A common question asked is “ can you invest in stocks with little money ?”, The short answer is yes! Many people are worried about investing because they think you need to be a high rolling businessman to start, which isn’t true. You can start investing from as little as £50 a month.
- Investing even minimal amounts can reap big rewards.
- In this article are five ways you can get involved in investing! (My favourites at the very end!)
The key to building your wealth is developing good habits, like regularly putting money away every month. If you make investing a regular activity now, you’ll be in a much stronger financial position for the future!
Investing is all about rewarding your future self!
So enough of why you should start investing! Here are a few ways you can invest in stocks with little money!
1. Try little but often with investing
Saving money and investing are intimately connected. To spend money, you first have to have some. This can be a lot less time consuming than you realise.
You can begin by saving just £10 a week: not a large amount, but over 12 months it builds up to £500. Which you can then use to take advantage of the following opportunities!
Little but Often
Try putting £10 away it doesn’t matter where. (as long as it is in a safe place!) A shoebox, a small safe, or even the bank, a piggy bank! Though this may sound childish is often a necessary first step. Get yourself into the habit of spending on a little bit less than you earn, and stash the savings rather than spending them frivolously.
The electronic equivalent of the piggy bank is the online savings account; it’s separate from your current/general use account. Therefore, the account is not linked to your debit card, making casual spending harder since you have to go through some additional steps to withdraw/spend the savings. Then when the stash is substantial enough, withdraw and move it into some actual investments so you can take advantage of higher growth rates!.
Start with small notes and change, and then increase as you get more comfortable saving. It may be a matter of skipping unnecessary activities such as not going for fast food or leaving that extra beer on the weekend, and putting that money into the stash instead.
Why not try an app to help?
There is an app called Acorns that rounds up your credit and debit card purchases and invests the difference. It’s a start. And for people who don’t typically save or struggle with it, getting that start is all the more critical.
This article on Acorns by Metro does a great job of explaining the process! Click HERE!
2. Max out your Lifetime ISA
I am from the UK so our retirement funding is a little different from the US. However, in the UK one of the best ISA I have found is the Lifetime ISA. Here is a link to the Government website: HERE
The lifetime ISA is an awesome tool. The max you can invest is £4000 per year. However, the government provides an additional 25% bonus, which means you effectively earn an additional £1000 as soon as you invest! A 25% return in one year is great! But when it’s guaranteed by the UK government you can’t do much better! Yet, the interesting thing is the 25% is not even the best part of the lifetime ISA
You can Invest the whole £5000
Yes, you read that right! Therefore, not only do you get 25% from the government but you can get additional money from investing in stocks and shares, providing a double investing bonus! Below I have entered into a simple online compound interest calculator how much you could earn from the lifetime ISA. I assumed you started at 18 and maxed it out every year till your 50!
Here’s a link to the compound interest calculator its quite useful to help see the potential future value of any investment!
- Max investment is £4000 per tax year
- The government provides a free 25% bonus, effectively giving you £5000
- You can Invest the WHOLE £5000
- The downside is you can only use it for retirement or your first home!
3. Let a “Robo-advisor” invest for you
Robo-advisors were created to make investing as easy to use and access as possible. No investment experience is required. Set-Up is simple. Let their automated intelligence track your movements and progress in the background, and pay lower fees in the process.
A great Robo-advisor that first-time investors should check out.
Their fees aren’t too steep at 0.25%, but the real bonus is you can get your first £5,000 managed free.
So if you’re looking to begin investing with small amounts, Wealthfront is a definite option. You will need £500 minimum to start with Wealthfront, so bear that in mind.
If you don’t have that £500 lying around, there are still multiple options such as M1!
M1 Finance has no commission or management fees, and their minimum starting balance is £100.
To begin with, you can try one of their pre-made diversified portfolios or customise your own by purchasing stocks through their platform. The user interface is very user-friendly.
Instead, If you’re starting with less than £100, you may want to consider betterment, which has no minimum starting balance.
