Is $500 enough to get started when investing in shares?

Getting started with investing can seem a bit overwhelming, especially when you don’t even know where to begin. Not only that, but it can sometimes feel like you need to have loads of money to even think about starting—but is that true? 

Let’s say you have $500 to start with. If you’re investing in the ASX (Australian Securities Exchange), you generally need this as a minimum to begin with, so that’s why it has been chosen.

So, let’s have a look at what you do with $500 and whether or not it’s enough to get started with.

What can I do with $500 when investing?

When looking to invest $500, it can seem like it wouldn’t be enough when you have giant stock prices in big tech companies and the like. However, if you value diversification, then investing this set amount in a managed fund or ETF (exchange traded fund) might be the kind of option that would be preferable.

Alternatively, you may want to invest in single stocks, however, it’s important to make sure that you do sufficient research before committing any cash. If you’re investing in the ASX, you’ll have to keep in mind the minimum investable amount.  So. with only $500, you’re generally only going to get one company's shares!

If you’re investing in the US stock market, you usually don’t have the large minimum in trades like with the ASX as well as the ability to buy fractional shares.

Should I wait to invest a larger amount?

Just like with savings, the major benefits of compound interest come from regular deposits and time. So, if anything, a dollar cost averaging strategy where you contribute a regular portion of your income can be helpful.

What’s more, the $500 minimum for ASX shares is generally for your first time buying the share, with all subsequent minimum investments needing to only be the price of the share plus brokerage fees.

However, if you’re looking to invest in a couple of shares (on the ASX) at once, you may want to hold off until you have saved up enough to get all the shares you want at the same time. However, also remember that time in the market is also important. 

How can a small amount add up over time?

Now $500 doesn’t seem like a lot when you get started with investing, but the most important thing is that you get started early. The number one reason for this is compound interest.

So, what is compound interest? Essentially, this is when the money you earn from shares (dividends) or a savings account (interest) increases the amount you earn the next time. Over time, this compounds from tiny gains to big leaps.

Keep in mind that, even if you’re regularly contributing only a small amount every pay cycle, this can still help to compound the growth. For this reason, it’s important to make sure you’re budgeting properly.

Where can I invest $500?

When looking to invest, be sure to choose the right platform for you. Part of this is making sure that there are low or no account fees and making sure that your brokerage fees aren’t too bad. Some platforms even allow for no brokerage fees on certain markets like US shares. 

Keep these factors in mind when looking for a brokerage platform, as comparison can help you to find the account that works for you. At Mozo, we have dozens of share trading platforms you can compare so that you get the share trading platform that works best for you.