Don’t get me wrong, this isn’t a shot at fund managers and stock brokers, you’d probably do the same if you were running their businesses, it just means that we’ll need to look a little harder to find a way into investing.
The guidance below can apply for any size portfolio but as you get into the tens of thousands there may be better ways to allocate your funds across sectors and products to optimise return and minimise fees. Until then, let’s stick with this example.
The reason it’s so hard to invest at low amounts is, frankly, because many fund managers and stockbrokers don’t want your business. Generally, the investment world makes their money from either ongoing fees on large sums invested or commission on large trades so they price those with smaller balances out of the market.
making them out of reach for smaller investors. so trying to buy into the stock market with less than that wouldn’t work anyway.
essentially cashing you out of your shares and solidifying the loss.
Like I said, fund managers have minimum investment amounts to discourage small balances.
You can do this in an everyday bank account, but in the interest of being a return-hungry investor, I’m going to suggest you at least consider getting a little investment return on your savings while you build them up. Two main options for this are micro investing and using a bonus saver account.
Micro investing can be a great way of accumulating ‘forgotten’ savings with apps like Acorns and FirstStep who will round up your spending and invest it for you. Micro-investing is a great idea and for some people who couldn’t save in any other way it may, over the long term, build a little investment nest egg that would have otherwise been spent.
A bonus saving account is an account offered by a bank or credit union that encourages saving by paying a bonus interest rate if you contribute a certain amount a month (usually around $40) and don’t make any withdrawals.