If $400 is money you can invest, then you have more than 45% of Americans.

The best strategy would be, in my opinion, to invest in high quality dividend stocks – dividend aristocrats. Here is a list of all high quality dividend stocks – champions (aristocrats), challengers, and contenders, Dividend Growth Stocks CCC list go there, review the stocks, pick few, and familiarize yourself with those companies – what do they do, how they make money, how they performed during the 2008 recession, what are their threats which can eventually put them out of business, etc.

Pick 5 to 10 stocks (later on you may start adding more shares, but for the start 5 companies is plenty). And start buying those shares. Slowly, every month, little by little, a few shares by a few shares.

Pick a broker, which charges zero commissions so it will cost you nothing to buy a single stock.

Apply dividend reinvesting program (DRIP) – so you choose a broker which has this program. This will automatically reinvest all dividends and buy you more shares.

Once your stocks start paying you let’s say $30 or more in dividends every month, you can eventually remove DRIP and start reinvesting your dividends manually into other companies.

In the meantime, educate yourself on dividend growth investing. A good book is The Simple Best Investment by Lowell Miller. It will tell you everything you need to know to pick high quality dividend growth stocks.

Do this regularly for the next 25 years, and your account will grow to over $380,000 paying you approx. $57,000 annually in dividends (calculations based on $400 starting value, $400 monthly contributions, 25 years duration, 8% annual return, 15% dividend YOC, and compounded monthly, so note that the result may be different, but in the above calculated proximity).

Are you referring to “stock trading” or “stock investing”? Because there is a huge difference between the two.

If you really mean “trading” then unfortunately you I have bad news for you. You won’t get rich quick. You won’t be able to trade successfully in a small account. You may have some success but long term, you probably will experience a boom bust trading – making money, losing them, making them again, losing them… etc.

Many people overestimate their short term abilities and think they can make it trading while being undercapitalized. But, trust me, I tried myself many times, until I gave up and got back to more decent, conservative investing style.

So, I use trading and options (love options) to monetize my stock holding but I no longer use them as trading only. If you want to trade, you really need capital, if you do not have the capital, fees, commissions, rules and regulation (such as PDT) will ruin you. Plus, a small mistake will cost you a lot. If you make a trade with $500 risk in a $5,000 account vs. $500,000 account, the pain will be very different and very real… And with that a fear will enter your mind and that fear will make you causing more mistakes and more losses.

And, if anyone tells you that they are making money consistently winning all the time, they are certainly lying or not revealing everything. More over, we are in a strong bull market and in a bull market, everyone is a genius.

But if you mean “investing”, building your wealth slowly over time on a limited budget, then it is achievable. Open an account with a broker who charges no commissions so you can be buying as little as one share of a company and all that for free and start depositing your deposits every month and start buying share by share and build up your portfolio. Start buying up to 5 companies and accumulate until you reach 100 shares of each. Once you reach 100 shares of each company, you can start using options. You can start selling covered calls to generate even more income. And if your calls get assigned you just start selling cash secured puts… Sounds easy, right? Well, not necessarily. It is not a quick rich scheme so you still will have to work hard.

In fact, there is not too much optimism despite markets moving higher. Too many people are sitting aside expecting a crash, too many investors are pulling money out of the market (check equity funds outflows), too many pundits are speculating and competing in predictions who would nail the coming crash and recession.

All this is in fact a bullish behavior. At some point, these people who are now scared and pulling out of the market lamenting that they have missed the rally and they start chasing it coming back in. That will be the time when even a plumber in a small rural town in midwest America becomes a stock analyst and investing guru. Then you should start being worried.

However, I am talking about a major bull trend for which I expect additional +/- 18 years to last. But, that doesn’t mean it will be a straight run up. No, there will be pullbacks (up to 5%) corrections (up to 20%) and sideways moves along the way.

Too many people miss the big picture, many do not even look at the big picture, and then lose money (like those who are now pulling their money out of the markets expecting crash. Not only they will miss the rally, but they will enter back at the very wrong time when the market rolls over and crash and they lose again.

Here is a picture from 2016 where everybody predicted end of the bull market saying that it cannot go any higher. It must crash again. The market was going up for too long. This is not normal. Brace yourself… Well, look where we are today.
 

