How Much Money Do You Need to Start Investing?

The honest answer: it depends on three things

• Your safety net. If an unexpected bill would force you to sell, start by saving a few months of expenses.
• The cost of investing. A $5 commission on a $50 purchase is 10%. Choose brokers and products where costs are small compared with your contribution.
• Your habit. $50 a month for ten years is a bigger result than $500 once, sitting in an account you stop touching.

What fractional shares changed

A single share of a large company can cost hundreds of dollars. Many US brokers now sell fractions of a share, so $100 buys, say, 0.3 of an expensive stock. The price per share no longer decides whether you can invest. The table shows what $100 buys of the largest S&P 500 companies at today's prices.

A simple way to decide

1. List your fixed expenses and build an emergency fund of three to six months.
2. Clear debts with interest above what you can reasonably expect to earn.
3. Decide a monthly amount you will not miss, even if it is small.
4. Check the broker fees against that amount.
5. Automate the transfer.

What small amounts can become

Time and regularity do most of the work. The compound interest calculator lets you test different monthly amounts and rates. The results are illustrations from assumptions you choose, not forecasts: real returns vary every year and can be negative.

Small amounts and diversification

With little money, spreading across ten individual stocks may not be practical. A broad ETF solves that in one purchase (see ETFs vs stocks), and fractional shares let you add individual companies later.