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You’re a broke college student or you’re working full time and have debt and a host of other expenses that keep draining whatever you earn away from you. You might be wondering if you should even learn how to invest if you barely have any money to begin with.
Well, I’m here to tell you that you should start investing as early as possible! Even if it’s with just a small amount you will gain an abundance of investing experience. This knowledge can help you accumulate more wealth.
Whether you’re in your 20s, 30s, 40s or older, this guide can apply to anyone who wants to get started in their journey towards investing in the stock market.
There seems to be a misconception that you need to have a large amount of cash to start investing. This definitely isn’t the case. I can definitely tell you that YOU DO NOT NEED A LOT OF MONEY TO START INVESTING.
I believe it’s best to start young and learn about investing as you go. Even if you only have $100, you can get some good fundamentals down. Once you know the basics, you can invest more. By following this guide, you will be able to learn how to invest in the stock market today in only 3 steps!
First, let me begin by saying that this post is based off of my experience as an investor who’s currently in college. However, I will become a better investor as I go and will improve this post so you can also join me in this journey if you wish.
It may not be the best that you’ll hear but it will be from my point of view and above all it will be HONEST and you will LEARN from my experiences. Now, let’s get to it!
Side Note: If you haven’t already and you’re a beginner, I would suggest reading the “What is a Stock?“ post.
Learn How To Invest!
Step 1: Educate Yourself
The first and foremost tip I can give you is to learn more, not just from me or other websites, but also from books on investing. There are some great books out there you can really get some good investing lessons from.
The first book I ever read to get started in investing was The Richest Man In Babylon. I highly recommend that book. It’s a little hard to get used to the text at first but it gets easier once you start reading.
You can easily spend a few minutes on your bus ride, or commute to college or work, and whenever you have some spare time to read a few pages. This will give you some good complementary and foundational knowledge for learning how to invest. However, educating yourself won’t help you at all if you don’t actually implement the lessons from books, or Parhelia Finance and START.
Now, while you’re reading these books follow along with the rest of the steps as well. Before we go on to the next step though, I also recommend reading my post, What is a Stock? It will help you get a better understanding about what stocks are and how they’re traded and what not. If you already know about stocks and would like to skip that, then it’s fine you can move on to step 2.
Side Note: Here are the great investing books I mentioned and that I recommend reading. They will tremendously help and be a great supplemental resource.
Step 2: Choose a Brokerage Account
Now that you’re educating yourself on how to invest properly in the stock market, we can move on to the next step. You need to choose a brokerage account so that you can actually trade stocks and invest.
A brokerage account is simply a service that allows you to trade stocks and mutual funds. You can access the service through a website or an app. There are a lot to choose from and you can find some by just googling around. Some examples of brokerages are Robinhood, UBS, E-Trade and Scottrade.
Most brokerage accounts will charge you a commission fee for every purchase or sell order. If you’re in college and are just starting out, I would recommend Robinhood. You can invest and trade stocks for FREE!
They don’t have any sort of fees and you don’t need a minimum amount to get started. That being said, the only drawback with Robinhood is that you’re limited on what types of investments you can make.
For instance, you can’t day trade or use options like the ones that charge you a commission. However, seeing that you’re most likely a beginner anyways, Robinhood will do just fine for starting out for investing in stocks. It’s easy to use and has a simple user interface.
- How To Setup Robinhood
- 5 Investing Mistakes to Avoid in the Stock Market
- Index Funds vs. Mutual Funds
You can download the Robinhood app on your Apple or Android smartphone. They recently also created a website for more functionality. Once you have chosen your choice for a brokerage account, you will need to follow their procedures on connecting your bank account and transfer some funds.
Step 3: Start Investing
You’ve educated yourself on how to invest and now you’re finally ready to invest your money in the stock market now…but…before you do that, think really long and hard about what you would like to invest in. Here are some different assets you can start to invest in:
Pretty straightforward here, stocks are publicly traded companies, that you can invest your money in. Now, you might be thinking there’s millions of those and you don’t know which one to invest in. Well I recommend looking into 5-10 widely recognized companies that you know and like, and then pick one to invest in.
Preferably choose one that’s been established for a while. Companies that are profitable and have been around for a long time are called blue-chip companies.
So when you’re first starting out in the stock market and want to invest in individual stocks, it’s a good idea to start with blue chip stocks. Some example of these companies are Coca-Cola, Proctor and Gamble and Microsoft.
The first company I invested in when I began investing was Apple. I really like apple as a company and I also use their products now, so I decided to buy 8 shares of it.
Now, that might not seem like a lot of shares but that’s all the money I had at the time. You can start investing in companies with even just $100, depending on which one you like and how much their share price is.
Once you know which company you would like to physically purchase shares in, go into your brokerage account from their website that you signed up for. After your brokerage approves you and you connect your bank account, you’re ready to become a shareholder.
In your brokerage account, there should be a way to search for companies and buy some shares. Depending on how much money you have transferred in your account and how much the share price is of the company you are interested in, you should be able to purchase some.
ETFs (Exchange-Traded Funds):
Another type of investment you can make is with an ETF, or an Exchange Traded Fund. An ETF is pretty much an index fund that you can readily buy and sell, just like stocks. If you are unfamiliar with what an index fund is, just think of it as a bag of multiple shares of different companies.
Therefore, an ETF is like an index fund that you can buy and sell whenever you want to, whereas with index funds you have to wait because money can usually only be taken in once a day.
Just like researching stocks, you can also find ETFs that perform similar to some market indexes like the S&P 500. Again, if you are using Robinhood like I am, then you can search for these ETFs the same way and trade them just like stocks.
Having an ETF will just diversify your portfolio, and you can usually buy shares of more specific ETFs as well. Such as tech ETFs, which may contain only shares of tech companies and nothing else.
So go ahead and take your pick. Whether you want to go ahead and buy shares of a company or try to find an ETF that will have some of your favorite companies that you can invest in and diversify.
Typically you will see that individual stocks will usually always be riskier to invest in than any type of funds, such as ETFs. However, the rewards can also be much higher with individual stocks. Take your pick and choose one.
If you have more money to invest you can dabble into both of these. But, I recommend you do some basic research at least before you purchase shares of either. Also, try to invest small at first.
Well, there you go, I hope you found this post useful and learned how to invest in the stock market. To reiterate, you don’t need a lot of money to start investing, even $100 is good enough.
As far as a brokerage account goes, I would start off with Robinhood as it doesn’t charge commission fees. It’s relatively easy to purchase your first stock, once your account is approved. From there, it will be up to you to choose your first investment, choose wisely!
Oh one more thing, if you want to have more of a hands-off approach to investing, you can look into investing with Wealthsimple. It’s a robo-advisor that will handle all of your investments based on the goal you set, and there’s no minimum to get started!
Feel free to leave a comment if you have any questions or anything, I’ll be glad to address them! If you enjoyed reading this, then consider subscribing to Parhelia Finance’s email list and sharing it on social media!