A few years ago, I started investing with USD 20,000.
Like everyone, I asked myself: “how much money do you need to start investing?”
At that time, I really wanted to get serious with investing, even though I did not have much experience investing on my own account.
I was more used to investment analysis and fundraising activities for large institutional real estate investors as part of my professional life.
This is why USD 20,000 felt like a sizable amount of money. At the same time, I felt more or less comfortable ‘experimenting’ with this amount.
I told myself that in the worst-case scenario, I would lose part of that money because I did not know what I was doing.
And if that would happen, I would just consider this loss as the cost of learning to invest.
And I hear you: you might think I was entirely nuts!
I was not.
It was a great decision.
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How much money do you need to start investing?
A lot of the women I meet think they do not have enough money saved up to start investing.
Many believe that although they have a good and steady job, investing is only for those who earn hundreds of thousands each year.
So let me clear this up right here and right now: although I started investing with USD 20,000, you certainly don’t need that kind of money to get started!
It is possible to get started with investing with as little as USD 1,000 or even less.
Actually, you SHOULD (and indeed, you MUST) start investing as soon as possible with whatever you have.
And actually, starting to invest early in life with little money has many advantages!
It means that you can learn how to invest very early and can build wealth over many decades.
Also, it is often less intimidating to start investing in small amounts than to start all at once with a big chunk of money.
This is the case for my sister Fanny. She has been disciplined in saving money for many years.
And now she would like to start investing, but she is afraid to invest her money all at once.
Also, people who only start investing once they have accumulated a significant amount of money are a favorite target for financial institutions.
The financial ‘sharks’ use their lack of knowledge and experience about investing to scare them into letting them manage their portfolio, which typically results in very high fees and low investment performance.
In what should you invest when you begin?
For a whole set of reasons, the best way to start (and to continue) investing is to invest in ETFs and index funds.
An ETF is a type of investment fund that invests in securities traded on the stock market.
The portfolio is constructed to match or track the components of a market index, such as the MSCI World Index.
The MSCI World Index is an index of 1,642 of the largest companies in 23 developed countries around the world, each weighted proportionally to their market value.
So instead of having a portfolio manager buying and selling shares or bonds on behalf of the fund, the portfolio is automatically invested to reflect the composition of the index it is tracking.
You can invest in ETFs using one of the three following alternatives:
Online robo advisor
Online trading platform
Let’s review these three options in more detail.
1) Invest with an online robo advisor
I am a big fan of online robo advisors (and if you happen to read my blog from time to time you might already have noticed that ;-)
There are many reasons why starting to invest with an online robo advisor is the easiest way to start investing.
Because the robo choose the ETFs for you and does all the work of investing.
(I wrote a whole article about that so go check it out: How to start investing with online robo advisory platforms)
And when it comes to how much you need to start investing, then robo advisors are great because of the two following reasons:
They require a rather low minimum starting amount (say, USD 1,000)
They allow you to invest each month automatically a small (or large!) amount of your choice, say USD 100, with no transaction costs.
The great thing with online robo advisors is that most of the time, everything is included in their low annual management fee.
This means that there are no additional costs for adding big or small amount of money to your investment account every month.
They are many robo advisors out there.
I compiled a list of the platforms available in Europe (click here to access it). Each has its own requirements regarding the minimum amount that you need to open an account.
If your income is in CHF, then you can begin with only CHF 1 (!) with 3a pillar robo advisor VIAC. (I have an account there and I just loooooove it!)
You will find a review of different online robo advisors in this article: Choose an Online Investment Platform and (Finally!) Start Investing.
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2) Start small via a savings plan
In Germany, you can open a savings plan without having to invest anything upfront.
Instead, you schedule regular contributions to your savings plan, which could be as little as EUR 25 per month.
With a savings plan, you need to choose the ETFs yourself, but then the savings plan does all the work of investing.
And when it comes to how much you need to start investing, then savings plans are fantastic because of the two following reasons:
You can get started with a tiny amount of money (or nothing at all).
You can contribute small (and large) amounts and only pay a transaction fee every time you add money (but there is no annual management fee)
You could set up a savings plan with Comdirect, for example.
