How much you really need to start investing
It's actually not as much as you think
- You can begin investing for as little as $5.
- Your goals and dream lifestyle should be an important deciding factor in how you invest.
- Before you begin investing large amounts, you should save and pay off debts.
For a first time investor, knowing what moves to make can be overwhelming. You start with way more questions than answers, and a common one is how much you need to begin investing. Many people mistakenly assume they need hundreds or thousands to get started, but that is not the case thanks to new options made available to us.
How much do you need to begin investing?
While the required amount varies for different investing types, it is possible to start as low as $5. Apps like Acorns and Stash let you sign up and begin with $5. The apps ask you questions about your life, goals, and a few other things. From your answers, a portfolio is put together and presented to you.
You can choose to put your money into that portfolio, or you can pick others. These are called micro investments, so do not expect to get rich over night. However, if you set up automatic deposits of even just $5 per check, your money will grow.
You also have the option of turning on “round ups.” Each time you spend money from your connected bank account, your total is rounded to the next dollar. That money builds and you can invest it into your chosen stocks.
Pay off debts before you begin investing. Otherwise, your investments might cost you more than they make you.
Options to consider for a first-time investor
There are many options available that a first-time investor with little cash can look into. Apps like those above are great choices for starting your investment journey. Robinhood is another great investment helper. You simply locate the stock you want to invest in, or one that is within your budget, and purchase it. As long as you have the money to cover the stock you choose, you are good to go.
If you want a human to hold your hand, consider hiring a broker. They can walk you through the process, help you locate stocks that would suit you, and handle the entire purchasing process for you. This option is a bit more expensive, though, as you are paying for the extra service.
Before you begin investing
Once you have set your mind to investing, it is normal to want to jump in headfirst. This is typically not the best move. Tying all of your extra cash up in investments when you have no liquid funds in case of an emergency can put you in a hole.
Since making micro-investments with places like Acorns and Stash do not take much investment, it may be safe to do that first. Higher investments, on the other hand, should come after a couple of other steps.
Save an emergency fund
The first of these steps is to have an emergency fund stashed away. In case of needed car repairs or illness, you need money that you can easily get your hands on. Save yourself that headache by having an emergency fund of at least $1,000 put away before making any large investments.
Pay off debts
The second step is that you should pay off debts, especially high-interest ones. Otherwise, your investments may cost you more money than they make. For instance, if you currently pay out $200 per month in debt interest while your investments make you less than $50 per month, you are losing $150. Start by paying off debts, then invest.
How to begin investing with no money
In truth, there really is no way to invest when you have nothing to invest with. You can, though, make some quick moves that will give you something to work with. One quick move is to have a yard sale or sell something of value online. Another is to start collecting your change in a jar. At the end of the month, you should have at least a few dollars to start. You might also consider asking for cash on your birthday or for Christmas instead of presents.
A deeper dive — Related reading from the 101:
A simplified guide to buying stocks for the first time.
There is more than one way to pay off your debts.