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How to Invest in the Stock Market With Little Money

Stock market investing is available to anyone with almost any amount of money; you don’t need to have thousands of dollars to invest. While investing a larger sum of money at one time can help limit your transaction fees, there are ways to invest small amounts of money with limited fees. Beginning to invest with a small amount of money instead of waiting until you have more cash allows you to start earning potential returns sooner. The longer you can invest in the stock market, the more your wealth has the potential to grow.

Open a discount brokerage account with a low minimum deposit requirement and low trade commissions. Some online brokers have no minimum deposit requirement to open an account and offer promotions and deals for free or cheap trade commissions.

Buy shares of a stock index fund, which is a low-fee mutual fund or exchange-traded fund that owns the same stocks as a particular stock index. An index is a group of stocks that represent a portion of the stock market. An index fund provides diversification, which spreads your money to many different investments. You can purchase index funds through your brokerage account or directly through certain fund providers.

Buy stock in a specific company using a direct stock purchase plan, or DSP. This plan is available through many large corporations, which allow you to buy stock in their company directly without using a broker. Matt Krantz says in his article “Direct Stock Purchase is Cheap, but it Can Cost You Dearly” in “USA Today” that the fees with a DSP are typically cheaper than buying stock through a brokerage account, but warns not to invest too much of your money in one stock.

Buy stock through a dividend reinvestment plan, or DRIP, which allows you to buy shares directly from a company and reinvest dividends in new shares. Many large companies have DRIPs that allow you to invest a small amount of money periodically and typically have low setup and maintenance fees. Many DRIPs require you to be an existing shareholder, so you may need to purchase a single share through your brokerage account before signing up for a plan.

Tips

  • Limit your transaction fees to a small percentage, such as 1 or 2 percent, of your transaction sizes to give yourself the best opportunity to grow your investments.

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