How Much Money Do I Need to Start Investing?

How much money is truly needed to start investing? What kind of amount do you think is needed to start an account? Maybe you have a figure in mind that either someone told you about or a made up figure that you imagined.

Trust But Verify When It Comes to Advice

My son told me last month that he had heard that he needed to have at least $5000 to invest or don’t even bother. If investing is new to you, it’s common to believe others as you might unintentionally think that everyone else knows more than you. Therefore, you are more willing to take advice on faith and not dig into it more yourself, especially if you trust that person.

Start small! What’s small? That can be as little as $25 but I think a nice goal to strive for is $500.  That way you can see results quicker. A gain of 10% for a $25 investment will only be $2.50, whereas a 10% gain of a $500 investment is $50. Making $50 in a month or two would be much more motivating to continue than $2.50.

In the Past, More Was Needed to Invest; Now Not So Much!

In the not so distant past, there were two reasons you couldn’t start investing with a small amount: the minimum amount required to open an account and the transaction fee for every trade. The history is interesting for commission fees: first it was hundreds of dollars for every trade.

Transaction Fees Get Lowered!

In 1975 Charles Schwab became the new trend setter and only charged $70 a trade. More brokerages joined the ranks in the 1990’s and the fee went down to $14.95. As recently as the beginning of last year it was down to $4.95 a trade.

When I opened my account 2 years ago, I negotiated it down to $3.99/trade. And as of last year (if you place the trade yourself), it is now $0 a trade! So, yes, a small account doesn’t have to be hindered by commission fees for every trade anymore.

Some Firms Have No Minimum Limits to Open an Account

Many brokerages have no minimum limits to open an account. One requires $500 to start. Just be sure to ask about the minimum to start and if there are any transaction fees.

Great Reason to Start Small

Regardless of how much your initial investment is, here is a reason to start small.

If you are going to self direct your account (meaning you are going to be in charge of where your money will be invested), then it makes a lot more sense to learn with smaller amounts. That way your mistakes will be less costly. There are virtual sites that you can practice on, but chances are you will learn more when you are using your own hard earned money.

Reinvesting Your Profits Will Bring You Wealth

Whether you manage your account personally or have it professionally managed, reinvest your profits. That is the true path to wealth.

Don’t let the initial investment amount be the roadblock to start investing in yourself. But as I’ve said in other posts, make sure you are debt free and have a savings account for emergencies before you even begin to open up your investment account. Be sure to read If I’m in Debt, Can I Still Invest for guidance in this area. There are steps to creating wealth, and this should help you get to your goals.

Until next time,

Linda

Linda Davis (“Publisher”) provides this website (www.stockmarketgal.com) for informational purposes only. All information on this website is information of a general nature and is not intended to provide specific advice or recommendations for any individual or entity or on any specific security or investment product. In reading this website, you understand that Publisher is not advising you personally concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. In making an investment decision, each investor must rely on his, her or its own examination of the investment, including the merits and risks involved, should consult with his, her or its own investment, trading, financial, legal, tax, accounting and other advisors, and should not construe any information on this website as investment, trading, financial, legal, tax, accounting or other advice. From time to time, Publisher or her affiliates may hold positions in securities discussed on this website and will disclose those positions if applicable, but neither Publisher nor any of her affiliates receives any compensation from the issuers of any securities discussed. Publisher does not warrant the accuracy or completeness of any information provided, either expressly or impliedly, and expressly disclaims all warranties of any kind.