys.com