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How to Start Investing With $500 or Less

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Investing with $500 or less can be a challenge, but it can be done. Here are brokers to consider and ways to start investing with 500 bucks or less.

“How do you start investing with $500 or less?” This is a question I receive almost daily as well as in my former day job as a stockbroker. Many believe that you can’t start investing with 500 or less and allow that to hold them back from growing their wealth.

Yes, investing with little money can be a challenge though it is most certainly possible. You just need to know where to start and what options you have to start investing. I firmly believe that if investing with 500 dollars is the most you can start with that time will do awesome things to it – but…you have to start!

You Can Start Investing With $500 at Numerous Brokerages

 

If you need to start investing with $500 or less the first big challenge is going to be finding the right broker for you. In many cases I’d recommend someone like Vanguard, Schwab or Fidelity.

The problem is you won’t have enough funds to start with any of those three in most cases. Take a look at their minimum opening balance requirements:

  • Vanguard – you’re subject to their fund minimums, which can go as low as $1,000 for some of their mutual funds. You can get into their standard brokerage accounts with no minimums for stock trading, though their tiered pricing leaves a bit to be desired for someone just starting out.
  • Schwab – you need at least $1,000 to open most accounts, though is waived if you set up a $100 monthly electronic transfer.
  • Fidelity – you need to have $2,500 to open an account with Fidelity.

Knowing that those options are off the table you will then want to look at other brokerages that will allow you to open an account with $500 or less.

Those are:

Acorns – Acorns has no minimum deposit requirement. The app rounds up purchases you make and invests it in a portfolio of index funds of your choice. Acorns costs just $1 per month and is free for college students.

Ally Invest – Ally Invest has no minimum deposit requirement. Ally Invest offers an industry-low $4.95 commission, and offers lots of tools to help manage your investments. Ally Invest also offers over 8,000 mutual funds if you do not plan to actively trade.

Betterment – Betterment has no minimum deposit requirement. Betterment is a robo-advisor, which means they manage your investments for you in a personally constructed portfolio of index funds. Betterment charges a .25 percent annual fee to manage your investments.

E*Trade – E*Trade has no minimum deposit on IRAs, but you must have $500 to open a non-retirement account. Thanks to their time in the industry, E*Trade has some of the best investing tools in the space. E*Trade charges $6.95 per trade.

Stash Invest – Stash Invest has a $5 minimum deposit requirement. Stash gives you $5 to start, so it really has no minimum requirement. The app invests in partial shares of selected stocks and index funds for you. Stash Invest is free for the first month, and $1 per month thereafter.

Stockpile – Stockpile has no minimum deposit requirement, and they give you $5 worth of stock to start. Stockpile lets you buy fractional shares of stock for just $.99 per trade. You can also buy gift cards towards stocks for others for just $2.99 per order. Stockpile has no annual fees.

Wealthsimple – Wealthsimple has no minimum deposit requirement. Wealthsimple is a robo-advisor, like Betterment, so they manage your investments for you. Wealthsimple specializes in Socially Responsible Investing and offers a portfolio devoted specifically to social issues. Wealthsimple is free for the first first for balances under $5,000, and charges a .50 percent annual fee thereafter.

I recommend each of the above online brokerages on a regular basis, especially for those investing with less than $500. Your specific need will dictate which broker you should choose.

When you’re investing with $500 or less you want to throw out any brokerage that charges too much in fees. Fees are an important part of investing and eat away at your growth.

I wouldn’t choose one broker over another for a negligible difference though – as you wan to make sure you pick the best overall fit for your needs.

Buy Funds for Free

 

A common option for those investing with 500 dollars are mutual funds. It makes sense, as they give you the possibility of being diversified for not much money. The problem with this approach is you’ll be running into the risk of higher than desired fees that will eat up too much of your funds.

That being the case, the best option is going to be the route of investing in index funds. If you can find them for free, even better. Index funds are just like mutual funds and give you access to a basket of stocks, but the fees are generally much lower. Thus, more of your money is working for you.

