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How to start investing with $500

With $500, you can get started in investing in the stock market. If there’s a company you like, or an industry you know, do some online research around their share price and buy at a price you are comfortable paying. You can buy shares yourself by setting up a brokerage account through your bank or an online broker.

Woman walks past the ASX
$500 can turn you from an observer to a participant in the stock market.

The minimum transaction for buying shares is $500 for good reason. Anything smaller will get eaten up by brokerage fees, which at around $20-30 per trade, is 4-6 percent of your investment.

As you save more money, you can buy other stocks. You should be thinking about building a portfolio of different stocks to spread risk or investing in a fund.

Investing in a fund

If the prospect of managing your own stock portfolio is a little daunting, there’s the other option of investing in a fund. There are two types of funds: managed funds and Exchanged Traded Funds (ETFs). Investing in a fund gives you instant diversification over a number of industries and companies.

Managed funds are run by professionals, and you pay these professionals a fee for their expertise. You can find out what funds are performing well over time and the fees they charge by checking out a site like Morningstar. Look for well-performing funds over the long term, with low fees (less than 1 percent). Managed funds generally need a bigger initial investment of around $5,000 however, though some will let you start with as little as $1,000.

ETFs track an index, like the S&P ASX 200 (previously discussed here), which means you are investing in the top 200 companies in Australia. ETFs have very low fees and you can buy them just like you’d buy individual company shares, for a minimum of $500 per transaction.

Is the stock market right for you?

Investments are more eHarmony than Tinder – they’re for those looking for a longer term commitment – and like any relationship, you need to ride the wave over time in order to balance out the highs and lows. We’re talking about at least five years.

How to save for a house depositIf you’re keen to buy a house or apartment in the next few years and are willing to forsake smashed avocado on toast, you should focus on saving for a deposit.

The stock market is a tumultuous investment over the short-term, so you’re probably best putting your money in a high-interest savings account. But shop around for an account to stash your cash in. Interest rates are ridiculously low at the moment so, in order to stay on top of inflation (currently at 1.0 percent), you need to find something paying more just to stay in the game.

Don’t even think about investing in the stock market if you’ve got a stack of debts. It’s no bloody good hoping to make a 9 percent return on the stock market if you’re paying off a credit cards or loans that might be costing you upwards of 20 percent in interest!

Also, think about having Fuck-Off Fund that you can access in case of an unexpected emergency. Losing your job, needing major dental surgery, being kicked out of your flat, ending a relationship or any number of unexpected life curve balls can be potentially costly.

If the share market is right for you, what’s your next move?

  1. Decide how much money you are willing to invest
  2. Choose whether you’d like to buy into a fund/ETF or individual shares
  3. Open a brokerage account, there are plenty to choose from and dead easy to set up
  4. Research the company or fund you’re interested in investing in
  5. Buy

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7 Comments

  1. Dividends Down Under Dividends Down Under August 25, 2016

    We are big fans of investing. Even if it has to be at $500 at a time at this early stage in our lives. We’re big fans of choosing individuals shares 🙂

    Tristan

  2. Miss Money Box Miss Money Box August 25, 2016

    That’s great Tristan! There are pros and cons to both individual shares and funds. It’s great that you’re being so proactive about investing.

  3. Tyler Hunt Tyler Hunt August 25, 2016

    I wish I would have saw this post before I started investing my money, because this post has some great info! But I agree about that part that investing isn’t that difficult. All it takes is a little time and research, and in return you can be rewarded in a big way!

  4. Miss Money Box Miss Money Box August 26, 2016

    Thanks Tyler, as you might suspect, I totally agree.

  5. yvetteposh yvetteposh September 13, 2016

    This is great advice. Hopefully your friend can get herself into gear.

  6. Miss Money Box Miss Money Box September 14, 2016

    With a bit of help, I’m sure she’ll be just fine 🙂

  7. Gavin Bottrell Gavin Bottrell September 28, 2016

    This is a great article! It’s so important to plan for the future and be organised early. The little bit of effort put in at the start to find the best option to suit your goals really makes a world of difference in the end.

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