The stock market is open to everybody; it's not just for millionaires. Everybody has to start from somewhere. Here is how to start investing with only $1000. That’s all you need, and here are a few simple ideas to get started.
Know the Costs
It's important to educate yourself on all the fees involved with trading on the stock market. The more you buy and sell, the more fees you will have. These fees go to commissions for your financial advisor or investment firm. So it’s good now to not do too much trading in the beginning. Some ways you can try to lower the fees are:
· Use a discount broker. They will offer less advice but will cost less too.
· Ask for a lower rate. Once you get trading more often, your advisor or stock broker might give you a little discount on their commissions.
· Limit the amount of trading you do. A portion of your returns goes to commissions, so try to trade less.
To diversify means that you will be investing in a range of different stocks. This way if one of the stocks is losing money, you won't lose everything. If you invest everything in a stock that does really well, you will be way ahead, but that is a huge risk to take. It's best to play it safe for now until you have a little more experience under your belt. If you start investing with only one thousand dollars, that only leaves room for 2 or 3 different stocks to invest in at once. This won't give you too much diversification, but still, lowers the risk of losing money.
Index Funds/Mutual Funds
Most experienced investors recommend buying low-fee index or mutual funds (Story). Index funds and mutual funds include stock from a diverse number of businesses. So if a few of the stocks in the fund aren’t doing well, there are still other stocks in that fund that can pull the value of your investment back up. You will have more stocks in an index fund than if you were diversifying on your own. A good place to start is the Schwab S&P Index Fund (SWPPX) because the minimum you need to invest with them is $100.
Speak to a Broker
A broker can give you more information on how to start investing with only $1000. They can have stock packages ready or personally made for you. There are two types of stock brokers: full service or discount brokers. Full-service brokers are more for people with a lot of money to invest, think $50,000 or more. Your best bet for now would be a discount broker, since they have much lower fees. An alternative to this is online investing. The most popular online brokers are Betterment and Wealthfront. For more on these companies, read here.