How to Start Investing with Little Money

The biggest myth in personal finance is that you need a lot of money to start investing. You do not. Every major brokerage in the US now charges $0 commissions on stock and ETF trades, most offer fractional shares starting at $1, and none of the top platforms require a minimum deposit to open an account. The barriers that once kept ordinary people out of the market — $50 trade commissions, $3,000 fund minimums, $500 account opening requirements — no longer exist.

What does exist is the enormous cost of waiting. A 25-year-old who invests $100 per month at a 7% average annual return will have $122,700 by age 55. If that same person waits until age 35 to start, they will have only $52,400 at age 55 — less than half — despite investing for only 10 fewer years. Compound growth is the most powerful force in building wealth, and it rewards those who start early far more than those who start big.

This guide walks you through every step of starting to invest, from choosing a brokerage to building your first portfolio. It is written for people with $50 to $500 to start and a willingness to invest consistently over time. No financial jargon without explanation, no sales pitches for specific products — just the practical steps to go from zero to invested.

Why You Should Start Investing Now, Even with $50

The stock market has returned an average of approximately 10% per year before inflation (about 7% after inflation) over the last century, according to historical data from NYU Stern. No savings account, CD, or bond comes close to matching that long-term return. A high-yield savings account paying 4.5% APY in 2026 is excellent for your emergency fund, but it will not build the kind of wealth that lets you retire comfortably.

Here is why starting small still matters: if you invest $50 per month starting today at a 7% real return, in 30 years you will have approximately $61,350. That is from depositing just $18,000 of your own money — compound growth more than triples your contributions. If you can increase your monthly contribution by just $25 per year (from $50 to $75 in year two, $100 in year three, and so on), the 30-year total jumps to over $135,000.

The market will drop. It drops every year at some point. The S&P 500 has experienced an average intra-year decline of 14.2% since 1980, yet it finished the year positive in 33 of those 45 years. Staying invested through downturns is what separates investors who build wealth from those who lock in losses by panic-selling. Starting small helps you build that emotional resilience before larger amounts are at stake.

Overcoming the Mental Barriers to Investing

The practical barriers to investing are gone. The mental barriers remain. Here are the most common ones and why they should not stop you:

• "I do not have enough money." You need $1 to buy a fractional share of VTI at Fidelity. You do not need $1,000 or $10,000. Start with whatever you have and add to it consistently
• "I do not know enough about the stock market." You do not need to pick individual stocks. A single total stock market index fund owns a piece of every publicly traded company in the US. You are not gambling on one company — you are investing in the entire American economy
• "What if the market crashes right after I invest?" If you are investing for 10+ years, short-term crashes are irrelevant. Every market crash in history has been followed by a recovery to new highs. The people who lose money are the ones who sell during the crash, not the ones who keep investing through it
• "I will start when I earn more." This is the most expensive excuse in finance. Every year you wait costs you thousands in lost compound growth. Someone who invests $100/month from age 22-32 and then stops will have more at retirement than someone who invests $100/month from age 32-65 — ten years of early investing beats 33 years of later investing
• "Investing is for wealthy people." Investing is how people become wealthier. The median 401(k) balance for Americans aged 55-64 who have contributed consistently is over $200,000, built almost entirely from regular paycheck contributions — not from starting with a large sum

Brokerage Platform Comparison for Beginners

Choosing a brokerage is your first practical decision. The good news: every major platform now offers $0 commissions on US stocks and ETFs, and the differences between them are smaller than ever. Here is how they compare on the features that matter most to beginners:

Our recommendation for most beginners: Fidelity or Schwab. Both offer every account type you will ever need, excellent customer service, deep educational resources, and fractional shares. If you already bank with one of them, use that one for convenience. Robinhood is fine if simplicity is your top priority, but its limited educational resources and fewer account types make it a weaker long-term home for your money.

How to Open a Brokerage Account Step by Step

Opening a brokerage account takes 10-15 minutes. Here is the process at any major platform:

1. Go to the brokerage website or download the app. Visit fidelity.com, schwab.com, vanguard.com, or the platform of your choice
2. Click "Open an Account" and choose your account type. For most beginners, start with an individual taxable brokerage account or a Roth IRA (see our Roth IRA guide for details on that option). If your primary goal is retirement savings, the Roth IRA is usually the better choice
3. Provide personal information. You will need your full legal name, date of birth, Social Security number, address, employment information, and a form of ID. This is required by federal regulations (the PATRIOT Act and SEC know-your-customer rules)
4. Answer the suitability questions. Brokerages ask about your investment experience, risk tolerance, income, net worth, and investment objectives. Answer honestly — these answers do not prevent you from opening an account, they help the brokerage flag if you try to access complex products like options trading
5. Link your bank account. Connect your checking account for transfers. This usually involves providing your routing and account numbers, or logging into your bank through the brokerage's secure portal
6. Fund your account. Transfer your starting amount — even $50. Electronic transfers typically take 1-3 business days, but many brokerages let you trade immediately with "instant deposit" for amounts under $1,000-$5,000
7. Make your first investment. Search for the fund ticker (like VTI), enter the dollar amount or number of shares, and click buy. That is it — you are an investor

