Learn more about moneyandinvestments with this collection
How to develop a healthy relationship with money
How to create a budget
The impact of emotions on financial decisions
How Much Money Do I Need to Start Investing in Stocks?
Technically, there’s no minimum amount of money needed to start investing in stocks. But you probably need at least $200 — $1,000 to really get started right.
Most brokerages have no minimums to open an account and get started buying stocks. So theoretically, you could open an account today with just $1.
That said, there are three factors that set a natural floor on how little money you can start investing with. In general, you should have enough money to:
- Afford a single share of stock.
- Properly diversify your portfolio.
- Protect your profits from trading fees.
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You Need Enough Money to Buy a Single Share of Stock
While many brokers allow you to open an account with just $1, there’s still the question of, “What stock can you buy for $1?”
Based on your research, there will be a stock (or several stocks) you want to buy. In order to start investing, you need enough money to afford at least a single share — which could range from $1 — $300,000.
However, there’s a relatively new workaround to this problem. A few brokerage startups allow investors to buy fractional shares for as little as $5.
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You Need Enough Money to Properly Diversify Your Portfolio
Put simply, your goal should be to own between 10–30 positions.
If you only have $1,000 to invest, it’s fine to start with just a few positions, especially if you’re planning to add more over time.
As you add money to your investment account,buy a different stock with your next $1,000, and a third stock with the $1,000 after that. You want to avoid piling all your money into a single stock since this leaves you overly concentrated and your entire investment future tied to a single position.
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You Need Enough Money to Protect Your Profits from Trading Fees
If you’re starting with a small amount of money in your investment account, trading fees could really eat into your profits.
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How Much Money Should You Invest in Stocks?
In general, try to invest as much as possible in the stock market because the incredible power of compounding can create so much wealth over the long term.
Every extra dollar you invest wisely in the market today could be worth $5, $10, $20, or more in the future.
Some very important guideline to follow to limit how much you invest in the stock market:
- Never invest so much money that it would risk your financial future.
- Never invest money you’ll need in the next 5–10 years.
- Never invest so much money that you can’t sleep well at night.
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IDEAS CURATED BY
Other curated ideas on this topic:
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A Beginner's Guide to the Stock Market
Matthew R Kratter
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Best Investing Strategies | Millennial Money
millennialmoney.com
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