How to Invest in the Stock Market With Little Money
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Many think you can’t invest in the stock market with little money. I was guilty of the same belief. I just finished paying off debt and thought I needed thousands of dollars to start investing. As a stockbroker, I spoke with a number of people who believed it’s impossible to invest in stocks with little money.
This myth not only held me back, but it holds many investors back from growing their wealth. From a certain perspective, it’s understandable why many think you can’t invest in the stock market with little money. Not only can investing be confusing, it’s the belief that only wealthy people can make money in the stock market.
You don’t have to be an expert to invest in the stock market. You also don’t need to have thousands of dollars to start. There are many tools that can help the most novice investors do quite well, even with limited resources.
As with many asepcts of personal finance, the key to investing is to develop good habits and find resources to help. This gives you the confidence to start, which is the key to growing your wealth.
If you have held back from investing due to lack of funds, this post is for you. Here’s how to invest in the stock market with little money, starting today.
Grow Your Available Funds
Saving money is closely tied to investing in the stock market. In order to start investing, you first need to have money to invest. This does not take as long as you think.
Many online brokers allow you to start investing for $500 or less, so that should give you a perspective of how much you need to start investing.
If you don’t have the available funds to start investing, there are ways to save money. You can start keeping change you receive and put it in a cash jar. You can eat out one less time a week or month. The extra money will add up soon enough, providing you several hundred dollars to start investing.
There are many ways to save money every month you can use to build the cash needed to start investing. Select a few and you’ll be surprised at how quickly you can build up an extra $500.
Better yet, you can automate savings to an online money market account like CIT Bank, which pays 1.85 percent on your cash. This lets you build funds to enable you to invest, and also builds the habit of saving money.
Do you want to start investing right away? You can use Acorns to start investing spare change. Acorns is an app that rounds up all purchases on your debit card and uses that to invest in index funds for you.
None of these options are glamorous, but they give you ways to invest with little money and begin building wealth.
Use Your Employer
If you want to know how to get into the stock market with little money, the best option is through your employer-sponsored 401(k) plan. In most cases, everything for your 401(k) is handled through your employer and you can put your investing on autopilot.
Why is a 401(k) the best place to invest in the stock market with little money? It’s quite simple:
- You can start investing with no money
- You can set up automatic transfers from each paycheck
- Your employer may match what you contribute – that’s free money
- Many 401(k) plans offer free resources to help you learn about how to start investing in the stock market
Each 401(k) plan is different. While some employers may make you wait several months, most allow you to start investing when you begin a new job.
Just ask your employer when you start when you can begin investing in your 401(k). Here’s our guide on how to set up your first 401(k) to get started if you’ve never invested in one.
Have you been investing in your 401(k) plan for awhile but think you can do better? Blooom is a great resource that can help you make sure your investments are in top shape.
Blooom checks your plan to make sure you’re not overpaying in fees and that you’re in the best possible investments available in your plan – all based on your specific goals.
Think of it as kicking the tires of your 401(k) to ensure it’s doing what you need it to. This can be done on a one-time basis, or you can use Blooom on a regular basis to analyze your plan. Blooom is free for the first 30 days, then $10 per month after that.
Get Someone to Manage Your Investments
Many people ask themselves “how can I invest with little money” and believe there are no available resources to help them invest. Thanks to robo-advisors, that is not the case.
A robo-advisor is a digital platform that helps you invest your money based on your specific goals. Think of a robo-advisor as another option to automate your investing.
Using a robo-advisor not only helps remove the emotion from investing, but it also helps ensure your investments are doing what they should be. The best part is many robo-advisors have no minimum balance requirement and are very cheap.
Betterment is a great option for those looking to invest in the stock market with little money and get assistance managing their investments. Betterment has no minimum balance requirement. You can start investing with as little as you want, and can contribute as little as $10 at a time.
When you open an account with Betterment they ask you a small handful of questions. They use your responses to build your portfolio. Betterment also charges a minimal annual fee of .25 percent of your assets with them.
You can check out our Betterment review to get a more in-depth look of the tools they have to offer.
Think of using a robo-advisor like Betterment as having a financial advisor, and all their resources, for minimal cost. If you’re new to investing and trying to figure out how to invest with little money, a robo-advisor can be a great option.
Invest with a Micro Investing App
The financial tech space has made it much simpler to invest in the stock market with little money. Thanks to what’s known as a micro investing app, you can now invest small amounts in stocks or index funds to grow your wealth.