What you really want to find though is an online brokerage that will allow you to trade Exchange-Traded Funds (ETFs) for free and thankfully there are a number of options to consider. Those are:

  • E*Trade – E*Trade has roughly 90 ETFs you can trade for free, though they tend to have higher expense ratios.
  • TD Ameritrade – TD Ameritrade has roughly 100 ETFs you can trade for free.

Bigger brokerages like Vanguard, Fidelity, and Schwab all offer commission-free ETFs but you run into the minimum account issue discussed earlier.

If you’re new to investing and rather not manage the investing on your own then automated retirement programs like Betterment or Wealthsimple will do much of the same with minimal cost.

don’t overlook the easiest place to start investing with less than $500

 

While you can invest at many online brokers with less than $500, don’t overlook the best place to start investing with little money – your 401(k) plan. In most instances you need nothing to start investing in your 401(k) plan at work. That’s also not to mention the fact you often receive a match (which is free money) on part of your contributions.

Many find starting their first 401(k) intimidating. I know I did, but thankfully it can be done quite simply. Here’s our guide on how to set up your first 401(k) if you’ve never had one before.

If you don’t know what investments to select, or think you could do better with what you’ve selected, Blooom is a great resource to help better manage your 401(k) investments.

Blooom is a service that will analyze your plan to see if you’re overlooking lower cost or better performing funds within the plan.

Blooom will give you a free analysis of the investments in your plan to lower fees so more of your money will work for you. Blooom does charge $10 per month, but offers a 30-day free trial to help get your 401(k) plan in shape.

invest in real estate

 

Investing in the stock market isn’t the only way to invest. You can also invest in real estate with $500. Many hear real estate investing and they come to the conclusion you need thousands of dollars. However, with crowdfunding you can invest in real estate with $500.

Real estate crowdfunding allows you to invest in real estate by putting your money into a pool with other investors. To do this, you can make equity investments in a commercial propertie. Investors receive an equity stake in the property and returns are provided in the form of shares of the rental income that is generated.

You can start investing in real estate with Fundrise for as little as $500. You can invest in either a retirement or non-retirement account with Fundrise and can choose to invest in funds that provide income or growth potential.

Real estate investing is a great option for those looking to create passive income, and with crowdfunded investing you don’t have to deal with the hassle of property management or needing to be a accredited.

Get Direct Ownership

 

The final way to start investing with $500 or less is buying directly from the company. This is often not worth the hassle, and risks having shares of stock in various places but it is still an option to consider especially if you’re a buy and hold type investor.

You can buy directly from the company in one way – through a Transfer Agent. This Transfer Agent is usually a company known as ComputerShare. If you call their investor relations department for your chosen company they should be able to tell you who you can buy directly from.

Most will have minimums of either $100 or $500 and some might charge a small fee, but this can be an option.

Investing with $500 or less can be a challenge, but it can be done. Here are brokers to consider and ways to start investing with 500 bucks or less.

It Can Be Done, Just Set A Goal

 

Investing with $500 or less can be a challenge, however don’t give into the belief that it won’t accomplish anything. You will actually be harming yourself more in the long run if you don’t start investing. That’s for one simple reason – compound interest.

While it can be a difficult topic for some to understand, it is your most powerful ally in building wealth. You can educate yourself about compound interest and other investing topics by picking up one of my favorite investing books for beginners.

If you don’t have the funds to start, then set a goal – it’s as simple as that! Make a commitment to set aside $25 or $50, or more, a month and if you can automate it, even better. Before you know it, you’ll have the funds you need to get started in the stock market but you must first set a goal to do it and then act on it. It might not be easy, but it’s most definitely simple!

 

What are your recommendations for people wanting to start investing with $500 or less? Why do you think we make excuses to not start when we have little means to do so?

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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.

28 Comments

  • You have to start somewhere even if its small. If you continue to make excuses you will never get started and begin to learn more about investing. All about taking that first step. The sooner the better too, to take advantage of compound interest.

