Investing can be a great way to grow your wealth over time, but it can be daunting to know where to start. One of the most common questions people have when it comes to investing is how much money they need to get started?
The good news is that you don’t need a large sum of money to start investing and there are edicts that dictate when someone should start investing. In fact, you can begin investing with as little as a few hundred dollars and you probably already are with money that you have in your savings account which is a form of investment, albeit with minimal returns in the form of ‘bank interest on savings’.
Investing with robo-advisors
One of the most popular ways to start investing with a small amount of money is through a robo-advisor. Robo-advisors are online investment platforms that use algorithms to create and manage a diversified portfolio for you. Many robo-advisors have low minimum investment requirements, making them a great option for beginners. For example, Raiz is one of the most popular robo-advisors in Australia and invests small amounts of money by rounding up daily transactions which is akin to loose change that they invest on your behalf.
Investing in Exchange-Traded Funds (ETFs)
Another option for those with a small amount of money to invest is to invest in exchange-traded funds (ETFs). ETFs are a type of investment fund that tracks a specific market index, such as the S&P 500. Because ETFs are a basket of investments, they provide diversification at a lower cost than buying individual stocks. Many ETFs can be purchased for as little as $50 or $100.
Investors can also use ETFs for thematic investing where some ETFs are designed to online include baskets that cover a specific sector, industry or structure. An example of this would be a healthcare ETF which covers a basket of healthcare stocks, a dividend ETF which only includes companies with high dividend yields or a high-growth ETF which includes riskier investments that have a chance to deliver higher returns but also a higher chance of losses.
Investing in individual stocks
If you want to invest in individual stocks, you can also start with a small amount of money. Some online brokers, such as Stake, offer trading with brokerage as little as $3 for share trading in Australia on ASX-listed shares. In the United States, brokerage platforms like Robinhood offer zero-brokerage services, making it easy and affordable to invest in individual stocks. However, it is important to remember that investing in individual stocks can be more risky than investing in a diversified portfolio of stocks, bonds, ETFs and other securities.
In summary, you can start investing with as little as $20. Robo-advisors offer investment products to get a taste of investing with loose change but investors must be wary of monthly fees to utilise these services which will limit returns. ETFs are popular options for beginners that wish to diversify their investments, while those who want to invest in individual stocks can also start with a small amount of money. It is important to remember that investing always carries some risk, and you should always do your own research and consult a financial advisor before making any investment decisions but investing can also be highly rewarding with higher risk investments also offering potentially higher returns on investment.
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