Do you need a lot of money to start investing?
You might be surprised to find that you don’t have to be rich to be a successful investor.
- You don’t have to be rich to invest money.
- Brokerage firms have taken steps to democratize investment processing.
- Fractions of shares also allow you to buy many assets without having a fortune.
Investing money is a great way to increase your net worth. When you invest, your money can actually help you build wealth. The funds you have already invested will pay off. And when these are reinvested, you effortlessly earn more in the future.
Unfortunately, many people don’t invest largely because they think they already need a lot of money to do so. But is it really true that you need a lot of money to invest? The good news is that there are three reasons why this is no longer the case and why it is now possible to start making your money work even if you only have a few dollars.
Most brokerages no longer have minimum balance requirements
In the past, you often needed at least a few hundred dollars to meet brokerage companies’ minimum balance requirements. Depending on the broker, you may have had to make a minimum initial deposit of a certain size to open the account. Or you may have been charged a monthly fee if your account balance was too low.
This is no longer the case. Virtually all online brokers have eliminated any investment requirement of a certain minimum amount. Therefore, if you only have a few dollars now, you can start investing.
Commissions have been removed
Commissions were also very common just a few years ago. Brokers basically charged you fees both when you bought assets and when you sold them.
If you had to pay $7 or $10 or some other amount every time you buy or sell a stock or an ETF, it wouldn’t make sense to invest without having a lot of money. If your investment was too small, commission fees would eat up most of the amount you had to buy the asset and make it nearly impossible to make a profit.
However, commissions have been eliminated by most brokers. Since you no longer pay fees, there is no downside to investing just $5, $10, or $20.
Fractions of shares may be available
Finally, there was another big change that made it possible to invest even if you have very little money. It is now common for brokers to allow you to buy fractional shares.
Traditionally, you would be forced to buy a full stock if you wanted to invest. This meant that if you had very little money to invest in the market, you would have a limited choice of investments you could make. This is no longer the case. With fractional shares, if you want to invest in a company that is priced at $100 per share but you only have $10, you can buy 1/10 of a share.
Fractional shares, combined with the elimination of commissions and minimum balance requirements, have made investing without a lot of money a smart financial choice. If you have even a little money to spend, you can start buying assets that will help you build wealth. Over time, your small investments can add up and have a big impact on your net worth.
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