 
Because of the lack of the big picture, people tend to be trapped in their recency bias. All they know and remember id the previous crashes and tops. and there fore they are expecting crash and predicting a top as people did before them, just look at the picture above. When this recency bias end and is replaced with complacency, they you should be worried. But we are not there. if you keep monitoring news headlines, all you will see is who is predicting a crash and when, trade wars worries, economic slowdown and subsequent recession, slowing this and that… just watch it daily and you will get frustrated of how much pessimism is in fact out there.

Here is a big picture indicating that we are in a secular bull market which will last for some time:
 

If you want to be risky (which at your age is a great approach, because as you said, you have time on your side to make mistakes and repair them).

In this case, individual stocks are the way to go. Forget mutual funds or ETFs. These are average and many do not even beat the market. On top of that, they will charge you fees while stocks will charge you nothing.

Then your stock selection will depend on your strategy.

Are you planning to buy stocks and hold them until retirement?

Or are you planing to play a bit and buy and sell (note, excessive trading will however lead to losses over time)?

If you want to build a portfolio which will bring you income and allow you to retire early, then you need to choose stocks which have a great potential to grow steady, slowly, and safely. You need to look at stocks which will be around 20 years or 30 years later.

I would recommend you to open a margin account and start slowly buying dividend growth stocks. These do not require much work on your part and you can afford to buy them and forget about them and while waiting, collect dividends which can be re-invested back to grow your portfolio.

In this case, I would look into dividend aristocrats. They are relatively safe and grow and will most likely grow. You just need to monitor your holdings time to time to check that the stocks you have still meet the criteria for investing in them. If not, get rid of them.

Now, when I mentioned margin account, do not use margin at this phase. Your account is too small and if you leverage your account using margin, interest rates would not only offset the dividends and capital gains but may even eat your principal.

Then start saving money, so you can start trading options and that is when you use margin.

I personally use a strategy of selling cash secured puts to buy 100 shares of a stock and do this as long as I get assigned. Once I get assigned, I hold the stock, and then start selling covered calls as long as I get assigned. With this strategy you monetize your positions. You collect premiums when selling puts, you collect dividends when holding a stock, and collect premiums when selling covered calls. And with this strategy it is handy to start using margin.

Example: Let’s say, you want a stock ABC which trades at $60 a share. In a cash account you would need $6,000 to buy 100 shares. In a margin account, you will need only about $3,000 initial margin to buy 100 shares.

So, you sell a 55 strike put and collect 0.60 credit (or $60 premium). For this, the broker will collateralize about $1,100 of your buying power. If the stock stays above 55 by expiration, your put expires worthless, your collateral will be returned to you and you will keep the premium you collected. If the stock drops below $55 a share, you will be required to buy 100 shares at $55 a share but your cost basis will be 55 – 0.60 or $54.4 per share and your collateral will be added to the margin of $2,600 (since now you are buying for $55 and not the original $60).

While you hold your 100 shares, you start collecting dividends and start selling covered calls. By selling the calls, you again receive premiums. If the stock stays below your call strike price, the call expires worthless, you keep the premium, and you can sell a new call. If the stock goes above your strike, you will be required to sell your 100 shares (for example, you bought in at $55 a share, so you sell 58 strike covered call and collect 0.25 or $25 premium. If the stock stays below 58 at expiration, the call expires, it the stock goes above, let’s say to $60 a share, you will be forced to sell your 100 shares at $58 a share. Your profit will be premium received + the difference between the stock and strike, in this scenario additional $2 per share).

If your shares are sold, you go back and start selling puts again. Rinse and repeat.

This is as “aggressive” strategy as I would recommend to go. There are riskier strategies of course, but, with those, you can easily wipe out your account (my experience). Later on, as you get proficient, you can use other strategies to generate more income.

However, in order to do this, you will need at least $5,000 or more account and proper options trading approval from your broker. But you can start slowly, invest your first $2,000 and study the strategy until you raise money for more trading.

As far as the stock selection, I recommend using dividend aristocrats, Here is a link to a David’s Fish list of the dividend champions (aristocrats), challengers, and contenders:
Dividend Growth Stocks CCC list This list has enough stocks to pick from and if you study them carefully, you can even pick a real winners.

And what you can expect? Well, I have been trading this strategy (I also traded other strategies not so successfully though) and my average annual return on investment is between 30% and 45%. If you do your work, read, study, pick your stocks carefully, and do not deviate from the plan, you will be able to double your account every 3 years.