Investing with little money: How to start investing in stocks for beginners with little money. 6 easy steps to buy stocks with low income.
Sadly, many people do not invest because they think they can’t afford to.
They look at investing in the stock market as something that is exclusive to the rich.
After the bills are paid, there isn’t anything left to invest. So, they just keep on living the same lifestyle in hopes that they will eventually earn enough money to start investing.
Well, let me tell you a little secret—there will never be enough money. And investing is not just exclusive to the rich anymore, it’s 2021!
Investing with little money is possible, accessible, and affordable to almost everyone now. It’s entirely possible to start with less than $25.
In this post, I will show you how to create a savings plan to invest in stocks on a budget.
Let’s dive in.
Investing With Little Money
Investing with little money is easier than ever.
Thanks to advancements in technology and economical advancements in society, nearly everyone has access to the stock market nowadays.
Prior to the internet, investing in stocks was a lot more complicated and expensive.
Even as little as five years ago, some Canadian brokers charged $28.95 per trade.
Now in 2021, as long as you have a smart phone and an internet connection, you can invest in stocks for free.
Is It Worth It To Invest With Little Money?
Yes, investing with little money is undeniably worth it.
Because of compound interest, it is always best to start investing as soon as possible.
Even if you save less money, starting just 5 years sooner can make a dramatic difference in how much money you could have in retirement.
How Much Do You Need To Invest in Stocks?
How much do you need to start investing in stocks?
$100? $500? Will $1,000 cut it?
As long as you have access to a zero commission broker, you can invest for free.
So, you can invest for as little as the cost of one share of the stock you want to buy.
Technically, you can start investing for less than $5 based on the cost of some stocks.
How to Start Investing With Little Money in 4 Steps:
1.Begin Budgeting Your Finances Like a Business
The key to investing with little money is managing your finances like a business.
Normally, we are told to pay off all debt before we start saving money.
We are told that the only good debt to have is a mortgage. In that case, why don’t we wait until after the house is paid off to save for retirement? It’s because there would not be enough time for the money to grow after the house is paid off. In turn, we pay for a mortgage and save for retirement simultaneously.
It’s the same for businesses. Typically, businesses will borrow money at low rates to grow their business. Even though a company like Apple has nearly $200 Billion in cash in the bank, you don’t see them using it to pay off their debt. They are investing in the business and they are paying off debt.
In the same way, it’s possible to invest with little money if you manage your money like a business.
Create a budget that allows you to save a small percentage of your income while still paying off debt. Even if you can only afford to save 1% of your income at first, you will be able to invest.
Related post: Saving vs Debt Payoff – Should You Save Money or Pay Off Debt?
2. Open a Zero Commission Brokerage Account
Zero commission brokers have made investing easier and simpler than ever before.
The main reason investing with little money is possible is because of the rise of zero commission brokers.
Commission fees eat into investors’ profits and make it harder to make money.
For example, if you buy a share with a commission, to profit, you have to sell it at a price high enough to pay for the buy and sell commission costs.
Now that zero commission brokers are available, it is much easier to make money.
If you reside in the U.S., investors can open a zero commission account with Robinhood.
In Canada, investors can open a zero commission account with WealthSimple.
Personally, I just opened a TFSA with WealthSimple to invest in dividend growth stocks.
For Canadian investors that want to buy U.S. stocks, the best option is likely Questrade (affiliate link). Although they are not a zero cost broker, you will pay the lowest cost for U.S. stocks in Canada. At Wealthsimple, the 1.5% conversion will make it more expensive.
If you are interested in opening a zero commission account in Canada, I would highly recommend WealthSimple. Open an account here to get $10 for free trades. Simply open a WealthSimple account through the link and invest at least $100 to get your $10 deposit.
3. Pay Yourself First a Percentage of Your Income into the Brokerage Account
As I alluded to earlier, if you manage your finances like a business, you can save money to invest.
To do this, you have to pay yourself first.
This is really the key to investing with little money.
“Don’t save what is left after spending; spend what is left after saving.” – Warren Buffett
So, even if you earn a small amount of money and think you can’t afford to save, start by saving 1% of your income.
When you get your pay check, do this calculation:
0.01 * pay check amount
Whatever the result is, save it and pretend it doesn’t exist forever.
After you do the calculation, transfer the amount directly to your zero commission brokerage account.
Although you don’t think you can live on less, you will be surprised how easy it is after a while. You won’t even notice.
If you were forced to live on less because of a job loss, you would find a way to figure out it.
Saving works the same way—you just do it and live on money that is left after savings.
Save a reasonable amount of money and slowly increase it every six months according to your cashflow.
4. Research, Read and Choose Low Cost Investments
Obviously, you don’t want to just buy a stock without knowing how to.
If that’s your plan, you should just spend the money. At least you’ll get something for it.
But if you are serious about investing, you should research stocks while you are waiting for savings to build up. You should read books like The Intelligent Investor, read quarterly reports, and analyze stocks with websites like MorningStar. Do as much research and studying as possible, take your money seriously.
If you are new to investing, you can research different investment styles.
There are plenty of low cost investments available:
- Stocks.
- ETFs.
- REITs.
- High interest savings accounts.
- Mutual Funds.
Related: Why Dividend Investing is My Main Investment Style
5. Create a Watchlist of Investments to Buy
As you wait for savings to accumulate on your zero commission brokerage account, you can create a watchlist to follow investments you are interested in.
I follow stocks I am interested in using these stock apps. And I also created a Watchlist with WealthSimple.
The reason for the watchlist is to follow your stocks and be aware of potential buying opportunities.
Then once you have enough money saved in your account, and once a stock on your watchlist is at a good value, you are ready to buy.
Related: Best Stock Apps: 4 Must-Have Apps for Tracking Stock Prices
6. Start Buying Stocks
Once you have your brokerage account open and some money is accumulated, you are ready to start buying stocks.
Now it’s time to figure out your buying strategy.
To make it simple, you could either buy every time you have enough money, because there are no commission costs.
Or you could wait until you accumulate enough cash to buy more significant amounts of stock.
Personally, I prefer dollar cost averaging into positions over long periods of time.
Perfect stock timing is rare anyways, so I just try to pick the best companies that are growing earnings at reasonable valuations.
But your buying strategy will depend on your investing style.
Investing With Little Money — Final Thoughts
In conclusion, investing with little money is possible because of new technology and zero commission brokers.
This has made investing easier, more accessible, and more affordable than ever before.
As long as you have a basic smart phone and internet connection, you can open an account with a zero commission broker and gain access to free investing.
In order to begin investing with little money, it just requires an initial mindset shift in how you manage your money.
If you manage your money like a business, you can begin to save small amounts of money into investment accounts. You just have to pay yourself first.
After you accumulate savings and research low cost investments, you can dollar cost average or buy stocks as soon as you have enough to buy one share.
And if you consistently save and invest into high stocks for long enough, you won’t be investing with little money for long.
Related Content
How To Pay Yourself First
Saving vs Debt Payoff – Should You Save Money or Pay Off Debt?
Why Dividend Investing is My Main Investment Style
Best Stock Apps: 4 Must-Have Apps for Tracking Stock Prices
I am not a licensed investment or tax adviser.All opinions are my own.This post may contain advertisem*nts by Monumetric.This post may also contain internal links, affiliate links to BizBudding, Amazon, Bluehost, and Questrade, links to trusted external sites, and links to RTC social media accounts.
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