How to Start Investing (even with little money): Total Beginner’s Guide

For me, simply hearing the term “Investing” used to evoke certain images in my mind a few years ago. Images of super-wealthy people in their suits making transactions in millions looking all busy and serious.

I never had financial goals that included “Investing regularly”. It sounded so complicated and frankly, I believed this is something only high-earning corporate people did.

I just planned on saving a ton of money in my bank account up until retirement 😂

As of writing this, I can feel the naiveness that was oozing from the old me. We often take the ostrich approach for the things we don’t understand and the longer we do that, the more impossible it starts to feel.

There are certain myths around investing that keeps people from participating:

  • You need sound knowledge about the market & finance
  • You need a ton of money to even get started

Both False!

Of course, if you had some ideas about the stock market, how it works, and had millions to invest, that would be nice but that is a bonus, not a requirement.

I can assure you that you don’t need a financial background and you certainly don’t need millions in your bank account to start investing. You can literally start with spare changes!

And after a year of putting a big chunk of savings in various stocks in the S&P 500 companies, I can honestly say that being a newbie investor, didn’t hold me back because of the easiness the new trading apps have brought to the common people like you and me.

Today with the technology in our hands, we are able to buy food, book a cab and even find a date with a few taps, similarly, we can use certain apps to buy stocks, it has become comparable to buying something off of Amazon. Just like that!

Tap to jump to best Stock Trading Apps

Once you actually get started and build up a consistent habit of investing, you’ll realize how fun growing your money can be. And on top of it, this makes you feel financially responsible rather than all the guilt you get from unnecessary purchases.

I strive to make more money every month just so that I can have more to invest the following month now that I know the importance of investing.

It’s an addiction that needs encouragement!

Moving on, let me tell you few things that proves why investing is so important in building wealth.

This post contains affiliate links, please read Disclaimer for more info.

Importance of Starting Early (or as soon as possible)

Investing, in general, is one of the best financial decisions you can make at any point in your life, but when you’re just starting out as a young professional, freelancer, or business owner, putting money aside every month for the sole purpose of investing is very vital if you want to retire with a big chunk of money in your account.

When it comes to investing, few factors play a major role in building your wealth,

  1. Amount of money you’ve put,
  2. Return rates,
  3. and Time

Of course, you have a good chance of making high returns if your invested amount and rates are high. But the “Time” part is still something most people underestimate, I did too, up until a few years ago.

Since you’re a beginner, I have to assume that, you might not have millions to invest. So you can’t afford to put a lot of money and return rates are not in our control.

Time, on the other hand, is something we can use to maximize our wealth with the concept known as “Compounding”.

The Power of Compounding

The concept of Compounding is, after a period of time, your returns on investment start making returns of their own, which literally means your money starts making you more money which all accumulates under your umbrella.

Investing while you’re still young is by far one of the best financial decision you can take for you future. Because right now you have a lot of time.

Lets take an example,

Let’s assume two people, Alex & Olive, working at the same job and with the same pay decided to start investing.

They both started with a $5000 initial investment with a recurring annual contribution of $1200 with a return rate of 5% compounded quarterly.

The only difference being, Alex started at the age of 20 and Olive started at the age of 30.

NameStarting ageRetired atYearsFinal Value
Alex206545$246,000
Olive306535$141,000

It is evident that Alex retired with almost twice the amount compared to Olive despite the fact that both initially invested the same amount of $5000 and had the same rate of return of 5%.

Even if you add the extra 10 years worth of investment Alex did as an extra, $1200 times 10, which comes out to be $12,000.

Adding this amount to Olive’s final investment amount doesn’t make much of a difference when compared to what Alex got.

This is the power of compounding!

This surely doesn’t mean, it’s too late to start investing if you’re 35 or 40 or even 50+. The idea here is to start as soon as possible.

The best time to start investing was yesterday, today is the next best thing.

