There was a time when I didn’t know that investing in the stock market was open to everyone.
Sure, I knew that some people did invest (my dad does it for a living) but I didn’t think it was something you did. Certainly not something that was talked about openly in my social circles.
Of course, people still talked about money and how to be responsible about it. However, the only real investing type they talked about was buying a house.
Some might say that buying a house doesn’t even count as investing, but that’s what people my age were doing.
Naturally, the problem with buying a house is that there’s a BIG barrier of entry: the down payment.
Even if you manage to boss the negotiation process, you’ll still need to fork out a large lump sum of money.
Oh, you only have a little money? Ha! Guess you won’t be able to investing your money at all!
How to Invest in the Stock Market with Little Money
For most people, their home will be the best investment they ever make… because it will be the only investment they make!
As a pure investment, housing is actually pretty lousy. House prices have historically kept up with inflation.
On the other hand, money in the stock market doubles every 10 years on average – that’s after accounting for inflation!
Now for the real question:
Do you need high amounts of money to invest in the stock market?
As long as you have the minimum amount required to open a brokerage account, you’re good. This is often less than $500.
Some brokerages, like Betterment, don’t even have a minimum money requirement!
If the only reason preventing you from investing is your belief that you haven’t got enough money, you’re doing yourself a disservice! Think about your future self and start as soon as possible.
It’s amazing how much your money can grow over time.
What’s the best way to invest $1,000?
Let’s say you have $1,000 and you’re wondering what to do with it.
A less wise person than yourself would perhaps see a kitchen renovation, a lavish weekend holiday or an iPhone 7. Since you’re reading this now, I know you’re better than that. 😉
You know that even a little money can go a very, very long way if you invest it wisely and you give it enough time.
This is where you should practice some delayed gratification.
Would you rather spend the money and get a little happiness for a short while? Or would you prefer to make a small sacrifice now, knowing that you’ll be way better off years from now?
Those $1,000 could become $16,000 in 40 years – even after inflation, assuming it continues to follow historical trends. 16k is a significant amount of money, that you could then use for something actually meaningful and life-changing.
If you wanna play the really long game, wait 60 years and you’ll have $64,000. You may not be able to enjoy it, but this could completely change your grandchildren’s lives!
Funds or Stocks?
Now that you’re on board with investing in the stock market – even with little money – you’ll need to decide whether to go for an investment fund or individual stocks.
This is simple. If you are a beginner or you don’t want to be bothered by the ins and outs of investing, go with a fund. Something like an idex fund will replicate the broader market, so you can expect historical returns.
Vanguard has some incredible low fee funds that have been very popular for years.
If you like the idea of picking your own stocks, definitely open a brokerage account and buy them individually. This is what I do, and I’ve been getting some decent results!
You know how I said $1,000 would, historically, double in 10 years?
If you invested that in Johnson & Johnson stock back in 2015, which is when I did, you’d now have around $1,700. A lovely 70% gain in 2 years!
Of course, you win some you lose some, but the longer you stay invested the less likely it is you’ll lose money. It’s as simple as that.
This is the take-home point:
You now know that you can easily invest in the stock market with little money. You also know that you’re very likely to gain some serious wealth – even with $1,000. You now just need to stop procrastinating and do it!