Technically, it’s $500.
That is the lowest amount that you can choose for a first trade on the ASX (Australian Securities Exchange). However, there are a few things to consider before you go ahead and make this first purchase.
Ever wondered why larger amounts like $5,000 or $10,000 are recommended to start investing rather than $500? This is due to brokerage fees.
When you buy or sell a stock, you pay a fee to do so. This fee can vary greatly (especially if you make a very large trade), however it is usually around $19.95. This means that:
- If you buy $500 of shares, brokerage will represent just under 4% of your investment
- If you buy $5,000 of shares, brokerage will represent only 0.4% of your investment
This means, the less you invest the more your shares would have to grow in value to cover brokerage costs. This doesn’t mean you need to save up $5,000 to start investing but rather, keep brokerage costs in mind when you are making a smaller trade.
How To Invest For Less Than $500
You can still invest even if you don’t have a spare $500 lying around.
Micro-investing is a way to invest small amounts like $5 or even your pocket change. With consistent contributions and time in the market, you can still accumulate a pretty sizeable investment portfolio. It is a great option for new investors who are perhaps uncomfortable with investing large amounts or find the stock market quite intimidating.
Raiz Invest and Spaceship Voyager are two popular ones, however I would highly recommend doing your own research and seeing what platform is right for you. Two key areas to look at are investment returns and fees. Make sure that the platform will actually make you money but also that they are not overcharging you. For example, if the investment return is 3% a year with high risk, that is very poor. You may as well put your money in a bank account instead which offers 3% interest and very little risk.
Do a lot of research to figure out what investment method is right for you. Saving up a large amount of money is hard in itself. Having to then invest it in the market for the first time can really scary! If you are more comfortable with making a smaller $500 trade, then go for it!