Your money can be invested in the Exchange Traded Fund (ETF) of your choice while paying a transaction fee of 1.5% for each amount contributed.
Comdirect accepts clients from Europe including Switzerland.
If your income is not in EUR, then you have to consider currency conversion costs, which could drain your returns.
This is, unfortunately, my case as the majority of my income is in CHF.
If this is your case too, then you might want to select another investment option to invest in your local currency, such as an online robo advisor.
(PRO TIP: Or if you are a little more adventurous, you could also open an account with online bank Revolut which allows you to exchange money for free. You could then have automated monthly transfers from your salary account to your Revolut account, and a couple of days later have another automated transfer from Revolut into your Comdirect savings plan ;-)
3) Invest directly through an online trading platform
You could also invest directly in ETFs by opening an account with an online trading platform such as Interactive Brokers and DeGiro.
By investing this way, you need to select the ETFs yourself and then do all the work of investing yourself too.
But when it comes to how much you need to start investing, then online trading platforms are great because of the two following reasons:
You could do so with just EUR 1,000 or less (although a few platforms may require you to invest a higher minimum amount of up to EUR 10,000)
You do not pay an annual management fee, but you do pay a fee for each transaction
As you pay a fee every time you invest some more money, you should carefully review the fees charged by the online trading platform that you select.
You should also make sure not to place too small transactions, because online trading platforms usually have a minimum fee. This means that it would not make sense to invest USD 100 if the minimum transaction fee is USD 20.
As a rule of thumb, the transaction fee should represent 1% or less of the value of each transaction.
A few online trading platforms also charge other fees, such as safekeeping fees (a small percentage of the total amount invested) or inactivity fees (if you don’t place transactions often enough).
So What Should You Choose?
Direct online trading is how I invest most of my money these days.
Having said that, I am not convinced it is the best way to go if you are just starting to invest.
Because investing directly through an online trading platform is a more 'hands-on' way to invest.
You have more choices on how to invest your money, which also means that it can be a little overwhelming for beginners.
Also, the online trading platforms themselves are generally a lot less user-friendly than online robo advisors.
And more importantly, investing directly through an online trading platform such as Interactive Brokers requires a lot more self-discipline.
This is because you have to log in and place transactions regularly.
You also have to keep your cool when the stock market goes down, which is a lot more difficult than you might think!
Assuming you are disciplined and can keep your cool, and if you already have a sizeable amount saved up, say EUR 20,000 or more, then investing this way could make sense for you.
Because it would cost you even less than with an online robo advisor.
It is also well suited for people who have a sizable sum of money but no regular income.
Because if you are unable to invest additional amounts regularly (although you should REALLY try to do so), then you would not benefit from many of the advantages of online robo advisors or savings plans.
If you feel this could be something for you, then you should check my recent article on Stock Markets Basics.
This article includes the rationale for investing in the stock market, a couple of ETF suggestions, and a list of curated online trading platforms in Europe.
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Sure enough, I made a few silly investments when I started investing with my infamous USD 20,000.
A few of these investments went well, and a few went considerably less well…
As things now stand, I have not lost money with these early investments, even if I experienced temporary losses with stock market fluctuations.
Although I did come out on top, I did not make tons of money with these initial USD 20,000.
But that does not matter.
Because by taking the step of starting to invest, I have learned soooo much about how to invest the right way.
I also gained so much confidence about it.
Now I just love to invest.
And the very fact of starting to invest ‘cold turkey style’ somehow helped me grow increasingly passionate about it.
Now, I am not saying that if you start investing, you will want to start blogging about it as I do ;-)
But I am pretty sure that if you start investing, you will grow a taste for it.
Especially if you make the effort of learning the basics and start investing the right way from the beginning (unlike what I did!).
So, how much money do you need to start investing?
As you just read, there are three good ways you can start investing with EUR 1,000 or less.
And importantly, what matters is not how much you can invest right now. What matters is that you get started as early as possible, with the money you have.
Over time, you will be able to increase your contributions, and with the right setup, you will be able to do so in just a few clicks.