How to invest with little money: fractional shares and low minimums

Step by step

1. 1

   Start with a safety net

   Pay off credit cards first: they often charge 18% or more, more than almost any investment earns. Keep some savings for emergencies so you never have to sell at a bad moment. Then invest only money you can leave alone for years.

2. 2

   Pick a broker with no minimum

   Fidelity, Vanguard, Public, Webull and Firstrade have no account or deposit minimum, and all five charge $0 for online US stock and ETF trades. You need an SSN or ITIN and a US address: Fidelity, Webull, Firstrade, Ally Invest and Acorns accept an ITIN, Webull and Firstrade only with a green card or some visas, while Robinhood, Public, Vanguard and Stash need an SSN.

3. 3

   Buy fractional shares

   A fractional share is a piece of one share: if a share costs $1,000, $100 buys 0.1 of it. Fractional buys start at $1 at Robinhood and Fidelity and at $5 at Firstrade, Moomoo and J.P. Morgan, and Stash sells stock slices from 1¢. Brokers limit which stocks you can buy this way, often only during market hours (9:30 a.m.-4 p.m. ET), and you usually cannot move fractional shares to another broker without selling them.

4. 4

   Start with a fund, not one stock

   With $50 you cannot buy many companies one share at a time, but a slice of an index fund or ETF spreads it over many companies at once. The yearly fee, the expense ratio, is a percent of your money: on $100,000 growing 4% a year, a 1% fee leaves about $179,000 after 20 years and a 0.25% fee about $208,000.

5. 5

   Set up a recurring buy

   Buying the same amount every week or month is called dollar-cost averaging: you get more shares when prices are low and fewer when they are high. Robinhood and Webull let you schedule automatic buys of stocks and ETFs, and Acorns invests your Round-Ups once they reach $5. $25 a week adds up to $1,300 a year.

6. 6

   Count every fee in dollars

   Subscriptions cost the same at any balance: Acorns from $4 a month and Stash $12 a month, which is $144 a year, almost half of a $300 account. Fidelity may charge up to $5 a quarter on accounts under $100 with no investments or activity for over a year. On Interactive Brokers Pro Fixed, the $1 minimum per order is 5% of a $20 buy.

7. 7

   Give it time and expect drops

   Small amounts grow slowly: for example, $365 growing 5% a year becomes about $466 in 5 years and about $1,578 in 30. Real returns are not fixed, and large-company stocks as a group have lost money in about one year out of three. Keep adding on schedule instead of selling after a fall.