How to Get Started Investing When You Don’t Have Much Money

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Investing is not just for the rich. Here are four ways to get started on Wall Street with as little as $50.

Playing in the stock market can be expensive. If you want to open a brokerage account at Charles Schwab, you’ll need $1,000. Over at Fidelity, the minimum investment is $2,500. And at Vanguard, you’d better be ready to invest $3,000 for most of their account options.

The hefty minimums required by many firms can make it seem as though holding investments is the preserve of the rich. However, don’t discount your ability to buy and sell mutual funds, stocks and bonds even if you don’t have deep pockets.

Money Talks News finance expert Stacy Johnson can tell you several ways to get into the investment game at a fraction of the normal cost charged by the big firms. Watch the video below for Stacy’s advice, and then keep reading for more details on each option.

Sign up for an automatic investment plan

Some brokerage firms are happy to open accounts with a small initial investment, as long as you agree to make regular, automatic payments. This is how I invest through American Funds. Most accounts have a $250 minimum for the initial investment, and then you can set up automatic payments as small as $50 a month.

Other companies that, as of this writing, offer automatic investment plans with low or no opening minimums include USAA, Heartland Funds and Monetta Mutual Funds. There are certainly others. If you have a company you’d recommend, share it in the comments below.

The biggest downside of this investment strategy is that small balances could be subject to extra fees not assessed of bigger customers. However, even if you’re able to swing a big initial deposit, an automatic investment plan can be a smart choice. It puts your savings on autopilot and helps ensure you’ll be putting money away month after month or quarter after quarter.

Look for online firms that welcome small-time investors

An automatic investment plan may be your best bet for buying mutual funds with a small deposit, but stocks are another story. They are much easier to buy with whatever little money you find leftover in your checking account at the end of the month.

There are two ways to buy stocks when you don’t have much cash, and we’ll start by talking about the most familiar one: online brokerages.

These companies are the ones with the Super Bowl ads and the promise that even Bob from Boise is just clicks away from becoming a winning day trader. The best-known companies in this category are E*Trade, ShareBuilder and TD Ameritrade.

While some online brokerages have minimum deposits to open an account, those that do typically keep them low. Others, such as ShareBuilder, have no upfront minimum requirements. Once you open your account, these companies make money by charging a commission for every trade.

Those commissions are the reason that while online brokerages make stock trading accessible, they also make it expensive. Paying $10 for a trade may not seem like much, but if you’ve only got $100 to play with, you’re starting off down 10 percent on Day 1, not a good place to be.

If you want to try an online brokerage, Barron’s published a list of their top picks for 2014. You can also look at the firms on our Online Brokerage page. Or, if you want to skip the fees, keep reading for a cheaper way to buy stocks.

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