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How to start with very small money?

Are you a small investor as I am? Are you a beginner? Do you think you cannot afford investing because you do not have enough money?

Do you want trade stocks however?

I consider trading stocks as my hobby. I like it. I like the game, its adventure and danger. I am also full of emotions when trading and trying to control them. One of my friends trades stocks as a game too. He has no background, no knowledge, he just plays it as betting horse racing. He says, “when the stocks are down I feel offended and do not look at them at all and they come back begging for my attention”. This is how he made his first $10,000 dollars within two weeks. I envy it and I tried to find out why it worked for him while I was loosing money. He simply didn’t allow his emotions take action and sell his stocks when they displayed initial losses while I was selling to cut losses quickly. It is a good strategy however you shouldn’t cut those losses too quickly, otherwise you start collecting losses one after second.

Well, let’s talk how to start when you have no money and no idea. I did it this way three years ago:

Opening trading account
Review your salary and your family budget. Write it down on paper. Write down how much money flows into your household. I recommend considering only regular income instead of seasonal unless the seasonal income is regular too (for example a summer help or a winter ski school instructor, etc.).
After that, write down all your mandatory expenses only (such as mortgage, tuition, rent, insurance, etc.).
Then you would be able to see, how much money you have left for your personal expenses (or your household). Now you can ask yourself a question: “How much money I can afford save aside?” Is it $50 a month? $100 a month?

There are many brokerage houses out there. Go to the internet and do some research what are their conditions to open a new account. I personally trade with TD Ameritrade and they require min. $2000 to open the account. You can try Sharebuilder. I think they have no minimum and low trade commissions. But I do not know all of them, so you should do your own search and study. You can go to MSN Money
and search through other brokers.

If you however decide for TD Ameritrade, you would need a minimum amount of 2000 of dollars to open the account. Then go to your local bank and open a Time savings account (I opened 91 day savings account) and start transferring your $50, $100 or whatever you decided to save into this account. Do it regularly every month and prior you start spending the money. Whenever you receive your salary, send your minimum to your savings account. No matter what, no questions, no excuses. Do it. Do not touch that money and let them grow. Soon you would be able to open the new account and transfer the money into it.

During the saving period you will have enough time to study the stock market, stocks, strategies, read books, create your control loss plan, journal, etc. Overall you make yourself ready to trade. You can open a Stock simulator and there you can try your strategies as well as try how it works (placing orders, executing, creating portfolio, etc.).

After you have your new account opened, do not stop saving your money on your savings account. If you have no reserves I strongly recommend building your emergency savings.

Always consider your money on your broker’s account as already lost. If you cannot afford it, continue in saving as long as you would be able to afford it.

8 responses to “How to start with very small money?”

  1. Katty says:

    Its pretty cool info about investing into stocks!

  2. Quiil Leonore says:

    Very good write-up , I am going to spend far more time researching about investing with small account…

  3. Alex says:

    Great goods from you, man. How to start with very small money? That’s a great question I was wondering a lot! I’ve understand your stuff previous to and you are just too magnificent. I really like what you have acquired here, certainly like what you are stating and the way in which you say it. You make it enjoyable and you still care for to keep it sensible. I can’t wait to read far more from you. This is actually a wonderful informations.

  4. Katty says:

    Great information about stock trading, but I am too scared of stock market to follow you!

  5. Wladik says:

    Thank you for the sensible critique. Me and my neighbor were just preparing to do some research on how to start investing with small account. We got a grab a book from our area library but I think I learned more clear from this post. I’m very glad to see such wonderful information being shared freely out there.

  6. Martin says:

    Good advice to invest into non transaction fee mutual funds and ETFs, I will check with my broker tomorrow.

  7. Horse Racing Data says:

    I would not have found this article if it were not for a blog who linked to it.

  8. I found your topic “How to start with very small money? | Hello Suckers …” when i was searching for income mortgage protection and it is really intresting for me. If its OK for you i would like to translate your topic and post it on my german blog about income mortgage protection. I link back to your topic of course!

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