How to Start Investing with $1,000 or Less
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How do you start investing with $1,000 or less? This was a common question I heard as a stockbroker and one I still get today. Many believe they can’t invest with 1,000 or less, and they miss opportunities to grow their wealth.
I know investing with little money can be a challenge. It’s one I faced as I was paying off debt. I thought the little bit I had to invest wouldn’t do anything, so I waited. Looking back, that’s something I wish I could change. That being said, there are many smart ways to invest $1,000 or less – you just have to start.
The Importance of Starting Investing
Investing in the stock market is overwhelming for many. We think we need to be experts at investing and so we sit on our cash and do nothing with it. That causes several problems, one, in particular – our money does not grow. If you have goals in life, then that is a problem.
Do you want to buy a house? Do you want to save for your children’s college? Do you want to stop working some day and enjoy life? If you answered “yes” to at least one of those questions, then it’s vital that you start investing in the stock market.
Ultimately, the importance of investing in the stock market comes down to time. You want to give your money time to make more money. If you don’t start, your money has less time to grow and thus, will have to put away more the later you start. By starting earlier, rather than later, you make it easier on yourself not to mention easier for your money. 🙂
Don’t Let the Amount Hold You Back
When investing with $1,000 or less it’s easy to think that you shouldn’t or can’t invest in the stock market. That couldn’t be further from the truth. Again, you want to give your money time to do its thing.
Yes, it does help to have more money to invest in the stock market, but that’s not the point. You can still invest with $1,000 or less and do quite well. Heck, you can start with next to nothing if you choose an app like Stash Invest who allows you to start investing with as little as $5. When you open an account with Stash Invest they start you off with $5 so you can start investing right away.
There should be no shame in the amount you start with, again, it’s the fact that you’re investing that makes the difference – not the amount. In the end, it’s the time you spend in the stock market that matters more than pretty much anything.
Investment Options to Consider
You might think that if you invest $1,000 or less that you have very few options. In many cases you have just as many options as other, more seasoned, investors do – you just need to be wise about how you invest your money. One key thing you will want to watch out for is the fees you’re paying to invest.
Fees can eat up a significant portion of your portfolio, and that’s the last thing you want to do. With that being said, if you need to start investing with $1,000 or less you can invest in stocks, mutual funds, Exchange-Traded Funds (ETFs), options and more. Just make sure you’re comfortable with what you’re investing in before you start.
Brokerages That Let You Start Investing With $1,000 or Less
Before you start investing in the stock market, you want to find an online brokerage to do your investing. I would typically direct investors to my favorite brokerage – Vanguard, but in many cases, you might not meet their required account minimums.
That’s ok, as there are many other online brokerages that allow you to start investing with $1,000 or less. In some cases, the brokerages might even offer a promotion for your new account. Below are some of the best options.
Betterment is one of the top robo-advisors in the brokerage space. A robo-advisor allows you to have someone manage your investments for little in terms of cost. Thanks to the algorithmic approach, brokers like Betterment offer advice, tools and assistance to what used to be available to only those with a lot of money to invest in the stock market. With Betterment you don’t trade stocks; instead, they make a portfolio of low-cost ETFs that’s customized to your specific situation. Once constructed, they manage it and rebalance it to make sure it’s on target.
What makes Betterment one of the best options to invest with $1,000 is that they have no minimum balance requirement which means you can open an account with as little or as much as you want. Here’s my Betterment review to get a better idea of the services they have to offer. You can also open a Betterment account and get up to six months commission free!
I’m a big fan of Motif Investing as they provide so many options for those investing with less than $1,000. Motif started by offering what’s essentially a personalized ETF, known as a motif. Motifs allow you to create a bucket that holds up to 30 stocks and ETFs of your liking for $9.95. If you don’t know what you’d like to invest in, they have over 100 pre-made motifs spanning many spectrums. They will manage either for you to make sure it’s tracking with your goals.
