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 you 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. If you want to know how to invest $1,000 or less, this guide is for you.
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 our Betterment review to get a better idea of the services they have to offer.
I’m a big fan of Wealthsimple, a new to the U.S. robo-advisor. Wealthsimple first began in Canada and now manages over $1 billion in assets.
Wealthsimple, like Betterment, also allows investors to open accounts with no minimum account balance so you can start investing right away – regardless of the amount.
What makes Wealthsimple unique is their focus on Socially Responsible Investing (SRI). With SRI you invest in companies focused on aligning with your values. There’s no extra charge to use a SRI portfolio, and follows the same low-cost ETF model you find with the rest of their offerings.
Here’s our Wealthsimple review to get a better idea of the services they have to offer.
E*TRADE is one of the more well known online brokerages listed here. Many know them for their talking baby commercials that ran for years.
Behind the clever ads is a solid online brokerage to house your investments. While they fall behind in terms of commission at $6.95 a stock trade, they more than make up for with the tools and services they offer.
E*TRADE offers a wide range of mutual funds, powerful investing tools, wonderful customer service and access to foreign markets. If you’re in the need of a new online brokerage, then check out our in- depth E*TRADE review.
Also keep in mind that they’re always offering promotions so keep an eye on that as you might even qualify for up to $600 for bringing them your business.
Ally Invest, like Etrade, is a traditional online broker. There is one key difference between the two; Ally Invest comes in at a cheaper $4.95 per trade vs. $6.95. 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 Ally Invest 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, Ally Invest stands apart with over 8,000 mutual fund offerings and a minimal $9.95 commission charge on mutual funds.
Here’s our Ally Invest review to get a better idea of the services they have to offer.
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.
*Related: Do you want to invest in real estate but have limited funds? Check out our guide of the best sites for real estate crowdfunding for non-accredited investors that let you invest with little money.*
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 our Wealthfront review to get a better idea of the services they have to offer and how they differ from Betterment.
don’t overlook the easiest place to start investing with less than $1,000
While you can invest at many online brokers with less than $1,000, 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 and simply don’t start. 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 gives 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.
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 LendingClub, 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.
crowdfunded real estate
When you hear the word ‘crowdfunding,’ you may think of your friend’s Kickstarter campaign, but it can also help you generate passive income through real estate investing.
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 commercial or residential properties. Investors receive an equity stake in the property and returns are provided in the form of shares of the rental income that is generated.
If you’d like an alternative to investing in the stock market, you can invest in real estate with Fundrise for as little as $500 when you open a new account.
RealtyMogul is another good option to invest in real estate. You need to have $1,000 to start, but has lower fees than Fundrise.
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?
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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