You don’t need thousands of dollars to start investing. Big brokers have no account minimums, and fractional shares let $5 buy a slice of a fund that owns 500 leading U.S. companies. Open a brokerage account and invest what you can spare now, since a month spent saving up is a month that money isn’t invested.
Investing a few dollars at a time made little sense when each trade came with a fee. Until October 2019, Charles Schwab charged $4.95 for an online stock trade, almost all of a $5 purchase.
Schwab now charges no commission on online trades of U.S. stocks and ETFs, the exchange-traded funds that trade like stocks, and Fidelity doesn’t either. Both open accounts with no minimum and sell fractional shares, slices of a share bought by the dollar, for as little as $1. The amount you start with matters far less than starting.
Start in a brokerage account or a Roth IRA, a retirement account whose withdrawals in retirement are tax-free under IRS rules. You need income from work to put money in a Roth IRA, and the IRS limits how much higher earners can add. A workplace 401(k) needs no lump sum at all, since it takes an amount you pick from each paycheck, and any employer match adds to it.
Put the first dollars into one broad index fund, a fund that tracks a market index such as the S&P 500, which includes 500 leading U.S. companies. Splitting a small account among a few single stocks makes all of it depend on how those companies do.
Once your starter emergency fund is in place, invest a set amount every week. At $25 a week, you put $1,300 a year into a Roth IRA without ever writing a big check. Each deposit buys more of the fund the week it arrives instead of waiting in checking.
Open the account this week with whatever you can spare, even $5, and buy your first slice of an S&P 500 fund the same day.
Pick your broker from the best online stock brokers for beginners.
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