  • Miriam says:

    Here in Canada we have something called a TFSA (I’ve forgotten what the letters stand for) but it is essentially an account where the earnings (not the capital) are not taxable. I have roughly $4 thousand invested through that account in a mutual fund held by my bank. I don’t seem to be making much money but it’s better than the no money I was making when it was just a cash account. I’m leery about doing anything on my own because whenever I have tried in the past I only lost money. Do you know of any services like you’re talking about – Etrade et al who operate in Canada? Should I consider moving my money ? I add to this fund sporadically because of other priorities right now (paying down debt) but hopefully I will be able to start adding regularly to it soon.

    • John Schmoll says:

      Those are good questions Miriam. I don’t know a whole lot about TFSAs – Tax Free Savings Accounts, other than it’s not taxed when withdrawn and such. I’m fairly certain that Etrade operates in Canada, as does Vanguard, Schwab, Fidelity and others. I don’t know exactly what their requirements and such are but would generally send you in that direction as I know they’re solid here in the States.

      If you did move it, I’d make sure you’re comfortable with what you’re doing first – generally speaking I’d direct you to the Canadian equivalent to our index funds so you’re staying with the market. But, not knowing your entire situation it’s hard to say exactly what you should do.

  • Any of the options you mentioned sound good for people just starting out. Whatever they choose, they should just start!

  • As soon as I’m able, I plan to ramp up my savings and investing as I know it’s super important to reaching my financial goals. First I just need to get rid of my debt! 🙂

  • Dominic says:

    John, having just found your site yesterday and you helping me with some questions on Twitter yesterday as well, this article was exactly what I was looking for! (Get out of my head!!!) I’ve just finished reading Rich Dad, Poor Dad and at 33, have decided I need to get my butt in gear! I’ve got about $20k in my 401k but my company quit matching due to starting an employee ownership plan. Our 401k is handled through Paychex with only a handful of funds available.

    I spoke with an investment friend a few months ago regarding reallocating because frankly, I have no clue what I’m doing! Right now, I’m sitting at 1.5% RoR, so I’m thinking I need to change up a bit.

    Since the company stopped matching, I’m thinking of starting up a separate Roth IRA or even starting small like this article suggests with either Motif, Sharebuilder, or Betterment.

    Say I can scrape up $100 to get started, and $50-$100 a month, what would be my best course of action? Got to tell you again, I love the site!

    • John Schmoll says:

      Ha ha, what can I say – I double as a mind reader. 😉 Seriously though I’m glad to be of help Dominic. Sorry to hear that your company is no longer matching funds, but sounds like you’re definitely on the right path with your book selection.

      I think a Roth, generally speaking since I don’t know your entire situation, is a great way to go! All three of those are solid options to look at. Sharebuilder is really good, though has a fair number of restrictions so would direct you away from them unless you have specific stocks you know you want to buy each month.

      That said, I think the Motif vs. Betterment question comes down to how much control you want. Betterment is going to do more hand holding. You, of course, can control it and do what you want at any time, but they act like a virtual financial advisor. Based on a few questions you answer, they’ll put you in a selection of some of the 12 or so ETFs they work with. They have no minimum balance requirement, so you can start with as little as you want, but if you can’t put in $100/month you’ll be charged $3 month – so $36 per year, BUT you won’t have trading fees on top of that.

      Motif is a good one to look at because you can start with as little as $250. However, you control more of it so if you’d rather not have that then you might not want to go with them. With Motif you basically create your own mutual fund or ETF and pick up to 30 stocks. They also have about 150 pre-made ones you can choose from if you like. To trade each Motif you pay $9.95, but is still a relatively good value.

      I personally have a Motif account and the platform is relatively simple to use. I don’t have a Betterment account, but have worked in it quite a bit as well and seems similarly simple to use. I don’t think you can really go wrong with either – just comes down to that control piece I mentioned above. The key, as you pointed out, is simply starting and make sure not to focus on a few dollars in cost but getting started.

      Anyway, I know that’s a lot to take in. 🙂 If you have any further questions – feel free to reach out to me through my contact page: https://www.frugalrules.com/contact/

      Thanks for the compliment, glad you like the site!

