How Much Money Do I Need to Start Investing?

A common question of beginners in stock market investing is how much money do I need to start investing? The quick answer is that you do not need a lot of money to start investing. However, it has to be money that you can afford to lose! When asking how much money to I need to start investing the beginning investor needs to be looking at money in excess of basic needs and several months’ worth of expenses in savings. And, don’t forget those credit cards! Paying 18% on a revolving loan, which is what credit cards often turn out to be, is a burden that requires a strong investment portfolio to overcome. How much money do I need to start investing in the stock market can be as little as $500 with some brokers although to trade online a broker will typically require $5,000 to $10,000. Then the investor may need software and substantially more expensive computer hardware.  So, where can an investor go with $500 to start investing and how should he proceed? Then the question is what is the best investment for my money?

For the beginning investor a good choice may be to invest in a mutual fund instead of directly investing in the stock market. Although a savvy investor can make more on his money than the return from a mutual fund the money, and time, needed to invest successfully may be prohibitive to the beginning investor. In the case of mutual funds how much money do I need to start investing may be as little as $50 a month. When asking what is a good investment mutual funds are typically not in the top rank of suggestions. However, it is possible to make more money in a mutual fund than in a bank account and it does serve to get your feet wet, so to speak. For the fledgling investor who puts money into mutual fund in order to build up his capital a good idea is too look at what individual investments the fund is composed of and to track those stocks individually. Another good thing to practice while waiting to build up capital is to choose stocks that you might buy. Write down the stock and price in a workbook along with the date you might have bought the stock. Then track the results. It will give you experience in actually picking your own stocks and the doing fundamental analysis necessary to find value in what you pick.

When you have several hundred dollars you may still choose to invest in a fund or perhaps look at an index fund. These investment vehicles track groups of stocks and don’t require that you do extensive research stock by stock. How much money do I need to start investing in individual stocks starts at $500 or so but the investor should really have a bit more. Nevertheless, the investor can just buy one share of stock. If he buys a share each pay period or each quarter his account will grow. If the investors is investing in growing companies the gains in stock price could eventually outpace his periodic purchases.

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