You’re doing everything you can to build a smart, solid financial plan. During your commute, you’re plugged into podcasts explaining how to curb unwanted spending. Each month, you review your accounts to ensure you’re hitting your savings milestones — getting you ever closer to big life goals, like buying your first home. You’ve even become one of those folks who checks their 401(k) regularly. However, when it comes to investing, you’re still a little skittish.
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And for good reason, given that every other headline seems to proclaim doom in the stock market. And the most famous investors, the ones you hear about making millions, are playing with more money than you’ll probably make in your lifetime. Starting to invest doesn’t seem wise if you want to sleep well at night.
But what if you could keep your head on the pillow and pad your accounts at the same time? Alonso Rodriguez Segarra, CFP, founder and CEO of Advise Financial, says it’s not only possible — it’s smart.
“The key to success lies in automating your contributions,” he says. “Even small ones build strong habits.” With the right mindset and a few simple tools, you can start investing today, even on a tight budget, without taking on big risk.
If you’re leery of dipping your toe into the market, it might be because you’re worried you’ll drown. After all, if you think you need thousands of dollars to get started, it may feel like you could lose it all on a single bad day.
Segarra wants you to relax a little. “Nowadays, anyone can begin with as little as $1,” he says. That’s right, for less than a cup of coffee, you can become an investor. That’s thanks to fractional shares, which allow you to buy a small piece of a stock or exchange-traded fund (ETF), which is a type of investment that holds many stocks in one place.
Let’s say you want to buy a stock trading at $500, but you only have $50. You could buy 0.1 shares — or a fractional share — instead. Fractional shares not only let you invest without blowing your personal piggybank, but they also enable you to build a portfolio that’s diversified, even with limited funds.
“Try to invest in an index fund or ETF, where a small amount can be invested in hundreds or thousands of companies across different sectors of the economy,” Segarra says. “The more diversified your portfolio is, the less risk you take on if one of those investments underperforms.”
Many major brokerage firms offer fractional shares, so it’s worth investigating.
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As you begin your investing journey, Segarra emphasizes that your mindset is just as important as your money. While you can’t control the stock market’s ups and downs, you can control how you approach investing.
“One of the first pieces of advice I could give to someone just starting in investing is not to think of the stock market as a casino where people become millionaires overnight,” he said. “Or to imagine themselves as one of those day traders who buy and sell stocks, thinking they’ll become millionaires. 85% of people who go that route actually lose money.”
Instead of daydreaming about being a bigshot, Segarra recommends sticking to investments that are low-cost and easy to understand. If you need help figuring out how to diversify your portfolio or understand a stock, tools like robo-advisors can help.
“If these issues seem complicated, rely on a robo-advisor,” he suggests. “It will create a widely diversified portfolio tailored to your profile and manage it to keep it on track.”
Segarra is a big fan of streamlining your investing through automation. “The simpler you make it for yourself, the stronger your investment habits will be,” he says. “If you have to overthink or follow a complicated series of steps to invest, it becomes harder.”
If you contribute to a retirement fund like a 401(k) through your employer, you’re technically already doing this. You can apply the same principle to your taxable brokerage account or an individual retirement account (IRA). Set up recurring transfers, and your investments can grow quietly in the background over time.
“Even if it’s a small amount, automate it,” Segarra says. “Over time, those small contributions add up, and you won’t have to stress about timing the market or making lump-sum decisions.”
And when you do come into extra cash — a bonus, tax refund, or raise — you can add it to your existing investments.
“If you receive money that you won’t need for the next two or three years, make an extra contribution,” he said. “Likewise, if you start earning more, remember to increase your automatic contributions.”
Investing may seem complicated and intimidating, especially when you’re starting out with limited funds. but it doesn’t have to be. Tools like fractional shares, low-cost diversified funds, and automation can help you get started without taking on big risks — or losing sleep.
This article is part of GOBankingRates’ Top 100 Money Experts series, where we spotlight expert answers to the biggest financial questions Americans are asking. Have a question of your own? Share it on our hub — and you’ll be entered for a chance to win $500.
This article is for informational purposes only and does not constitute financial advice. Investing involves risk, including the possible loss of principal. Always consider your individual circumstances and consult with a qualified financial advisor before making investment decisions.
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This article originally appeared on GOBankingRates.com: How To Start Investing With Less Than $1,000