  • Great post, John. I think the thing that made me not start investing when I didn’t have a “lot” of money to invest was the thought that the transaction fees would be killer. I prefer to buy at least $2k of stocks to offset the cost of the trade, but I think you would agree that it’s better to get started than to worry about a $5 or $7 fee. I’ve changed my view on this and now realize how harmful the “I don’t have enough” mentality is. I’m actually a big fan of investing while paying down student loans, as I think long-term it’s better to get in the habit and get some dollars flowing into your investment account than to wait until every last student loan is paid off. Lots of people will disagree with that approach : )

    • John Schmoll says:

      Thanks DC! I tend to be the same way with my investing – I like to buy in blocks so as to mitigate any trading fees. But, like you said, as long as you’re not paying crazy fees sweating a few dollars should be the last of your concern as you’re just starting out – it’s that getting started that truly matters.

      I’m with you on investing while paying down debt. I didn’t when I was in credit card debt and wish I would have. Many don’t and they have no clue what to do when they’ve freed up that cash each month. That’s also not to mention the fact that it’s best for the long run to get those investing dollars to do what they need to be doing.

  • I agree with you John that setting a kind of goal is really the factor here whether you lose or win, in spite of how much your money is. Proper mindset should be obtained and a good approach must be adopted prior to investing.

  • I’d recommend opening a Vanguard account. When buying their own ETFs on their brokerage platform I do not believe they charge a transaction fee. For example if you like VTSAX but can’t meet the minimum you can buy VTI which is the ETF equivalent.

    • John Schmoll says:

      Yes, I do believe you’re correct in that you should be able to buy their ETFs without a commission. The only concern, and why I typically wouldn’t recommend them to someone just starting out with a little amount is their tiered pricing structure, especially once you move away from their ETFs. I’d rather see someone build up $3-5k then move over as they’ll benefit more from what Vanguard has to offer.

  • Jen says:

    If you like ETFs, I recommend Betterment, WiseBanyan and Acorns. There are no minimums to open an account, but fees do vary. For example, Betterment charges .35 if you set up monthly contributions of $100. WiseBanyan doesn’t charge a fee…

    • John Schmoll says:

      I like Betterment as well, especially if you want a hands off approach. I’ve heard relatively good things about Acorns, though they have a limited offering and is just really spare change – but is better than nothing I guess. I’ve done a little bit of research into WiseBanyan – they do have some good selling points, but would direct towards Betterment in most cases.

  • Every now and again I go for the ETFs through Trade King. Easy, cheap, and definitely doable with under $500.

  • These places are all doable. Like Natalie said above, ETF’s can be the way to go. Many of the robo advisors will help you get started for less than $500 with those as well.

  • Great suggestions John!! We just opened an investment account for my son’s money through Motif and it was not only easy to do, but I loved the minimum balance requirement. I also recommend Drive Wealth for people with low starting balances, they have low minimums and also let you create a starter account where you can practice investing before you actually do it.

    • John Schmoll says:

      Thanks Shannon! I really like Motif for that as well – they make it very easy to manage and love the specialty twist to it. I’ve never heard of Drive Wealth – I’ll have to check them out.

    • Mrs Lewis says:

      You’re such a good mom! I remember handing every dollar from birthdays and holidays to my parents for “savings” as a kid. Today I have no clue what happened to it all. I look forward to having kids so I can teach them about building their own wealth and not leaving it all to me.

  • Wow, I wasn’t aware about some of these options. I have a 401k and an IRA, but haven’t dabbled much in regular investing. Once we finish paying off our debt, I think we will venture into stock market investing.

  • Reuben says:

    I’m not sure if I’m correct in saying this but the Robinhood app is great for iOS. I’ve been playing around with it and the benefits are no commision trades (stocks, ETFs) and an easy to use interface. No research/balancing but there a no minimum balances to maintain so you can start with as little as the lowest cost ETF. I’d love a review of it to make sure my comments aren’t off base!

  • Mrs Lewis says:

    Investing makes me nervous and I think it’s because i haven’t hit every savings goal yet or pay off my debt. Being the only income earner in my family makes it hard to juggle priorities.

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