Having more money to invest in the stock market is obviously better though that doesn’t mean you have to wait. It just means that you have to find the options that work best for your specific situation.
I believe that the most important step to grow your wealth is just starting – regardless of the amount you have to begin with. If you’re looking to start investing with $1,000 or less I’ve put together some of the best ways to do so – even as low as $250.
Pick the Right Discount Brokerage
As I shared in my initial post on investing in the stock market, choosing an online brokerage is a key part to investing. The problem is not all brokerages have the same minimum balance requirements, not to mention the fact that the number of options can be overwhelming.
If you want to start investing with $1,000 or less you will be somewhat limited, but not as much as you think. In fact, you can even invest at several of the three more well-known online brokerages. Below are their minimum requirements:
- Vanguard – you’re subject to their fund minimums, of which some are $1,000
- Schwab – you can open most accounts for $1,000
- Fidelity – you need to have $2,500 to open an account with Fidelity
Outside of those major brokerages, there are still many others that will allow you to open an account with under $1,000. Many of the more well-known ones, such as Scottrade allow you to open various account types with less than $1,000. You can also check out our TradeKing review for a brokerage that has no minimum balance require to start.
If you’d rather have someone manage the investing for you that is even possible. You can look at Betterment vs Wealthfront as both robo-advisors manage investments and you can open accounts for $500 or less.
Point being, you do have viable options when you start investing with $1,000 or less. I will give the disclaimer though that you want to be very mindful of fees when you have little money to start investing. Fees can be a drain on an investment portfolio, and this is even more so when investing with little money.
Start Investing by Buying Fractional Shares
When you first start investing you may be overwhelmed when you look at certain stocks which trade at hundreds of dollars per share. You may think it’s impossible for you to invest in the stock market, but that’s a myth. What many don’t know is there are ways to buy fractional shares of stocks.
While this will not make you a millionaire overnight, the point is that it allows you access to start investing in the stock market so you can grow your money. The two main options to choose from if this is the direction you want to take is Sharebuilder and Motif Investing.
Sharebuilder is the older of the two options and with them there is no account minimum to start investing. After opening an account with Sharebuilder, you set up what’s called an Automatic Investment Plan. This plan allows you to set up an interval for your investing – weekly, monthly, etc. You establish how much you want to spend with each interval and what stocks, ETFs or mutual funds and it invests the money in those, even buying fractional shares if need be.
With Motif Investing, you set up what’s called a motif for as little as $250. This can be a grouping of up to 30 stocks or funds you like and they also have pre-made ones. This essentially allows you to create your own ETF and invests in fractional shares. For a further breakdown of how Motif works, here’s our Motif Investing review.
What I like about both of these options is they allow you to start investing in the stock market with less than $1,000 and make it simple to manage. The beauty is that you can start with something like this and use it as a base to get more serious with your investing as time and finances allow. Of the two, Motif Investing is my personal favorite as they allow you to create your own fund (and thus everything in one place) as opposed to buying a bunch of individual stocks as you would through Sharebuilder.
Buy Direct from the Company
The final main way to start investing with $1,000 or less is to buy shares directly from the given company. I will say that there are a few drawbacks to this, mainly that not every company sells its shares directly and that it can lead to having shares that are too spread out. While this is a viable option, I prefer not to buy direct as it can overcomplicate things – I’d much rather have everything in one location.
In most cases, you won’t buy directly from the company but through a Transfer Agent – usually through ComputerShare. Most companies have a minimum of either $100 or $500 and some will allow you to buy shares for free, though some will charge a nominal fee.
I personally wouldn’t choose to go with this route, as I’d rather not have different investments all over the place. However, if you’re a long-term investor and plan little change in approach this can be a viable option to consider.
What challenges did you face as you started investing in the stock market? How would you start investing if you were starting with $1,000 or less?
Additional resource: If you’re looking for an online broker to start investing but have limited funds check out my favorite brokerage that allows it – Motif Investing. You can open an account for as little as $250. I personally invest with Motif as they provide instant diversification and make it easy to invest in what you know.
Photo courtesy of: 401(k)2012