Do You Need a Lot of Money to Start Investing?

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  • You don't need to be rich to invest money.
  • Brokerage firms have taken steps to democratize the investing processing.
  • Fractional shares also enable you to buy many assets without having a fortune. 

You may be surprised to find you don't need to be rich to be a successful investor.

Investing money is a great way to grow your net worth. When you invest, your money can actually help you build wealth. The funds you've already invested will earn returns. And when those are reinvested, you effortlessly earn more going forward. 

Unfortunately, many people don't invest in large part because they think they need to already have a substantial sum to do so. But, is it really true you need a lot of cash to invest? The good news is, there are three reasons why that's no longer the case and why it's now possible to begin putting your money to work even if you have just a few dollars. 

Most brokerage firms no longer have minimum balance requirements

In the past, you often needed at least a few hundred dollars in order to meet minimum balance requirements for brokerage firms. Depending on the broker, you may have been required to make a minimum initial deposit of a certain size to open the account. Or you may have been subject to monthly fees if your account balance was too low.

This is no longer the case. Virtually all online brokers have eliminated any requirement that you invest a certain minimum amount of money. As a result, if you have just a few dollars now, you can get started investing. 

Commissions have been eliminated

Commissions were also very common just a few short years ago. Brokers essentially charged you a fee both when you bought assets and when you sold them. 

If you had to pay $7 or $10 or some other amount every time you bought or sold a stock or an ETF, then it wouldn't make sense to invest without having a lot of money. If your investment was too small, the commission fees would eat up most of the amount you had to buy the asset, and would make it all but impossible to end up making any profit.

Commissions have been eliminated by most brokers now, though. Since you no longer pay a fee, there's no downside to investing just $5 or $10 or $20. 

Fractional shares may be available

Finally, there's been another big change that has made it possible to invest even if you have very little money. It's now common for brokers to allow you to buy fractional shares of stocks.

Traditionally, you'd be required to buy a full share of stock if you wanted to invest. This meant if you had very little money to put into the market, you'd have a limited choice of investments you could make. This is no longer the case. With fractional shares, if you want to invest in a company with a price of $100 per share but you have just $10, you can buy 1/10 of a share. 

Fractional shares, combined with the elimination of commissions and minimum balance requirements, have made investing without a lot of money a smart financial choice. If you have even a little bit of cash to spare, you can start buying assets that will help you build wealth. Over time, your small investments can add up and have a big impact on your net worth. 

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