Investing used to be a thing for people with a lot of money. The hardest part for average income earners was coming up with enough cash in the first place just to get started. On top of that, if you wanted to invest in your favorite companies you had to purchase stock shares in whole, aka you couldn't buy fractional shares of stock.
Thanks to innovative companies and technology, now you can invest in the stock market with as little as $5 – $10, and you can split it up to buy fractional shares of each of your favorite companies.
Ill show you how you can begin investing with little money, because the excuse “I don't have enough money to invest” is no longer valid.
How To Invest With Little Money
One of the biggest reasons people don't get started investing in the stock market, is lack of knowledge or education. They think it sounds complicated, and dont want to risk messing up. As previously mentioned, another common excuse is “I don't have enough money to invest.”
Bot of those are no longer valid excuses thanks to the help of technology and modern investment companies. So how do you invest in the stock market with little money? The answer is actually pretty simple. Find a company that lets you invest with as little as $5, and has little to no fees!
There are essentially two ways that companies let you invest with little money to start. They are:
- Invest with a company that lets you buy fractional shares of stock
- Invest with a modern day “robo-advisor”
Both of those options listed above are things that you couldn't do in the past. It used to be that you needed thousands of dollars to start investing, and the fees to invest were painful. Not anymore.
How to buy fractional shares of stock
This is a relatively new concept. When referring to fractional shares, it means the ability to buy any number of shares of stock that aren't whole numbers. In the past, investment banks only allowed a customer to buy stock shares in whole numbers (1, 2, 3, 4…100, 101 shares of stock).
That means if you want to purchase stock in Amazon, you have to invest at least $1,000+ just to get a piece of the pie because one share of Amazon (as of this writing) is valued upwards of $1,000.
Wouldn't it be nice if you could invest just $5 in Amazon stock? Here's how you can.
Where to buy fractional shares of stock
M1 Finance is a modern investment company that has made investing in fractional shares of stock quick, easy, and FREE!
M1 Finance allows its customers access to the stock market via their free investment account. You can access your portfolio of investments through their user friendly iOS or Android app, or through their desktop computer website.
Once you set up your free account with M1 Finance, you can create your own “pie”, or stock portfolio comprised of just one or multiple of your favorite stock companies. You can then invest as little as $10, and that money will be dispersed among your chosen stock companies as desired.
Keep in mind that M1 Finance requires that you have at least $100 in your account before investing. After that, you can invest with as little as $10. You can still open your account with no money, you just need to deposit $100 to start investing, and then you can invest with as little as $10 from then on.
If you don't have that money yet, just start a savings account and set aside a few bucks here and there until it reaches $100. Then start investing.
You can create multiple different “pie's” or invest all your money into just one pie. A pie is really just M1 Finance's name for what is similar to a mutual fund or ETF (exchange traded fund), only this time you are the creator of the portfolio, not the bank.
As your balance grows over time, M1 Finance even allows you to borrow up to 35% of your account balance should you need quick access to cash. There is no credit check and it doesn't reduce your balance invested, but rather is a loan against your account balance. Should you not pay the money back, they just deduct it from your investment account balance.
==> Read more in our detailed review of M1 Finance
How To Invest With A Robo Advisor
What is a robo advisor? It's an investment strategy that uses complicated algorithms to create a customized investment portfolio based on your investment objectives. Long story short, a robo advisor will create a diversified investment portfolio comprised of stocks and bonds, based on your responses to a few basic questions regarding your investment objectives.
Robo advisors are great in that they take the worry of not knowing how to invest properly out of the equation. The algorithms are created by very experienced investment experts. So it's not a “robot” investing for you if that's what you're thinking.
Rather, professional investment experts simply automated their process to creating a portfolio for you by creating algorithms that tell you which portfolio is best for you unique scenario.
Where to invest with a Robo Advisor
There are multiple robo advisor companies available today. But perhaps the most popular and unique option for beginning investors is Acorns.newly opened Acorns investment account, and they simply “round up” all your daily purchases to the next whole dollar. Acorns then takes the extra money rounded up and invests it in a diversified investment portfolio put together for you upon account opening.
Just answer a few questions, and they will assign you one of their professional investment portfolios based on your investment objectives. Usually a robo advisor will offer up to 4 or 5 different portfolio options ranging from conservative risk, moderate risk, moderate aggressive risk and aggressive risk investments.
Again, the portfolio that your investments will be put in are dependant upon your answers to a few simple questions about your goals for your invested money.
Robo Advisors are great in that they don't charge the high fees that an expert financial advisor costs, and they make investing automatic, easy and accessible.
When investing with Acorns, you no longer have to worry about setting aside money for investments because they automatically “round up” your daily purchases and invest your spare change automatically. Your “round-ups” can be put on pause, however, should your budget suggest so.
When round-ups are on, you hardly feel any change in your budget since the investments are just small amounts each day, and before you know it you've got a large chunk of change growing automatically.
Acorns lets you add or withdraw money from their desktop website, or their investment app for iOS or Android devices.
==> Read more in our detailed review of Acorns Investing
Why To Start Investing With Little Money
The biggest mistake the average family or person makes, is waiting until the perfect time to start investing. The ironic answer to that question, is that there will never a perfect time to start. You just need to get going…yesterday.
The advantage anyone has when it comes to growing a wealthy investment portfolio is time. The longer time you have available to you, the better the opportunity to set your investments on automatic, and let compound interest do it's magic. This is exactly how millionaires become wealthy.
Don't believe me? Just read “The Millionaire Next Door” which details who the millionaires of America are and how they got there. It's based off of real life studies and interviews of thousands of the wealthy families and how they grew their investment nest egg.
For those of you who have started investing, what are the biggest benefits you have seen in the first stages of investing?
For those of you just starting out, what are your biggest “excuses” or “fears” to get started investing?
**Post your comments below and ill personally respond with my thoughts and experience!**