What to Invest In First: Funds, ETFs, and Stocks

With your account funded, you need to decide what to buy. Here are your three main options, ranked from simplest to most complex:

Option 1: Target-date retirement funds (simplest). A target-date fund is a single fund that holds a mix of US stocks, international stocks, and bonds, automatically adjusting to become more conservative as you approach your target retirement year. If you plan to retire around 2060, you buy a 2060 target-date fund and never think about it again. Fidelity Freedom Index 2060 (FDKLX) charges 0.12% per year. Vanguard Target Retirement 2060 (VTTSX) charges 0.08%. These funds are the single best option for people who want to invest correctly with zero ongoing effort.

Option 2: Total market index funds or ETFs (best long-term value). An index fund owns every stock in a given market index. A total US stock market fund like VTI (Vanguard) or FSKAX (Fidelity) holds over 3,500 US companies, giving you exposure to the entire American stock market for an expense ratio of 0.03-0.015%. These are the building blocks of a diversified portfolio. You have more control than with a target-date fund, but you also need to decide your own stock/bond/international allocation.

Option 3: Individual stocks (highest risk). Buying shares of individual companies like Apple, Amazon, or Tesla is what most people picture when they think of "investing." But individual stock picking is the hardest and riskiest approach. Even professional fund managers fail to beat the S&P 500 index over 10+ year periods about 85% of the time, according to the SPIVA scorecard from S&P Global. If you want to buy individual stocks, limit them to 10% or less of your portfolio until you have years of investing experience.

Your First Portfolio: A $200 Starter Example

Here is a concrete example of how to invest your first $200 using fractional shares at Fidelity or a similar brokerage:

• $160 (80%) in VTI or FXAIX: VTI is the Vanguard Total Stock Market ETF, covering the entire US stock market. FXAIX is the Fidelity 500 Index Fund, tracking the S&P 500. Both charge 0.015-0.04% annually. This is your core US equity holding
• $40 (20%) in VXUS or FZILX: VXUS is the Vanguard Total International Stock ETF, covering developed and emerging markets outside the US. FZILX is the Fidelity ZERO International Index Fund, which charges literally 0% in fees. This gives you global diversification

This 80/20 US-to-international split is a reasonable starting allocation for a young investor with a long time horizon. As your portfolio grows, you can add a bond allocation (10-20% in BND or FXNAX) for stability, but for a small initial portfolio under $1,000, the growth potential of 100% equities makes more sense. You can fine-tune your asset allocation as you learn more and accumulate a larger balance.

If you would rather not think about allocation at all, just buy a target-date fund and put the entire $200 there. You will get US stocks, international stocks, and bonds in a professionally managed mix — all in one fund.

Dollar-Cost Averaging and Compound Growth Projections

Dollar-cost averaging (DCA) means investing a fixed dollar amount at regular intervals regardless of what the market is doing. When prices are high, your $100 buys fewer shares. When prices are low, your $100 buys more shares. Over time, this smooths out your average purchase price and removes the stress of trying to "time the market."

Here is what a $100 monthly investment looks like over time at a 7% average annual return (inflation-adjusted):

The pattern is clear: compound growth accelerates over time. In the first 10 years, compounding adds $5,400 to your contributions. In the last 10 years (year 20 to 30), it adds $70,300. This is why starting early matters so much more than starting big. A person who invests $100/month for 30 years puts in only $36,000 of their own money but ends up with nearly $123,000.

Set up automatic recurring investments through your brokerage. Every platform supports this — you choose the amount, the frequency (weekly, biweekly, or monthly), and the investments to buy. Automating removes the temptation to skip a month or to try to time the market. Treat your investment contribution like a bill: it gets paid first, before discretionary spending. For help freeing up money in your budget for investing, see our personal finance guides.

Your Employer 401(k) Match: Priority Number One

Before you open a brokerage account or a Roth IRA, check if your employer offers a 401(k) match. A typical employer match is 50% of your contributions up to 6% of your salary, or 100% of contributions up to 3-4%. This is an immediate, guaranteed 50-100% return on your money — no investment in history comes close.

