How To Invest In Stocks For Beginners With Little Money

October 7, 2021 | June Mckaig

invest stocks for beginners with little money

 

According to the Federal Reserve, 53% of American families owned stock in 2019. That’s up from 32% compared to 30 years ago. But there are still many who are hesitant about investing in stocks. This is especially true for those that don’t know how to invest in stocks for beginners with little money.

Some feel they don’t know enough about how the stock market works or don’t know where to start. Others may feel they don’t quite have enough money to begin investing. The truth is it’s easy to play the stock market even with just a bit of cash. Here’s our guide on how to invest in stocks for beginners with little money.

The Basics For How To Invest In Stocks For Beginners With Little Money

When you invest in stocks, all you’re doing is purchasing tiny ownership shares in a company that’s public. These shares are called stock. By investing in stock you’re predicting that the company will grow or continue to perform well as time goes on. That increases your stock’s value.

Before you start investing, it’s important to think about what you want to invest (choosing stocks on your own, investing in a 401(k), having someone manage your account), decide on an investing account (brokerage, robo-advisor, IRA), and figure out your budget for investment. These are the best first steps when figuring out how to invest in stocks for beginners with little money.

Tips For Getting Started In Stock Investments

It can be intimidating when deciding how to invest in stocks for beginners with little money, but there are a few different approaches to choose from. Here are some tips for you to know when you want to start investing in a stock.

Consider Stock Mutual Funds

When it comes to stock mutual funds, these are a good place to start with investing. They’re lower cost, easy to understand, and can be available through an IRA, a brokerage account, or your employer’s 401(k).

Through one option – the S&P 500 fund – you’re able to purchase small bits of stock in some of the largest companies in the United States. It’s a great place to start when you’re focused on how to invest in stocks for beginners with little money.

Find Low Minimums

Investing in the stock market often means that there are high cash investment minimums to hit, making it more difficult to spread around investments on the market, called diversification.

Exchange-traded funds (ETFs) and stock index funds have low minimums and several brokers offer index funds that don’t require any type of minimum. That makes it more comfortable for you to diversify your investment.

Micro-Investing

In addition to contributing to a 401(k) and working with a robo-adviser who automatically invests for you, you can also use a micro-investing app to buy fractional shares. Micro-investing is a recent trend that directly addresses the question of how to invest in stocks for beginners with little money.

With micro-investing apps like Robinhood, Stash, and Betterment, you are able to buy fractional shares, very tiny bits of stocks in some of the biggest global companies for just a few dollars, sometimes even just $1.

Try Self-Directed Investing

There are many new services out there that specialize in investing designed for beginners. One, J.P. Morgan Self-Directed Investing, offers free unlimited trade and no fees. You can also invest in mutual funds, stocks, and options without paying a commission.

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