One of the common misconceptions I hear is that people think they need lots of money to start investing. Nothing could be further from the truth. Today, I will dispel this myth and also show you my humble beginnings. Hopefully, I will encourage you to start your investing journey today.
Investing has never been easier than in today’s world. Everything is custom-made to take your money. Let’s look at some of the mechanisms introduced over the last few years that make investing simpler than ever.
Fractional Shares. Buying a fraction of a share means that you are not purchasing the entire share at the total price. For example, Amazon trades above $3,000 per share. When buying fractional shares, you could buy as little as $1 of the $3,000 share.
Fractional Dividends. With rational shares comes fractional dividends. If you buy 50% of a dividend-paying stock, you will get 50% of the dividend on payday. It’s not much, but money is money.
Nobody Owes You Anything
Automatic Investing. It has never been easier to get money into your accounts. I have five brokerage accounts, and I use automatic investing on 2 of them. These accounts grow faster than weeds. Auto-investing helps you get money into your account before you spend it. “Pay Yourself First.” Read my article “Stock Market Investing 105: Pick Your Platform” for more on the different platforms.
Auto Rebalancing. Rebalancing is the act of spreading your portfolio gains across the entire mix of stocks. For example, if you had ten stocks at $1,000 each, each stock would represent 10% of your portfolio. If Tesla was one of those stocks, it might have grown to $7,000. For rebalancing, you would spread some of those Tesla stock gains across the rest of your portfolio. You usually do that once a year. Nowadays, some platforms, like M1 Finance, can do this automatically. Disclaimer, you may incur some tax events if done outside of an IRA account.
Zero Commissions. The granddaddy of them all, zero commissions. When you buy and sell, there used to be a percent commission or flat commission. It could really add up. Now you can buy and sell to your heart’s content, although I recommend buy and hold strategies.
So back to the question, “Do I need lots of money to start investing?” No, you do not. You can go to the STASH app (or Cash app), open an account, and deposit $1 into my favorite EFT, Vanguard Total Stock Market, or VTI. From there, you are officially an investor. Just stick with it, and eventually, you will naturally become more curious.
Wealth is a Mindset
You will start to wonder why the market goes up and down daily. What stocks does VTI consist of? Where do these quarterly dividend payments come from? It can all happen over time. Do not wait until you answer all these questions before you get started.
The day you get your first dividend, you will be ahead of most humans. Most people will never understand the importance of passive income. Your first dividend will be proof that you at least understand the concept of passive income and the power of compounding. “The best time to invest was ten years ago; the second-best time is today.”
Let’s look at how I started my journey.
These pictures are from my Wells Fargo brokerage account. I opened the account in June 2019 with $250 invested in dividend-paying stocks. At the time, there were $5 commissions on all transactions. There were no fractional shares either.
I took a leap of faith. When you are buying whole shares with a commission, things are a lot different. It is tough to diversify and dollar-cost-average. Your money didn’t go as far as it does in today’s world.
For example, if I had $100, I could buy one share of Abbvie (ABBV) for $75 and try to find a home for the other $15. Remember, I would have to pay $10 worth of commissions for two trades. Today, I can spread that $100 across my 32 stock M1 Finance account. M1 Finance will balance it and find the best deals at the second that I invest the money. All for no commission. Wow, the world today is truly amazing.
Start Investing or Pay Off Debt?
One last note. You are not investing to become super-rich, at least not any time soon. The stock market is a place to have your money working for you. Dividends can help supplement your lifestyle and retirement. Keyword being supplement. If you are always looking for the hot new stock, you will eventually lose.
It took us six months to invest our first $10,000 into our portfolio. At that time, our passive income was $36/month. Look at where we are at less than two years later. $150,000 and $500/month passive income. Slow and steady wins the battle.
If you are interested in getting started, I have articles that can assist you: Stock Market Investing 101 series, Preferred Shares 101 series, Introduction to REIT investing series, Investing for Dividends series, and more. Hit the investing tab on the banner and enjoy. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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