If you think you need thousands of dollars to start investing right now, you’re not alone! Before I started working at AAII, I didn’t think I would ever do any investing by myself. And even then, I thought I would need at least $10,000 to start investing. But the good news is, you only need $5 to start investing right now. You can start yourself a tiny little portfolio! Like with anything, there are risks attached to investing with small amounts but here are some ways you can do it:
Micro-investing apps are those like Acorns, Stash and Cash App. These apps provide services like rounding up the charge when you buy something and investing that extra change. Acorns provides more of a hands-off approach, doing the work of saving and investing for you. But this also means there can be hidden transaction costs since Acorns is making the decisions.
I looked into Acorns as an option for starting something small, but the behind-the-scenes aspect of it concerns me. Since I chose my broker based on the lack of fees for exchange-traded funds (ETFs), I’m going to stick to my main Schwab brokerage account for now.
With Stash, you can control your investments and buy fractional shares of stocks, but there are a lot of other distracting bells and whistles like the Stock-Back card that invests in the stocks of the brands you purchase from. This strikes me as a bit of a leap, a whole new way of saying “Put your money where your mouth is.” Simply investing in the companies that you buy from already is not an investing strategy, and it’s just giving more money to corporations that could be doing more harm than good.
Cash App also allows you to choose what you want to invest in, including fractional shares. It’s not just for investing, so if you already use it to send money to friends it could be a multi-purpose app for you. I like that Cash App seems to be more transparent than the other two micro-investing apps.
Acorns invests mainly in ETFs, while Stash and Cash App have a focus on stock investing with some ETF offerings as well.
Keep in mind that Acorns and Stash have a minimum fee of $1 per month to maintain your account, while Cash App is free. Fees were a huge part of choosing my broker, so if you haven’t opened a brokerage account yet, check out my post and accompanying video on how I did it!
With these apps, you can start investing with very little, but with Acorns, for instance, you can also boost your savings to invest for your future as it squirrels away your spare change.
Purchasing fractional shares of stocks or ETFs can be one way to start investing if you only have a little to spare each month. If you want to invest in a stock that’s pricey but you don’t want to shell out the entire share price amount, you can buy a fraction of the share. You can also do this with ETFs, which can be an easy way to get better diversification for your portfolio right off the bat. Not all stocks and ETFs are available for fractional share purchases, leaving you with limited choices, and they can be risky in the sell process since your fractional shares have to be matched up with other fractional shares in order to be sold. However, it’s a great way to start out with your first stock purchase if you’ve been putting it off. It’s getting your foot in the door (and maybe just your foot for now). I made the decision to go with Schwab for my broker because it offers fractional share purchasing, so I might be playing around with that in the future!
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