How to Get Started Investing With $500 or Less

Playing in the stock market may seem like something for the rich only. However, don’t discount your ability to buy and sell mutual funds, stocks and bonds when you don’t have the deepest of pockets.

Here’s how to get into the investment game even if you have just a small amount — say, $500 or less — to put to work.

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. Call your favorite mutual fund family to find if it offers this service.

The biggest downside of this investment strategy is that small balances could be subject to extra fees not assessed to 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, quarter after quarter.

Look to online firms that welcome small 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 however little money you find left in your checking account at the end of the month.

Online brokerages can be a great place to buy stocks when you don’t have much cash. While some online brokerages require minimum deposits to open an account, those that do typically keep the amount low. Others 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 One. That is not a good place to be.

Buy stocks directly from a company

Direct-purchase plans are an easy way to get your shares straight from the source. These plans are how big companies sell stocks directly to investors.

Some companies may allow one-time purchases of stock, while others offer plans similar to automatic investment plans. Either way, the minimums are generally low — as little as $250 for a one-time purchase, or $50 for an automatic investment plan.

While there may be set-up fees and purchase fees, the cost of buying directly from a company is usually much less than what you’d pay if you bought through a brokerage.

Put your money in exchange-traded funds

Another option for those of us without much startup dough is an exchange-traded fund, known as an ETF. These investing tools offer the diversification of a mutual fund with the convenience of a stock.

ETFs are handy because they contain a number of securities — like a mutual fund — but trade on the exchanges like stocks. And they are perfect for investors with thinner wallets. As Money Talks News founder Stacy Johnson explains:

Some mutual funds have a minimum of $3,000 to open an account. With ETFs, you can buy just one share, which could cost as little as $5. They also have lower management fees than traditional mutual funds.

For more, check out “2-Minute Money Manager: Should I Invest With ETFs?

Looking for more guidance before jumping into the world of investing? Check out Wealthramp. This Money Talks News partner is a free service that connects you with fee-only advisers in your area.

Have you ever used one of these techniques? Share your experiences in the comments section below or on our Facebook page.

Christina Majeski contributed to this post.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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