Curious about how to invest in the stock market with a little money? For beginners, it can be a challenge to start investing in stocks with little money, especially if the amount you have to invest is $500 or $1,000. Many new investors feel that if you put that small amount of money in stocks, the returns will be so small that it isn’t even worth the trouble. Others worry that most discount brokerages have minimum balance requirements that may prevent them from even opening an account.
Does this mean it’s impossible to invest $1,000 or less? No, it is possible to invest with little money – you just need to know the best discount brokers for beginners with small accounts. Below, we’ll guide you through the process of putting money in the stock market in small amounts to help you get started towards saving for retirement!
Investing For Beginners With Little Money
We often allow the myth that we need a lot of money to start investing hold us back from opening a retirement account. While more money is obviously better when it comes to investing, this misconception overlooks one major problem. It’s time in the stock market that matters, not the amount you have to start. You can’t time the stock market – just look at 2013 when the S&P returned approximately 35% in one year.
Ultimately, time in the market takes advantage of compounding, where your future returns grow on past gains, and the earlier you start investing your money, the more time you will have to grow it. This is why many finance professionals recommend you start investing in your 20s and 30s.
With that out of the way, let’s look at some of the discount brokers that will allow you to start investing in the stock market with small amounts of money.
Not All Brokers Will Want Your Business
In many instances, we would recommend you to one of the more established online brokerages for your investing needs. Those are Vanguard, Fidelity, and Schwab. All are good brokerages with solid investment philosophies. In many cases, unfortunately, you’re unable to invest with $1,000 or less at any of those three brokers.
Below are the minimum balance requirements at each brokerage:
- Fidelity – Fidelity requires a minimum balance of at least $2,500.
- Schwab – Schwab allows some account types at the $1,000 level.
- Vanguard – Vanguard offers some mutual funds with a $1,000 minimum investment.
If you have less than $1,000 to invest, your options will be limited at traditional brokerages. Thankfully, there are many other discount brokers to consider.
How and Where To Start Investing
If you need ways to invest with as little as $1,000 or $500, there are a number of online brokers and wealth managers available to you. Here are the best discount brokerage firms to consider:
Betterment is a robo-advisor. A robo-advisor gives you access to tools once found only through a financial advisor or planner. How much do you need to open an account with Betterment? Nothing. $0. Betterment has no minimum balance requirement to open an account, so if you have only $200 to invest, you can open a Betterment account. While you’ll pay slightly more in fees, they are still relatively minimal given Betterment’s low-cost fee structure.
The best part is that you can get up to six months commission free when you open a Betterment account, so keep that in mind as you consider other brokerages.
Check out our Betterment Review for an in-depth analysis of how they can help you start investing.
Motif Investing is a cross between a robo-advisor and traditional discount broker. A motif, which is what they’re known for, allows you to create your own fund of up to 30 stocks, ETFs or index funds for $9.95. You can also trade individual stocks with Motif for $4.95. In general, Motif Investing’s fees are among the lowest in the industry, making it a great place to invest in small amounts.
Furthermore, Motif makes it relatively easy to start investing with $500 or $1,000 since the minimum balance requirement is $250. You can also get up to $150 cash back when you open a Motif Investing account, which is a competitive promotion.
Read our Motif Investing Review for a full breakdown of how you can invest in stocks with them.
Wealthfront is similar to Betterment because they are both robo-advisors. They have a very similar investment philosophy focused on low-cost index funds to grow your money. Having once been $5,000, Wealthfront now requires only a minimum balance of $500 to start investing.
The benefit of choosing Wealthfront vs Betterment is that, at these levels, you pay less in fees. In fact, you can get your first $15,000 managed for free when you open an account with Wealthfront, so you only pay the expense ratio of the chosen index funds.
Read our Wealthfront Review for a complete look at how they can help you start investing early.
Etrade is a traditional discount brokerage. You manage everything on your own and you can invest in anything from stocks to commission-free ETFs and mutual funds. Etrade’s fees and commissions are on the higher end, coming in at $6.95 per trade, but Etrade is consistently ranked one of the best discount brokers online.
Moreover, the account minimum at Etrade depends on the type of account you open. You can open an IRA with Etrade with no minimum balance requirement. However, if you want a private portfolio instead of a retirement account, the account minimum requirement increases to $500. Etrade also offers a promotion of up to $600 cash back, depending on how much money you fund your account with.
Check out our E*TRADE Review for a closer look at what they have to offer.
If you want to invest in individual stocks and nothing more, Loyal3 may be a good platform for you. Loyal3 takes a twist on the common online broker and allows you to invest in a little over 60 stocks from well-known companies, such as Apple, Yahoo, Amazon, Alibaba, Google, Berkshire Hathaway, Coca-Cola, etc. You pay nothing to place the trades nor does Loyal3 have a minimum balance requirement.
Loyal3 is admittedly not for everyone because of the limited investment selection, but the company may be ideal for beginner’s wanting to invest in high-quality names. You can open a Loyal3 account with no minimum balance and start trading stocks as soon as the account is funded.
Read our Loyal3 Review to see how they might be a fit for your investing needs.
Scottrade is the final online broker to consider if you’re investing with a small amount of money. The one thing to keep in mind with Scottrade is that the $500 minimum balance requirement only applies to retirement accounts such as IRAs. Non-retirement accounts still require at least $2,500.
Scottrade, like Etrade, is a traditional discount brokerage offering much of the same tools and products. Scottrade offers a better commission, a flat $7 per trade, and has a national branch network of over 500 locations. You can also open a Scottrade account and get up to $2,000 cash back, which is one of the best promotions available.
See our Scottrade Review for a comprehensive look at whether they are the best place to invest your money.
Start Investing With Little Money
How to invest $100, $500, or $1,000 can be a challenge, but there are still many great options to consider. If none of the above options fit your needs, check out our other discount brokerage reviews to find a fit; otherwise, keep saving up so you can start investing as early as possible.