Like M1, it’s also great for newbies as it provides a simple platform and a hassle-free approach to investing.
4. Low initial investment mutual funds
Mutual funds are investment securities. They allow you to invest in a portfolio of stocks and bonds with a single transaction, perfect beginners.
The trouble is many mutual fund companies need minimum first investments of anywhere from £500 to £5,000. If you’re a first-time investor with little to play with, those minimums can appear unreachable. But some will waive the minimums if you agree to automatic monthly investments of around £50 to £100.
Automatic investing is a standard part of mutual fund accounts. It’s less familiar with taxable accounts, though its always worth asking if it’s a possible feature. Mutual fund companies that have offered to do this in the past include Dreyfus, Transamerica, and T. Rowe Price.
An automatic investing is convenient if you can set it up through payroll savings. You can sometimes set up an automatic deposit through your payroll. Just ask your H.R. department how to organise it.
5. Fixed interest securities
Fixed interest securities are a method for companies/governments to raise money by borrowing it from investors. Securities issued by the Government are also called ‘gilt-edged securities’ or ‘gilts’, while company-issued securities are known as corporate bonds.
Fixed interest securities are also recognised as:
- Debt securities
- Loan stocks
Fixed interest securities can work well mixed with other methods of investment, to adjust the overall risk, you’re taking.
Investing in gilts usually is thought to be less risky than shares. There is potentially more risk with corporate bonds, though they are for the most part, still a lower risk than stocks.
Fixed interest securities, on the other hand, are more likely to be affected by inflation (and changes in interest rates) than shares. There might be credit risks if you choose non-UK government bonds or corporate bonds. Fixed interest securities can be suitable if you want to invest a lump sum to provide you with income. Most fixed interest securities offer a regular, more stable income from their interest payments.
6. CFD Platforms
The final suggestion, if you are looking to invest in stocks with little money, is to look at investments platforms such as eToro and Plus500! Both eToro and Plus500 operate on a CFD contract and can let you invest with small amounts of money! eToro minimum investments amount is $50 and Plus500 minimum deposit is $100.
What is a CFD
CFD stands for “Contract For Difference” and is a specific type of financial contract utilised by these two platforms. When you use a CFD you agree to exchange the difference in price at the initial purchase point against its future value.
In essence, you put a bet on what direction the price is going to go and you make money if you are right or lose it if you are wrong. CFDs are a favourite of speculative traders and are useful you want to invest in stocks with little money!
Investing with Plus500
Plus500 has low spreads the user interface is easy to use and it is listed on the LSE! It is FCA regulated but you control your account and 80% of people using this broker lose money!
Plus500 has limited CFD available and quite high financing rates along with only basic research tools. While Plus500 is an option it is not the best out there.
I would instead invite you to look at eToro!
Investing with eToro
Instead of Plus500 I find eToro a better platform for beginner investors with only a little money and also more seasoned investors. Like with Plus500 on eToro you can invest in stocks with little money! Indeed, the minimum investment amount is $50!
While eToro does have higher spreads than Plus500 but provides better stock analysis tools and depending on your investment amount they can offer all sorts of extras to help you trade.
For me, it is the social trading aspect that makes eToro my favourite platform. I Started investing with very little money whilst at University. Now in 2019, I have an ROI of over 50%. Part of my success is partly due to being able to see other peoples analysis and sharing news sources and information.
If you would like to read more about investing in eToro check out A Beginners Guide, Trading on eToro. it provides a more in-depth look at eToro.
Hopefully, this article has given you some ideas on how you can invest in stocks with little money! When investing the most important factor is your ability to be patient and hold your nerve when stocks go down!
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Hi, my name’s Joseph Moricca. I’m the Founder of Velox Investments! At 16 I learnt to count cards, at 17 I started day trading on various crypto exchanges and for the last 5 plus years I have been learning about Social Trading on eToro! I found that there wasn’t a good source for people looking to get into “Copy Trading” so I made one! On this website I share my best tips and tricks.