As Albert Einstein famously quoted,

“Compound Interest is the 8th wonder of the world. Those who understands it, earns it; those who doesn’t, pays it.”

Effects of Inflation

Another reason why you shouldn’t just save your money in you bank account is to overcome effects of Inflation.

It doesn’t matter how much you have saved, money loses its value over time due to Inflation. It literally cuts your saving by a small fraction over a period of time if not invested!

But…What the heck is Inflation?

Here’s a simple way to understand inflation:

You might realize that the cost of goods and products (say, a table) was way cheaper 20 years ago as it does now. The value of money decreases with time and now you have to pay more for the same product.

So anything that you’ve saved today, will be worth a lot less 10, 20 or 30 years from now.

What to Invest in?

Stocks:

A Stock is a unit that represents some ownership shares of a company. If you own few Apple stocks, you own some shares of the company!

Different stocks have different values and they go up or down depending on multiple factors. Good and promising companies tend to grow their stock values over time that results in more profit for the stockholders.

How investing in stocks can make you money?

  1. If you buy a stock at a price and sell it at a comparatively higher price, the difference becomes your profit.
  2. Through dividends: Certain companies pay you a small amount just for owning their stocks based on the number of stocks you own of that company. Dividends are usually paid quarterly.

You can buy stocks through the apps mentioned below!

ETFs (Exchange-traded funds):

When investing, there’s one thing you need to keep in mind: Do not put all of your eggs in one basket! You need diversification, because if by chance that one place that you’ve put all your money in goes down in value, you’re at loss.

ETFs are basically a collection of different stocks that you can buy collectively as a single entity. This is why ETFs are always a good choice.

For example, Vanguard S&P 500 ETF is the collection of top 500 companies in the US (Discussed later), so when you buy one unit of this ETF, you are buying small shares of all of these top 500 companies at once.

This way you get a little diversification and the overall risk is reduced significantly.

You can buy ETFs using apps that I’ve mentioned below.

Real Estate:

People also invest a lot, like a lot in real estate but since I don’t have much experience in the domain of real estate so I’m not going to try to elaborate on this. But you can research this on your own.

Below are some of the best stock trading apps and brokerages that you can signup to start investing right now:

Best Platforms And Apps To Start Investing

1. Webull

(Available for iOS, android and Desktop)

Webull is one of the first stock trading apps I’ve ever tried & this app is still my main stock app to this day, it’s totally beginner-friendly.

Webull has a Paper trading feature that allows you to practice your investments in real-time with over $1 Million worth of fake money, totally free of cost.

So you can try out and dip your toes in the investment market without any risk whatsoever.

You can claim your free stock (worth up to $250) for signing up.

And get another free stock (worth up to $1600) again once you’ve deposited a minimum of $100 into your Webull account which too can be used to buy more stocks.

Webull is totally legit and your hard-earned money is protected. Webull is completely safe to use, regulated by the SEC and FCA, and is not a scam in any way.

In fact, I have deposited over $30,000 in my Webull account (the black screen you see in the image above is actually a screenshot of my account as of now, and I’ll keep updating any changes).

So Signup and get two stocks completely FREE!

2. Betterment

Betterment is one of the best robo-advisors in the market .

A Robo advisor is a financial adviser who provides automated investment solutions online without any need for human intervention.

There is no need to set up an appointment with a financial planner each time you need to review your goals, it’s all done automatically. Hence the name, Robo-adviser.

Here like most other platforms, you can buy stocks, ETFs as you desire but the difference is, there are more options for investments based on your end goals.

  1. Safety net: To grow your emergency fund
  2. Retirement: To plan your retirement with IRA, Roth IRA and 401(k)
  3. Major purchases: House, wedding plans etc
  4. Education
  5. General Investing
  6. Trusts

4. Public

(Available for iOS and Android )

Public is a the new kid in investment town and it is a free app at allows fractional investments. The platform is beginner friendly and pretty easy to navigate.

