Is It Worth Opening a Brokerage Account if You Hardly Have Any Money to Put In It?
You’ve probably heard that investing is important to build wealth. But if you don’t have a lot of extra money in your checking account, you may be hesitant to actually get started with investing. It’s natural to assume you need a large sum to open a brokerage account and start putting your money into the market — especially if you think investing is something rich people do.
The reality, though, is that it is absolutely worth opening a brokerage account even if you have only a little bit to invest now or for the foreseeable future. Here’s why.
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Many brokerage accounts make it easy to invest with very little money
The great news is, opening an account with a discount online broker isn’t something you need a lot of money to do. Many brokers make it easy and simple to get started with almost no money.
You can find plenty of great online brokers with no minimum balance requirements, and that charge no commission fees or trading fees to buy stocks and ETFs (exchange-traded funds). A number of brokers also offer something called fractional shares, which means you can actually buy stocks and ETFs even if you’re investing hardly any money. Fractional shares are just partial shares, which give you the same percentage returns as any other stocks or ETFs. So, if a stock cost $100 a share and you had only $10, you’d buy one-tenth of a share.
With fractional shares, you aren’t stuck with higher-risk stocks (often called penny stocks) just because they have a low share price. You can even buy an ETF that tracks the performance of the stock market as a whole, which is a great option for beginning investors without a lot of money or knowledge. The risk involved in investing in this kind of ETF is very low if you’re investing for the long term.
Your small investments can add up over time
So, you can open a brokerage account with hardly any money and find great investments — but you’re probably still wondering if it’s worth doing. And the answer is a definite yes. Once you get your money working for you, even if it’s a small amount, you can benefit from compound growth that happens when your returns are reinvested. And this makes a big impact.
Let’s say you invested just $10 a month, or $120 a year, over a 30-year period of time. By the end of the 30 years, you’d have $21,713.21, assuming a 10% average annual return — despite investing only $3,600. There are not too many other things you can do to turn $3,600 into more than $20,000.
Once you start making these small investments, you’ll also develop your knowledge and get into the habit of investing. This may help you increase your contributions over time. The important thing is to just jump in. If you have only $5 or $10, you can still get started. Open your brokerage account today, buy a great asset with fractional shares, and begin to reap the benefits of making your money work for you.
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Is It Worth Opening a Brokerage Account if You Hardly Have Any Money to Put In It? was originally published by The Motley Fool
