If you are considering the idea of buying stocks for the first time, you might be wondering just how to invest in stocks with little money as a complete beginner. Today, we will explain some of the ways you can make this happen. While you can’t invest with no money, you can get started for as little as $500.
Here’s How to Invest in Stocks With Little Money:
Step 1: Start Thinking about Products and Services You Use Every Day
It may sound simple, but some of the smartest advice you can receive about stocks may in fact come from grade schoolers! (No I’m not kidding.) If you don’t believe me just ask any grade schooler you know in your family what their favorite restaurant is. What do you suppose their answer would be? If you guessed Mcdonald’s you are correct!
Now, I’m not saying go out and buy Mcdonald’s stock right away! I’m simply trying to illustrate the point that some of the top Wall Street investors would tell you something different and the chances are the stocks they are pushing would get beat by the stocks your average first grader would recommend!
Let’s Compare 2 charts. Here is Mcdonalds:
Now, let’s think of something the experts were pushing 5 years ago. Remember the big stem cell research debate? One of the companies the so called experts were raving about was Geron Corp. Here is their chart:
Needless to say, if you look at the two charts your average 6 year old would win this stock pick debate!
Now the point I am trying to make is that you as a new investor have a huge advantage over the investors who have been doing this a long time. Your head has not been filled with nonsense. So start thinking about the companies you love and why you love them and you will be taking the first step towards how to start buying stocks with little money.
Step 2: Play a Stock Simulator Game
Now that you have a few companies in mind, try your hand at some free stock simulator games. If you are not familiar with the concept you can learn more about them here. I’m not going to tell you which ones to play because you can find many by searching online. Just make sure they are free! Our aim here is to learn as much about investing as possible without spending a single dime.
Step 3: Save up at least $500
As you play the game, start saving some money. Put away little amounts of money somewhere safe and do not spend it! Once you have saved up $500 or more move on to step 4. If you need ideas for ways to make extra money, read our posts here: Making money to invest & 8 ways to make more cash.
Step 4: Find a Broker
In order to invest, you need to find a broker. In the old days this was some sleazy salesperson. Today things have changed. Today you can invest online right from your computer at home. You can be your own broker and guess what…you are free. With that being said there are costs associated with choosing the right online broker. To learn more about this, read our post on Choosing the Best Online Broker.
The main thing you need to understand is that online brokers require an initial deposit. What you do is create an account, give the online broker some basic information and add funds in order to get started. There are many brokers to choose from so you will have to do your own research on this one.
There are two main types of brokers: Expensive and Discount. The expensive ones have all the bells and whistles for the richest and most prolific investors. If you have the cash you can choose them and you get what you pay for. The main ones of course are TD Ameritrade, Etrade, Charles Shabb etc.
Then there are discount brokers. They cost less but you need to be careful. Choosing the wrong broker can cost you. Even good brokers can cost you. In fact you can lose every dime you invest no matter how careful you are so you have to know your risks.
With that being said, our goal here is to find what to invest in with little money and one of the brokers I like is Suretrader. They have great rates for a small time investor. You can get started with as little as $500. Keep in mind they are foreign so if that scares you then you may want to find some other alternatives. Just do your own research and take your time. It never hurts to save up extra money while you research in case you choose a more expensive broker.
Step 5: Learn Stock Investing Software known as Trading Platforms
Trading platforms is a fancy way of saying that you will have software that allows you to buy your own stocks. It shows your account balance, what stocks you bought and what stocks you sold. It shows how much money you made or how much you lost. It lets you see what stocks are for sale and at what price. It essentially helps you do all the investing yourself without needing a human broker who will cost you more.
I have more good news. If you choose the right broker they give you this software for free! You can use the free stock trading software and if you start making serious money you can upgrade to ones that cost you.
The important thing is it doesn’t matter what fancy stock trading software you use. What matters is that you learn how to use it before you trade with real money. Here is more good news: most brokers allow you to try a demo so you can practice without using real money. Just ask them about a demo.
Step 6: Choose an Investing Strategy
Decide if you want to be a long term investor or short term investor. Long term means investing and not selling for decades and short term can be a few years or even a day! Also, decide if you want to be a high risk – high reward trader or a low risk investor. These are totally different things. You can learn more about all of these things here at the Trade Locker. Just browse around there is much to learn!
Decide if you want to buy one stock or thousands. Even for those with a low budget you can buy multiple stocks by choosing an ETF or a mutual fund. If you are your own broker these are all things you get to decide for yourself.
Step 7: Buy your First Stock, ETF, Bond or Mutual Fund
Once you have done all of the research possible you finally get to give investing a try. Just remember to start small – if you are trading, something like an ETF is the perfect choice. You will make mistakes. You will probably lose money at first. If you make money don’t let it get to your head. Do not get over confident because you won on a few investments. Even the best investors have fallen into that trap and have been known to lose millions. Just be careful.
Step 8: Learn from your Mistakes and Learn from your Successes
Always try to learn and grow as an investor. The best investors never stop learning. Just because you figured out how to start buying stocks with little money doesn’t mean the learning stops. Consider keeping a stock trading journal to chronicle the path you took and where you plan to be.
Step 9: Have fun with it! Investing can be so much Fun when done correctly!
After all, what’s more fun than making money right?
I hope these tips on how to invest in stocks for beginners with little money will point you in the right direction towards all of your investment goals. If you have any questions, comments, or ideas that you think should have been included please do so below!