If you’d rather not have a motif, Motif Investing also allows you to invest in individual stocks for a rock-bottom price of $4.95 per trade. So, Motif is part robo-advisor part traditional online brokerage, which meets the needs of both whose who want help as well as those who want a DIY approach. Here’s my Motif Investing review to get a better idea of the services they have to offer. You can also open a Motif Investing account and get up to $150 cash back!
Scottrade is what you’d think of as a traditional online brokerage. You manage the investing on your own and can choose anything from stocks and options to mutual funds and ETFs. While this will require more work than going with a robo-advisor, Scottrade is well-known for their tools and educational offerings.
You have one option if you’re investing with $1,000 or less at Scottrade – that’s an IRA. You can open a retirement account with a minimum balance of $500. They do require $2,500 for a non-retirement account, so that won’t be a possibility if you’re investing with $1,000 or less. Scottrade has a competitive commission, coming in at $7 per trade plus an abundance of tools to help you manage your investments. Here’s my Scottrade review to get a better idea of the services they have to offer. You can also open a Scottrade account and get up to $2,000 cash back!
Tradeking, like Scottrade, is a traditional online broker. There is one key difference between the two; TradeKing comes in at a cheaper $4.95 per trade vs. $7. If you don’t plan to trade much, it might not impact you, but the difference is important to keep in mind.
What I like about TradeKing is that they have no minimum balance requirement. Just as with Betterment, you can open an account for as little or as much as you want. If you’re a long-term investor, TradeKing stands apart with over 8,000 mutual fund offerings and a minimal $9.95 commission charge on mutual funds. Here’s my TradeKing review to get a better idea of the services they have to offer. You can also open a TradeKing account and get up to $1,000 in free commissions!
Wealthfront is the final broker to consider if you’re investing with $1,000 or less. Wealthfront, like Betterment, is a robo-advisor that manages the entire investment process for you. What’s to like about Wealthfront is that they offer better, more diversified, investment selections. You simply answer 10-12 questions about your needs, goals, experience level, etc. and they customize a portfolio for you.
With Wealthfront, you can open an account for as little as $500, and they have a wide variety of account options available. Here’s my Wealthfront review to get a better idea of the services they have to offer and how they differ from Betterment. You can also open a Wealthfront account and get your first $15,000 managed commission free!
Other Investment Options to Consider
While an online brokerage might offer one of the best ways to start investing with $1,000 or less, there are several other options to keep in mind:
Peer-to-Peer Lending (P2P) may seem like an odd way to start investing, but it’s a great option to consider. With P2P Lending you loan money to individuals in need, and you earn interest on their payments. They may be looking to pay off debt, want to remodel a room in their house, etc. but they seek out P2P loans as a means to save money vs. other options.
A P2P lender, like Lending Club, allows you to open an account with no minimum balance requirement and make loans to individuals. You can open a variety of accounts from a personal account to a retirement account. Just remember as with investing to spread your risk among a number of loans.
Buy Direct From a Company
Another option to consider when you’re investing with $1,000 or less is to buy directly from a particular company. This isn’t as common as it used to be but is still around today. Say, for example that you want to buy stock in Disney. You contact Disney and ask what you need to do to buy their stock directly through them.
If the company offers this, they will usually work with a Transfer Agent. Just keep in mind they may charge a fee of $100 or more to do this and your investments can easily become disorganized if you do this with many companies as you would have no central hub, such as is offered with an online brokerage, to display your investments and track their progress.
An Automatic Investment Plan
The final way to invest with $1,000 or less is by setting up an Automatic Investment Plan through Sharebuilder. It’s a fairly straightforward process, but you decide how much money you want to invest each week or month and determine the stocks you want to purchase. This will likely result in you having fractional shares, which may be a hassle, but it is a nice way to start investing if you have little money.
In today’s age, there are many ways to start investing with $1,000 or less. I know it may feel like the money won’t grow or do anything for you – don’t give into that myth. By starting today, you do your future self a favor by actively growing your wealth.
When did you start investing in the stock market? Why do you think people allow the amount they’re starting with to hold them back? What are some other options to start investing with little money?
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