One of the great myths of the stock market is that you need a lot of money to invest in stocks, but this is only a myth. Anyone can buy shares with little money, even though I would be more direct, and I would say that it is best to start with little money, understand how the stock market works, and then increase our operations.
Many people want to start investing and buy their first shares, but they think that their initial capital is insufficient, which slows them down to make the final leap. This article is for those people. Having a considerable investment is not a prerequisite for becoming a trader. All you need is a good grasp of the fundamentals and some fortune, and you can succeed as a stock trader.
How Much Money Does it Take to Start Investing in the Stock Market?
The definition “invest in the stock market” is not the one we like a lot. We prefer to talk about buying shares since investing in the stock market sounds speculative, whereas when you buy shares of any company, you are taking part in a business, and you can buy a single share.
The price of the shares depends on the company’s value. We are not implying whether a security is expensive or cheap or the optimal time to buy shares. We will touch on the price and the money necessary to start buying. Some securities with quotes are available for as low as a dollar, and others can reach hundreds of them, but we should not confuse their listing price with a cheap value. The listing has nothing to do with whether a security is cheap or expensive.
We must assess to know if a purchase is expensive or cheap and the associated costs. We have two types of commissions:
- The broker’s commission. Broker commissions are the most critical cost of buying stocks. Some brokers apply minimum commissions, which vary between $5 and $10. Others charge a percentage depending on the amount of the purchase. If our investment is small, we must avoid the fixed commissions.
- Bag fees. Every time we buy shares, the market operator charges a commission, including accounting records.
Strategies for Buying Stocks with Little Money
Just as it is essential to have very well controlled the expenses that buying shares will mean, we also must have a very well-defined investment strategy.
There are many valuable strategies to buy shares with little money. Some will look to invest in shares that distribute dividends, others will look for shares with a low, others are looking to buy shares at annual lows, and one of the most followed by many investors is to make periodic purchases. Any strategy would be valid; here, what counts is establishing a criterion and complying with it without regard.
If we decide to buy shares every month, we must follow the strategy and purchase the shares that meet our selection criteria, thus ensuring a high probability of success.
The greatest investor disasters arise when they cannot establish criteria for the selection of shares and for deciding when to buy shares. When there is no action protocol, the result is most likely disastrous.
Let’s go to the money. We think a minimum purchase of shares could be satisfactory, using a cheap broker over $500, and a strategy that seeks to diversify the risk should have at least five values, which would give us an investment to start with $2,500.
We have established that having a small capital is not a limit to buying shares. Some low-cost brokers limit our expenses a lot, and we can start creating our investment portfolio with a small amount of money.
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