We’ve already discussed Acorns as a micro investing option, but there are other apps that let you invest in stocks with little money. Below are the best micro investing apps to consider:
Robinhood: Robinhood is a free-to-use micro investing app that lets you invest in stocks and options. It doesn’t allow retirement accounts, but they have no minimum balance requirement and you can invest with as little as you want.
Stash Invest: Stash Invest is another free-to-use micro investing app. However, they differ from Robinhood in they let you buy partial shares of stock and index funds. They also offer retirement accounts. You do need $5 to start investing with Stash Invest, but they give you $5 when you sign up!
Stockpile: Stockpile is a bit more unique relative to Robinhood and Stash Invest. Stockpile only allows you to invest in roughly 1,000 different stocks, but they’re well-known blue chip stocks. They also allow you to purchase partial shares of stock. Stockpile has no minimum balance requirement and they give you $5 in stock to start.
If you need to invest in the stock market with little money, a micro investing app can be a good option to start and build confidence.
Invest in Low Initial Investment Mutual Funds
Mutual funds can be a great way to start investing with little money, especially for beginners. These types of funds group together stocks and bonds into one basket, making them a perfect alternative for beginners or those wanting to passively invest.
Mutual funds don’t trade like stocks, trading only once a day after the stock market closes. Another way mutual funds differ from stocks is they often have a minimum initial investment, typically $1,000 or more.
However, some mutual funds waive this if you agree to invest $50 or $100 per month. This gives you the benefit of automating your investing, plus you can start with little money. Below are the best brokerages to find low initial investment mutual funds:
Ally Invest: Formerly known as TradeKing, Ally Invest has over 8,000 mutual funds to choose from many of which have low initial investments. Ally Invest only charges $4.95 per stock trade, and has no minimum balance requirement.
E*Trade: E*Trade, like Ally Invest, has over 8,000 mutual funds to choose from, many of which have low initial investments. E*Trade requires $500 to open an account, but if you open a retirement account they have no minimum balance requirement. If you prefer to trade stocks, E*Trade charges $6.95 per stock trade.
M1 Finance: M1 Finance does not offer mutual funds, but they’re still a valid choice for those investing in the stock market with little money. M1 Finance is a hybrid robo-advisor/traditional online broker. It lets you select your own investments, then automates its management to ensure it’s reaching your stated goal. M1 Finance has no minimum balance requirement to start and you can start investing once you have $100 in your account.
Don’t Give Into excuses when trying to invest in the stock market with little money
I know it’s challenging to figure out how to invest in the stock market with little money. When you don’t have a lot of extra money at the end of the month, it’s easy to put off long-term needs like investing.
That sentiment makes sense. Unfortunately, it overlooks the major point of investing – time. Giving your money more time in the stock market is the best thing you can do for your future self, thanks to compound interest.
Take a look at the below graph from Business Insider as an example of how compound interest works.
As you can see, the earlier you start, the less money you actually have to save as it has more time to grow. On one level, it doesn’t make sense, but it shows how important time is when it comes to investing in the stock market.
It’s easy to think the amount you can put in the stock market each month will do nothing. I used to feel the same way. Now I realize that thinking only holds you back from growing your wealth. Saving for retirement may not be a priority for you now, but there are many other reasons why you may need to invest, such as:
- Buying a house in the future
- Go on exotic vacations
- Helping your child pay for college
There may be many other reasons, but in every case more time can only help you meet your goals.
If you legitimately have no money to invest in the stock market, look for ways to free up money. You can find ways to cut spending or find ways to bring in additional income by asking for a raise or starting a side hustle.
Also realize that you don’t need to have thousands of dollars to start investing in stocks. In most cases you can start with $500 or less. If you don’t have that initial lump sum, you can also start with $50 per month.
Ultimately, the amount you begin with really doesn’t matter. What matters is developing the discipline of investing and giving your money time to grow. I know the amount may seem like it will do nothing, but thanks to compound interest, it can have a significant impact on your future.
What are some other ways to invest in the stock market with little money? Why do you think many believe you can’t invest in stocks with little money? When did you start investing?
John is the founder of Frugal Rules, a dad, husband and veteran of the financial services industry whose writing has been featured in Forbes, CNBC, Yahoo Finance and more.
Passionate about helping people learn from his mistakes, John shares financial tools and tips to help you enjoy the freedom that comes from living frugally. One of his favorite tools is Personal Capital , which he used to plan for retirement and keep track of his finances in less than 15 minutes each month.
Another one of John's passions is helping people save $80 per month by axing their expensive cable subscriptions and replacing them with more affordable ones, like Hulu with Live TV.
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