For many new investors, something which often worries them is, “how much money do I need?” To start investing, you will probably be surprised to discover that you do not really need anywhere near as much money as you may at first think. To answer the question “how much money do I need to start investing?” the answer could be as low as five dollars if you are going to make regular payments into your investment plan.
“How much money do I need to start investing?” in reality, of course, depends on exactly what kind of investment you are going to make. If you are looking to make small regular savings each month, then you should consider mutual funds or an account with Charles Schwab that we discussed in the previous post. That way, the amount you require to start will be very low, but you will already have begun your investment portfolio and can build from there. With these smaller payments, you do need to consider very carefully the charges that you will incur, especially with annual minimum balance fees. Most mutual funds required a minimum investment or regular deposits to open an account. But mutual fund companies and Schwab do not have minimum account fees to worry about.
If you have decided to start your investments with a lump sum, then the minimum amount you need will vary depending on a couple of factors. Firstly you will need to decide whether or not you require a full-service broker or whether you feel confident in making your own investment decisions.
If you feel that you would like the reassurance of having a full-service broker, then you will generally find that they are looking for you to invest between $3,000 and $5,000 minimum. There are a few; however, that will consider acting for you with a minimum balance of just $1,000, providing you are prepared to search around.
Online brokers offering a cut-price service where you are responsible for your investments will often let you open accounts with amounts as low as $500 or less. These will enable you to get a start in the market much more easily, but you do need to be confident in your own decisions.
Whether you go for the online brokerages or the full-service option, you do need to keep in mind that each trade will incur a fee. Most online brokers now offer commission-free trade, so shop around before you open an account. These fees will, of course, have a disproportionately large effect on your account if you only have small amounts invested. So please remember to allow for them when deciding on the answer to “how much money do I need to start investing?”
If you need assistance or have any questions, please reach out to me directly or leave a message on the website. No matter what, always use the services of a fee-only Registered Financial Consultant. For more information and to join our email newsletter, fill out the form below.
