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I've known for years that I need to do some investing of some kind. But I've never been in a position to be able to do it on the level that I'd like to. In fact, right now I probably couldn't even spare more than a few hundred dollars. But at the same time, with the stock market in a total free fall, I feel like some time this year will be an opportune time to invest that might not come around again for quite some time. I feel like it'd actually be stupid not to take advantage of this situation.

I know the more you put in, the more you get back, because that's how percentages work. But I want to at least do something.

I've read that even the index funds with a low cost of entry still require a $1,000 minimum? Is there no way to get started in the stock market this year, even with only a few hundred dollars?

User51610
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    It's great to get started in investing. I don't want to dissuade you, but I'll point out that many financial advisors would suggest you have at least 3-6 months of expenses saved up before you begin to invest. With the current uncertain situation, I would suggest closer to a year's worth. Something in what you wrote made me share this info with you. Best of luck! – RWP - Down by the Bay Mar 23 '20 at 16:22
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    Yes, before 2008, I read the suggestion was 3 months. But after going through more than a year of joblessness, my goal was always 6 months minimum, 1 year preferable. – User51610 Mar 23 '20 at 16:32
  • Worth noting: Just because stocks have dropped considerably lately does not necessarily mean they were cheap. The dropped after a huge run-up over several years. Don't just the "expensiveness" of a stock based on historical prices. Look at the fundamentals like P/E ratio. – JohnFx Mar 23 '20 at 23:59
  • Surprised no one suggested Stash app. While teaching my nephew how to invest, I was able to buy fractional shares of Tesla last year, and still ended up more than doubling my $500 investment. – Allen J May 21 '20 at 06:30

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Regarding this part of the question:

I've read that even the index funds with a low cost of entry still require a $1,000 minimum? Is there no way to get started in the stock market this year, even with only a few hundred dollars?

This is not true. There are many ETFs (Exchange-Traded-Funds) that you can buy shares in that cost < $1000/share. There may be mutual funds that require a minimum investment, but by no means are you limited to mutual funds when making an investment.

An example of an index fund you may want to look at would be VTI, which seeks to track the CRSP US Total Market Index. Essentially, it's an index fund that seeks to track the overall performance of the U.S. market, and it's trading at about ~$115.

Regarding this part of your question, however:

In fact, right now I probably couldn't even spare more than a few hundred dollars. But at the same time, with the stock market in a total free fall, I feel like some time this year will be an opportune time to invest that might not come around again for quite some time.

I would be careful with the "FOMO" of wanting to invest just because everything looks cheap right now, if like you say, you do not have money "to spare". There is no "Holy Grail" moment, and there will always be buying opportunities.

Investing should be looked at/carried out in a long-term manner, and if you need money quickly and do not have money to spare to invest, I would approach the situation with caution. As you can see, the market can be volatile, and if you have expectations of investing and pulling out your money quickly to fund some obligation or the other, you may want to take a step back and evaluate the situation.

Note: None of this should be taken as financial advice in any manner, and you should consult a licensed financial advisor before making any investment decisions.

  • No, this would not be a short term thing. I know there are investments on all terms (short, medium, long). This would be looking to start out with the long term. I'm not really the short term risk taking type. – User51610 Mar 23 '20 at 16:29
  • Okay, I just wanted to put that out there since it seems you're new to investing. So regarding long-term investments, yes there are many ways you can begin investing with a couple/few hundred dollars. I would research ETFs related to the indices you have looked into, and there are also brokers that allow you to buy fractional shares if that's of interest to you. –  Mar 23 '20 at 16:32
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There are many mutual and index funds you can invest in for very small minimums (down to single digit dollars at some brokers).

There are also free/hyper discount brokers that allow you to buy ETFs and even individual stocks for no commission, where your only barrier of entry is the cost of a single share of the ETF or stock.

You can definitely get started with a few hundred dollars :)

Philip
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  • Some brokers even offer fractional stock purchases, so you could buy Apple, Amazon, etc. with less money than a single share price. – Nosjack Mar 23 '20 at 18:51
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Consider an at-the-money Dec Call Option on IWM and that's about $12 * 100-share-contract for a total cost of about $1200. Then IWM is currently about $98 a share so the call option is a position that speculates that IWM will be higher than $98 + $12 per-share in December. The beginning position size is $98 * 100 or $9800 ! In other words a $1200 option premium holds a $9800 stock position and holds it until December.

But find a stock that has a share price of $24 instead of $98 and the option premium could be something like $3 a share or $300 total.

Or consider a June Micro-Mini-Russell-2000 futures contract and the margin deposit is about $780. The futures contract is priced slightly off the spot price but there is no big option premium added to the position to beat. The $780 margin deposit holds a position about $4900 in size but a little extra deposit is needed for fluctuation.

Either the options or the futures can take buy-side or sell-side positions.

S Spring
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    Options are not a good idea for someone completely new to investing - this answers the question about what can be done with < $1k, but not in a way geared to someone at the OP's level of understanding. – Grade 'Eh' Bacon Mar 23 '20 at 17:20
  • The OP is new to investing. Options are tough enough when you understand them. Suggesting them for a novice is a terrible idea. Suggesting futures is even worse. – Bob Baerker Mar 23 '20 at 18:54
  • Long-term call options are not that difficult but many beginners take an options-council course to qualify themselves. The small amount of funds required is the draw to many beginners. How is it known that this beginner couldn't possibly match-up to the suggestion of long-term call options ? – S Spring Mar 23 '20 at 19:07