Example: if you earn $50,000 and your employer matches 50% up to 6% of salary, contributing 6% ($3,000/year or $250/month) gets you $1,500 in free employer money every year. Not contributing enough to get the full match is literally leaving money on the table.

The optimal order of investing for most people:

1. Build a starter emergency fund — $500-$1,000 in a high-yield savings account for unexpected expenses
2. Contribute to your 401(k) up to the full employer match — this is the highest guaranteed return you will ever get
3. Build a full emergency fund — 3-6 months of expenses in a high-yield savings account
4. Max out a Roth IRA — $7,000/year in 2026 with tax-free growth and withdrawals
5. Increase 401(k) contributions beyond the match, up to the $23,500 annual limit
6. Invest in a taxable brokerage account — for any additional savings after maxing tax-advantaged accounts

Assessing Your Risk Tolerance

Risk tolerance is your ability and willingness to endure drops in your portfolio value. It has two components: your financial capacity for risk (your time horizon, income stability, and savings) and your emotional tolerance (how you react when your portfolio drops 20-30%).

If you are under 30 with a stable income: You can likely handle 90-100% stocks. You have 30+ years to recover from any downturn, and historically, 100% stock portfolios have always recovered within 5-7 years from even the worst crashes. The higher long-term return of stocks compared to bonds makes an aggressive allocation mathematically optimal for young investors.

If you are 30-50 with a stable income: An 80/20 or 70/30 stock-to-bond split balances growth with some downside protection. As you approach your target retirement date, gradually shifting toward more bonds (20-40% by your 50s) reduces volatility when you have less time to recover.

If you lose sleep over a 10% portfolio drop: You may benefit from a more conservative allocation regardless of your age. A portfolio you can stick with through a downturn is better than an "optimal" portfolio you sell in a panic. Consider a target-date fund that handles this balance for you, or start with a 60/40 stock/bond split and adjust as you gain experience.

The key insight: risk tolerance is not just about math. The best portfolio allocation is the one you can maintain during a bear market without selling. If a 100% stock portfolio would cause you to sell everything during a 35% crash, you would be better off with 70% stocks and 30% bonds that you hold through the downturn.

Should You Pay Off Debt or Invest First?

This is one of the most common questions beginners ask. The answer depends entirely on the interest rates of your debt:

• Always get the full 401(k) employer match first. Even if you have credit card debt at 22%, a 50-100% instant return from the employer match beats paying down any debt. This is the one exception to every debt payoff rule
• Pay off high-interest debt (above 7-8%) before investing beyond the match. Credit card debt at 18-28% APR, personal loans at 10-15%, and private student loans at 8%+ should all be eliminated before you invest extra dollars. No investment reliably returns 18% per year. Check your credit score to understand your debt situation
• Low-interest debt (below 5%) can coexist with investing. A mortgage at 3.5%, federal student loans at 4.5%, or a car loan at 3.9% cost less per year than the stock market's average 7-10% return. You can invest and make minimum payments simultaneously
• The gray zone (5-7%): For debt in this range, consider splitting extra money 50/50 between debt payoff and investing. The mathematical difference is small, and the psychological benefit of seeing both your debt shrink and your investments grow helps maintain motivation

Frequently Asked Questions About Starting to Invest

How much money do I need to start investing?

You can start investing with as little as $1 at most major brokerages in 2026. Fidelity, Schwab, and Robinhood all offer fractional shares with no account minimums. Realistically, starting with $50-$200 and adding $25-$100 per month is enough to build meaningful wealth over time through compound growth.

What should a beginner invest in first?

A total US stock market index fund or S&P 500 index fund is the best first investment for most beginners. Funds like VTI, FXAIX, or a target-date retirement fund provide instant diversification across hundreds or thousands of companies with very low fees. Avoid individual stocks until you understand market fundamentals.

Is $100 enough to start investing?

Yes. $100 is more than enough to open a brokerage account and buy a diversified index fund. If you invest $100 per month at a 7% average annual return, you will have approximately $17,400 after 10 years, $52,400 after 20 years, and $122,700 after 30 years.

What is the best investment app for beginners?

Fidelity is the best overall brokerage for beginners in 2026, offering $0 commissions, fractional shares, no account minimums, excellent educational resources, and a strong mobile app. Schwab is a close second. Robinhood has the simplest interface but fewer educational tools and account types.

Should I pay off debt before investing?

Always contribute enough to your 401(k) to get the full employer match first. Then pay off any high-interest debt above 7-8% (credit cards, personal loans) before investing extra. For low-interest debt below 5% (federal student loans, most mortgages), you can invest simultaneously since stock market returns historically exceed those rates.