- I don't have a lot of money, but I know I want to start investing
in the stock market. Since I don't want to touch my emergency fund,
is it worth opening an account with just $25? - Paul
Hey Paul - $25 is technically enough to start with, but I would
prefer you put it in savings until you have more money to invest.
If you're buying stocks with that little money, you'll see a large
percentage of your funds swallowed up by service fees. So, instead
of just buying a share of stock, let's go over your other options.
Save more. This is what I'd prefer you do. By actively saving
your money and putting $5 to $20 aside each week, it won't be
long before you have enough to make a worthwhile investment. If
you can show the patience and restraint to save $1,000, you can
invest in a couple of companies and potentially see some returns.
You'll also lose a much smaller amount on fees when you invest
more. It might feel exciting at first to buy $25 worth of stocks
(closer to $15 after the fees), but most stocks that trade that
low come with a lot of risk. Take the time to build up an investment
fund, then give it a go.
2. Get creative. If this is really about growing your wealth,
and you only have $25 available, think about ways you could put
that money to work. You could buy a $15 chair at a thrift store,
get $10 worth of paint, refurbish the chair and sell it for $35.
If you think about how much your time is worth, you could pay
yourself $25 to organize and host a yard sale. There are immediate
ways for you to build your money, all of which can move you closer
to doing some serious investing.
3. Buy a commission-free fund. This definitely isn't my
first choice, but I think you should know it's an option. You
can buy certain ETFs without paying a service fee, but there will
almost certainly be charges on the back end, plus you won't really
know what your dollars are doing. You'll need to keep buying into
this fund to see returns down the road, which is why I think it
makes more sense for you to just keep saving money and invest
later when you have more capital.
I know this
isn't particularly exciting advice, but there's not much sense in
making an investment that sets you back financially and discourages
you from future investing. You want to make the most of what you
put into the stock market, and saving up is the best way to ensure
you do so. Be patient and it will all work out. Good luck, Paul!
© Taylor Kovar
April 6, 2018 column
More "Go Far With Kovar" April
6, 2018 column
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