Public is a free investing app that offers fractional investing with no commission fees and no account minimums. It is like social media for investing where you can see what stocks people bought when they do.

Public also has a referral program where you can refer your friends to join the app and you both get a free stock.

Mistakes to avoid when it comes to investing…

1. Starting late

One of the regrets people have these days (including me) after seeing bitcoin prices soar, stock prices go up multiple folds, etc, is why didn’t I invested in that a few years ago when I could have but chose not to?

For example, if you would’ve invested $10,000 in Tesla in 2010, your stake would be worth around $1.8 million today (Source: Investors.com).

As I’ve already mentioned with the Alex/Olive example how important it is for you to start investing as soon as you can so that the “compounding effect” can kick in.

2. Impatience After Investment

I can’t tell you how many times I’ve been on the edge of my seat trying to contemplate what should I do if the market isn’t performing well on a particular day.

“Should I sell my stocks because the prices that were high yesterday are now going down, What should I do?

After an investment, it’s obvious that you want your investment to grow. But losing sleep over something that you have no control over is a waste of time.

You cannot time the market.

Growth in the stock market is never linear, someday your stocks might see high gains and same days the opposite, but holding your stocks for a longer period of time increases your chances to get much higher returns

Buy and hold, just buy and hold it long term and you’ll be able to sell them later in life after its exponential growth over a period of years.

Promising stocks such as Apple, Google, Nvidia, New York Times, Adobe, Disney, etc have grown few folds in the last five years.

This is evident that, investing (and holding them long term) in good stocks always pays off.

Moreover, in the US, you pay more taxes on stock profits (counted as capital gains) if you have them for less than a year, even if you had them for 1 day less than a year you’ll have to tax at a much higher rate.

For the profits you make off of buying and selling stocks within a year (which are considered as short term capital gains), you have to pay taxes as the following table below:

Filing StatusSingle
Up to $9875Taxed at 10%
$9876 to $40,125Taxed at 12%
$40,126 to 85,525Taxed at 22%
$85,526 to $163,300Taxed at 24%
$163,301 to $207,350Taxed at 32%
$ 207,351 to $518,200Taxed at 35%
Over $518,201Taxed at 37%

As you can see you might have to pay up to 37% of your total profits for short-term investments. The 37% might be applicable for very high-profit margins but even the 24% and 32% seem a bit high too.

Now let’s compare this to the tax rates of long term capital gains (holding stocks for more than a year):

Filing StatusSingle
Up to $40,000Taxed at 0%
$40,001 to $441,450Taxed at 15%
Over $441,450Taxed at 20%

You can compare the above to tables and see how a long-term approach is more profitable.

For example,

You’ve bought some stocks on Jan 1, and you’re getting $10,000 by selling your stocks on 30 December, you have to pay (24%) $2400 as tax and if you sell your stocks on, say Jan 2 of next year (3-day difference), you’ll have to pay (15%) $1500 in taxes.

So in conclusion:

  • Short term: low profit and higher tax
  • Long term: More profit and less tax

3. Investing on stuff you have no clue about

It is one thing to take calculated risks and a totally different thing when it comes to “Investing in anything” because some guy (that’ll be me) on the internet told you to invest.

I have no money invested in real estate because I don’t have any knowledge of the real estate market at this moment.

If you believe that you have absolutely zero knowledge about where to put your money, you can always talk to an investment advisor, and/or you can blindly put your money in a good ETF.

For example, the Vanguard S&P 500 ETF (ticker name, VOO) has seen a 112.37% gain in value in the last 5 years (as of 16 Apr 2021) which is more than double in returns compared to the amount invested.

This is the money doubling scheme you can trust becaues you’re betting on the top 500 most successful companies in the US.

The S&P 500 is the top 500 company in the USA, and if you put, say $100 in this ETF, your money will be distributed (not equally) in these top 500 companies and the value of this ETF has grown consistently every year.

You can research about this and watch videos on YouTube if you need some more information and then you can decide for yourself about where to put your money in.

