How do I Get Started Buying Stocks With Little Money?

by Rocco Pendola, Demand Media

    Just because you're clipping coupons, buying generic Pop Tarts and giving your kids hand-me-downs (or wearing them yourself) doesn't mean you have to give up or not even start stock investing. You don't need a trust fund, rich parents or an Ivy League education to be an investor. In fact, you can invest in stocks, regularly, by saving loose change.

    Step 1

    Open a brokerage account. Yes, you have enough money. Some firms require a minimum initial investment, but you might be able to afford it; common minimums range from $250 to $1,000. Some brokerages waive or reduce their minimum if you agree to automatically deposit money -- usually around $100 a month -- into your account on a regular basis. Of course, you could always save up for the minimum and go from there.

    Step 2

    Start an account with a company that caters to small investors. Forget the big name brick and mortar and online brokerages if they prove intimidating or cost-prohibitive. Firms, such as ShareBuilder, exist that charge no minimums and relatively low fees to buy a small number of shares, even fractional shares of stock on a regular basis, often weekly or monthly. Yes, you can buy .0125 shares of Google stock every month and pay a nominal fee for the privilege. Don't scoff; it can add up.

    Step 3

    Consider dividend reinvestment plans (DRIPs). Not all companies offer DRIPs, but you can effectively purchase stock directly from dividend-paying publicly-traded companies that do. DRIPs typically charge low fees and require small minimum initial investments. They automatically reinvest dividends that they pay you for free. You need to own at least one share of the company's stock before you can enroll in most DRIPs. No worries, though, as companies exist that specialize in facilitating the entire process, from buying that first share to DRIP enrollment.

    Tip

    • You can also buy stocks indirectly by purchasing mutual funds. Many mutual funds hold a portfolio of stocks. Investors simply buy shares of the mutual fund. While some funds have high minimum initial investment requirements, many don't. Others, just like with brokerages in relation to stocks, reduce or waive minimums if you make regular automatic investments.

    About the Author

    As a writer since 2002, Rocco Pendola has published numerous academic and popular articles in addition to working as a freelance grant writer and researcher. His work has appeared on SFGate and Planetizen and in the journals "Environment & Behavior" and "Health and Place." Pendola has a Bachelor of Arts in urban studies from San Francisco State University.