Investing small amounts of money

Many first-time investors may think that they need a lot of money to start investing. The truth is, investing with small amounts can be a good start to gain an understanding of how the market works and learn which types of investments are suitable for you before investing larger amounts.

How to start investing in the stock market with small amounts?

The first step is to open your investment account, which you can easily do online. It is also recommended to familiarise yourself with some key investing concepts. Whether it’s a small amount or a large amount you want to invest, it’s always good to do some research first. If you’re new to investing, Knowledge Centre is full of helpful information and is a great place to start.

Invest your spare change

If you decide that keeping money in a bank account is not for you and you want to go the investing route, it is time to make an investment plan if you have not already done so. Depending on your investment goals and risk tolerance, as a beginning investor, you may consider investing in individual stocks or exchange traded funds (ETFs). You can read about all the different types of financial products in our Knowledge Centre.

Set aside a certain amount to invest regularly

It is also possible to invest small amounts of money on a regular basis, whether it’s every month, quarter, year, etc. In this case, you may want to consider a strategy called dollar cost averaging.

In short, with this investment strategy, you invest equal sums of money at regular intervals, regardless of the asset’s price or what is going on in the financial markets. A dollar cost averaging benefit is that it takes emotional factors out of investing. Since you are regularly making investments no matter what the market conditions are, emotions are eliminated out of the decision-making process. The idea behind this strategy is that when prices are high, you can only afford a certain number of shares. When prices drop, you can purchase more shares with the fixed amount you are investing in each period. Then, when the market recovers, you benefit from having more shares when you bought them at a low price.

It is important to keep in mind broker fees if you choose a dollar cost averaging investment strategy. If you invest periodically on a regular basis versus invest in one lump sum, you may pay more brokerage fees, which can be significant especially if you are investing small amounts at a time.

Choose a broker with low fees

Broker fees will impact the returns of your investments. Especially if your investments are relatively small, transaction costs will make a big difference in your returns. Fees vary from broker to broker, depending on many factors. With our unheard-of low fees, we have made investing accessible for everyone. Compare our fees with other brokers.

It is also important to be aware of any hidden fees or charges aside from transaction costs, such as inactivity, maintenance or custody fees.

Inactivity fees

As most brokers make money from commission fees, some brokers will impose inactivity fees on their clients as a way to make up for commission charges if a client does not trade frequently. Inactivity fees are most impactful on passive and buy-and-hold investors that invest with small amounts of money.

Maintenance fees

When choosing a broker, it is also important to be aware of any maintenance fees. Maintenance fees are charged for just having an account. These can be charged monthly, quarterly, yearly and so on. They can also depend on various factors, such as the value of your portfolio.

Custody fees

Brokers may also charge custody fees for the holding and safekeeping of your assets. These also can be charged monthly, quarterly, yearly and so on.

What should be my minimum investment?

Some brokers have a minimum investment requirement. Therefore, if you only want to invest small amounts, this is also something to consider when choosing a broker. We do not have a minimum trading limit imposed on our investors. You have the freedom to invest however much you want, even if it is just €1 per year.

Determine the best type of investment for your amount

There are plenty of financial products available. Not all of them are suitable if you have a small amount to invest, and even more important – not all of them are suitable for those that have just start investing. We advise you to only invest in financial products that match your knowledge and experience. As mentioned, if you are a beginner, you may want to consider stocks or ETFs. You could also consider bonds or other types of funds.

Investing as an alternative to saving

You may wonder, why not just keep money on the saving account? There are advantages and disadvantages to both saving and investing. Saving is typically safer because the amount of money in your account will generally not decrease unless you make a withdrawal. On the other hand, your money could lose purchasing power due to inflation and you may not receive as high returns as with investing, especially in a low interest rate environment.

If you choose to invest your money, you could receive higher returns than if you saved your money in a bank account. However, there are always risks involved.

Whether you save your money or invest it, you should always consider your investment plan and your investment goals for the long term and the short term.

Expected return depends on your investment plan

Forecasting returns is not an easy task, even for experienced investors. Although you can never be sure how your portfolio will perform, you can always make a plan that will help you to estimate it.

Remember that every investment involves risk. Even when investing small amounts, be aware of all potential risks. Awareness, together with planning and diversification, can help you achieve your financial goals.

Investing small amounts? Open an account

Now that you know about how to invest small amounts of money, it is time to start. You can register an account with us entirely online and the process is easy and straightforward. Open an account today!

The information in this article is not written for advisory purposes, nor does it intend to recommend any investments. Please be aware that facts may have changed since the article was originally written. Investing involves risks. You can lose (a part of) your deposit. We advise you to only invest in financial products that match your knowledge and experience.