Saving vs. Investing: What should be your priority?

Before diving in, let me tell you something that might help your decision:

Do you know that the money that you’ve put in your so-called “high-yield savings account” is making more money for the bank than for you?

Chances are, you already know this but might not have put much though to it. This is one of the ways how banks make money!

For example, If you have any amount in your savings account with an APY of, say about 1.3%, The bank uses your money, lends it to others, and avails much higher returns than what you’re getting.

The bank uses your money to fund someone’s:

  • Mortgage: 3-5% APR
  • Education: 5-7% APR
  • Or Credit card: 20.29% APR

Investing on the other hand can get you much, much higher returns than all of these. So why a majority of people settle for the 1.3% but are afraid to put even a dollar on investing?

One word: Risk!

The whole notion of investing being risky and “you can lose your money” is so badly perceived by people that they rather NOT take opportunities to make more money than having to come to terms with the risks involves.

Yes, you can lose money, but aren’t you losing money anyways? Factors such as inflation, unnecessary frequent shopping, eating out, fancy purchases, etc do contribute to your financial loss.

What is the solution here?

An emergency fund!

Start building an emergency fund (say 3 or 2 month’s worth of expenses). Once your emergency fund threshold is complete, you can safely afford to put money every single month in an investment that’ll grow over time.

This way you’ll have enough in your emergency fund in case you need it at any point in time, like a safety net. And putting money aside for investing won’t imbalance your life.

I put around $10k every two months in my Webull account and I consistently buy stocks that I think will perform well over time. This amount might increase once I start making more from my business.

Try not to grow your savings account, grow your assets (stocks, property, etc) for greater ROI (return on investment).

But on the other hand, if your money is super tight for you right now, investing shouldn’t be your priority at all. Only when you have some extra money that you don’t need anytime soon that you can put it to good use, choose Investing.

Final Word

It all seems hard and complicated until its done! So don’t say no before you even try investing.

There are literally plenty of ways you can get started (some of which are mentioned above), once you get the hang of it, you’ll enjoy the liberating feeling of NOT constantly worrying about your financial situation in the coming times.

Common FAQs:

1. How can I invest $100, $500, or $1000?

You can choose from a wide variety of stocks and ETFs where you can put your money in.

A lot of good stocks are valued under the values mentioned above, you just have to look out and choose. And once again, Webull gives out two free stocks (one for signing up and one after depositing $100 that can be worth up to $1400)

2. How to start investing in stocks?

Buying company stocks isn’t that hard anymore. Investing in stocks has become so convenient largely due to the emergence of new beginner-friendly brokerage apps such as Webull.

Similar to buying products on amazon you can buy stocks directly from the app after depositing some money from your bank account.

3. How do I start investing as a teenager? Or how can I invest with no income?

Being a teenager, you might not have a job or even if you do, you might not have good pay which can restrict you from setting money aside to invest.

But if you have an internet connection, you have a lot more income opportunities compared to people 20 years ago. Use them!

You can always start a blog, a YouTube channel, or any other side hustle for that matter which can fund your investments.

That’s all folks, hopefully, you got what you were looking for in this post. Feel free to comment on any suggestions, questions, etc down below.

13 thoughts on “How to Start Investing (even with little money): Total Beginner’s Guide”

    • I agree Kelsey, Starting a blog was one of the best career move I’ve ever made, thanks to a big leap of faith.

      Reply
      • What’s the best site to use? I tried to start a blog once but the pictures and wording kept moving all over the place also,when I wanted to start a new section it wasn’t letting me.
        I was so frustrated I just quit,that and learning how to make and edit YouTube videos would be something I’d like to do and get out information more than making money,although it’d be a plus.

        Reply
    • Go for it, Acorns lets you invest spare changes, which obviously reduces the risk of losing large amounts of money!

      Reply
  1. Hi , is there a way to actually get in touch with you and talk about this .
    I’m really interested in getting some help with investment thing

    Reply

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