Can you really get started investing in the stock market with a limited budget? What about as little as $200?

You absolutely can!

For most of us, the idea of investing in the stock market conjures images of the Wolf of Wall Street (not me, the other guy), strings of numbers and letters, horror stories of people losing everything, and substantial amounts of money. 

Many people think investing is only for the wealthy. But that’s not true at all. Investing is HOW you get wealthy! And you don’t need a bunch of money to get started. In fact, you can start with as little as $1 and work your way up.

The reality is that even if you don’t have a lot to invest initially, it’s still incredibly worthwhile to get started. 

Today I want to delve into the importance of breaking down investment barriers, strategies for thriving in the stock market with a modest budget, and the many benefits of embracing investing, regardless of the scale. 

Breaking Down Investment Barriers

The stock market is more accessible than ever, and this accessibility is a game-changer for those with limited funds.

Free Platforms

A common thing I hear is, “I can’t open a brokerage account (or a Roth IRA, Traditional IRA, or any other investment account) because it costs too much to open!”

I don’t know where this came from, but I can assure you there are plenty of platforms where you can open an account for free and there are no maintenance fees associated with doing so.

There are so many free platforms available these days like Fidelity, Charles Schwab, or Vanguard. These platforms really level the playing field! Sure there is a small transaction fee associated with buying something within the account, but usually it’s built-in and for the most part, it’s so small that you won’t even notice.

Fractional Shares

Fractional shares enable you to own a fraction of a stock or fund rather than a whole share. This empowers you to explore the stock market with just a small amount of money and invest in the same things the big names on Wall Street are.

If you do not have enough money to buy a whole share, you can buy a fractional share. Kind of like pizza...if you don't have enough money to buy the whole pie, you can buy a slice! Instead of buying a whole share of a stock or a fund, most brokerage firms offer the option to buy a fraction of the share, or a slice if you will. Whether you're with one of the big ones, like Fidelity, Charles Schwab, or Vanguard, or if you go to one of the boutique ones like Robinhood, you can usually buy one dollar worth of a share. Some of the mutual funds, specifically at Vanguard, will have minimum investment amounts. At that point, you will not be able to buy just $1 worth, but there is almost always an equivalent out there.

No Investment Minimums

Many firms have no investment minimums to purchase a stock or fund. In the past, that was a huge barrier to start investing for many because most firms required a minimum to invest and these minimums were in the thousands. That all changed though. Fidelity, for example, lets you buy $1 worth of just about anything on the platform. (No, I don’t work for Fidelity - I just like them a lot!)

How to Invest in the Stock Market with a Limited Budget

Starting small doesn't mean your investment journey lacks potential. In fact, it’s a great foundation for substantial financial growth when using the right strategies:

Diversification

No matter your budget, diversifying your portfolio is essential. Rather than going ham on a single stock, you want to invest in a mix of different companies and industries. This will help mitigate risk greatly - you won’t have too many eggs in one basket if you will. If you feel overwhelmed and don’t know what to pick, you can always start with an S&P 500 Index Fund, which is the top 500 or so companies in the US, or a Total Stock Market Index Fund, which is the whole US stock market in one fund!

Be a Long-Term Investor

Don't try to be a day trader and time the market. Timing the market is a strategy where you try to buy and sell by predicting future price movements. You are pretending like you have a crystal ball trying to analyze what the company is doing and what the trajectory looks like - you are going to try to predict when the market dips. The problem with that is that nobody has a crystal ball and nobody really knows what's going to happen.

But you can’t go wrong with long-term investing. Why? The stock market may go up and down, but one thing remains true: the US stock market has never not recovered and has consistently returned an average of 10-11% a year over the past 100 years (side note: not exactly this much every single year, but rather an average over many years. Some years could be down 10% and some up 20%, but it all averages out; hence the whole long term thang). Harness the power of compound interest, which requires us to keep our hands off our investments and let the market do its thing. 

Consistency is Queen

Regular contributions are a powerful way to build your portfolio. Even small, consistent investments, especially when combined with the power of compounding, can aid in growing your money over time. This is why I’m always preaching for people to set up automatic contributions; even if it’s $10 out of every paycheck, overtime, it will add up.

Set it. Forget it. Get rich. 

Educate Yourself

Invest (pun totally intended) your time in learning about the stock market and investment strategies. Investing only seems hard because we’ve not been taught how to do it. But there are a ton of resources out there that are too legit to quit and will empower you to know how to invest strategically. I mean, look at you now! You are already doing this step. Go you!

Embrace Funds

Index funds, Exchange-traded funds (ETFs) and mutual funds, pool together hundreds or even thousands of stocks to track a specific thing (like the S&P 500). It’s instant diversification which makes them super suitable for even the smallest budgets. I’m personally a BIG fan of index funds!

Embracing the Benefits of Small-Scale Stock Market Investing

Don’t be discouraged about starting with a small amount of money. Starting small is better than not starting at all.

Here’s why:

Small investments, over time, can lead to significant growth. Your initial $200 investment can transform into a substantial sum with prudent investment choices and patience.

In fact, waiting to start investing is actually costing you money.

Wrapping Up

There are so many opportunities to get started investing, even with limited funds. As barriers to entry continue to crumble, the potential for growth is within reach. 

Whether you are starting with $200 or a similar amount, a well-thought-out strategy, a commitment to diversification, and a grasp of the associated risks and rewards can set you on the path to substantial financial gains. Don't let your budget, whatever it is, deter you from the world of stock market investing; instead, see it as the first step toward your financial future.

I want to show you how to start investing with only $1! I’m personally inviting you to my investing class party where I do just that. The best time to start investing is now, so RSVP today to get started!