You don’t need a lot of money to invest in stocks, an asset that offers the greatest potential for growth over the long haul.
For novice investors working with a tight budget, targeting stocks that combine stability, growth potential and affordability is key. And with fractional share trading, you can now dip your toes into the market without breaking the bank.
Here are the best stocks for beginners with little money and tips on making the most of your limited capital as you start investing.
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Instead of trying to beat the market, index funds passively track the performance of the underlying index by holding the same stocks in the same proportions.
And because these funds are passively managed, their fees are significantly lower than actively managed funds. The average expense ratio for index equity mutual funds was 0.05 percent in 2023, compared to 0.65 percent for actively managed mutual funds.(1)
Market data from Google. Returns accurate as of market close on October 4, 2024.
Index funds provide several benefits:
Instant diversification. Index funds invest in a broad range of stocks. This diversification helps spread risk across multiple companies and industries, reducing the impact of individual stock fluctuations on your overall portfolio.
Cost-effectiveness. Index funds have low expense ratios, which are the fees charged by the fund manager for managing the portfolio. Since index funds passively track the performance of an index, they require minimal active management, resulting in lower expenses than actively managed funds.
Easy to understand and suitable for long-term investing. Beginner investors can choose an index fund that aligns with their investment goals and risk tolerance, and then hold onto it for the long haul. This passive approach to investing eliminates the need for frequent trading and market timing, which can be daunting for new investors.
Exposure to the overall stock market’s growth potential. Over the long term, the stock market has historically delivered positive returns, around 7% after inflation, making index funds a reliable option for building wealth over time — even with small initial investments.
Why index funds are good for beginners with little money They’re a good option due to their diversification, affordability, simplicity and long-term growth potential.
2. Blue chip stocks
Blue chip stocks are renowned for their stability, reliability and long-standing performance in the stock market, making them a compelling option for beginner investors with limited funds.
These stocks represent shares of well-established, financially sound companies with a history of strong performance and leadership in their respective industries.
Blue chip companies typically have large market capitalizations, established brand names and a track record of generating consistent profits and dividends over time.
Market data from Google. Returns accurate as of market close on October 4, 2024.
For beginners with little money, blue chip stocks offer several advantages:
Stability and safety in an otherwise volatile market. Due to their established reputations and solid financial positions, blue chip companies are less susceptible to market fluctuations and economic downturns than smaller or riskier companies.
Dividends. Blue chip stocks often pay dividends to shareholders, providing a reliable source of income for investors. Dividend payments from blue chip companies are typically stable and predictable, making them attractive for investors seeking to generate passive income from their investments.
Relatively easy to research and analyze. Many blue chip companies are household names with widely available financial information and analysis, making it easier for investors, specifically those who may not have the time or expertise to conduct in-depth stock analysis, to make informed investment decisions.
Potential for long-term growth and capital appreciation. While they may not deliver the same level of explosive growth as smaller, high-growth companies, blue chip stocks have historically provided steady returns over the long term. This makes them a reliable option for building wealth.
Why blue chip stocks are good for beginners with little money They’re great options due to their stability, dividend income, ease of research and long-term growth potential.
Dividend stocks represent shares of companies that regularly distribute a portion of their profits to shareholders in the form of dividends.
These dividends provide investors with a steady stream of passive income, making dividend stocks particularly appealing for beginner investors looking to grow their wealth over time.
Market data from Google. Returns accurate as of market close on October 4, 2024.
For beginners with little money, dividend stocks offer these benefits:
Supplemental source of income. Dividends provide passive income that can help cover expenses, be reinvested to purchase additional shares or be saved for future financial goals.
More stability and less volatility than non-dividend-paying stocks. Companies that pay dividends typically have established business models, strong cash flows and a track record of profitability, making them less susceptible to economic shocks and industry disruptions.
Acceleration of wealth accumulation through compounding. By reinvesting dividends to purchase additional shares of stock, investors can take advantage of exponential growth, allowing their investment to grow faster than if dividends were taken as cash.
Potential for both income and capital appreciation. While dividend payments provide a reliable source of income, the underlying stock price can also appreciate over time, further increasing the value of the investment.
Why dividend stocks are good for beginners with little money They’re a good option due to their income-generating potential, stability and long-term growth prospects.
Fractional shares make it easier for everyone to invest in the stock market, regardless of how much money they have, by allowing the purchase of partial shares instead of the whole ones. This lets you buy into expensive stocks with specific dollar amounts, rather than needing to afford entire shares, making it particularly beneficial for beginners looking to diversify their portfolios without a large initial investment.
Additionally, fractional shares offer flexibility and precision, letting you build and tailor your portfolio to match your investment goals and risk tolerance and allocate your funds exactly how you desire. Examples of brokers that offer fractional share trading include SoFi Invest®, Robinhood and Charles Schwab.
Why fractional shares are good for beginners with little money Fractional shares are a game-changer for beginner investors with limited funds, allowing them to participate in the stock market and build wealth over the long term, even with small initial investments.
Choose an online broker. Consider usability, fees, investment tools and customer support when selecting a broker.
Sign up and fund an account. Provide your personal information during the signup and then link a bank account or transfer assets to fund your account.
Research and choose your stocks. Do your due diligence on potential stocks, considering your time horizon, risk tolerance and investing goals. Search for the stock by name or ticker symbol.
Place your order. Buy the stock.
7 tips to make the most of your limited capital
Start with what you can afford. Begin with a realistic investment amount that won’t strain your finances.
Focus on low-cost options. Look for investments with minimal fees, such as index funds or commission-free stocks and ETFs.
Prioritize diversification. Spread your investments across different asset classes, sectors and geographic regions to reduce risk.
Reinvest dividends. Instead of taking dividends as cash, reinvest them to purchase more shares and accelerate growth. Many brokers offer automatic dividend reinvestment.
Take advantage of fractional shares. Invest in high-priced stocks, or stocks of any price for that matter, by purchasing fractional shares, allowing you to diversify your portfolio with smaller amounts.
Stick to a long-term strategy. Avoid frequent trading and stay committed to your investment plan to benefit from compounding over time.
Educate yourself. Continuously learn about investing principles, market trends and risk management to make informed decisions and maximize returns.
Bottom line
Fractional shares, index funds, blue chip stocks and dividend-paying companies are top choices for beginner investors with limited funds. Accessibility, diversification, stability and growth potential make these options ideal for building a strong investment portfolio, setting the stage for long-term financial success.
Whichever you choose, the best brokerage accounts will give you commission-free access to all these beginner-friendly investment options.
Frequently asked questions
What are the best stocks to buy for beginners with little money?
For beginners with limited funds, consider blue-chip stocks like Coca-Cola (KO), dividend-paying companies like AT&T (T) and index funds like Vanguard Total Stock Market ETF (VTI) for a diversified and stable portfolio with growth potential. But do your own due diligence to decide if these stocks are right for you and your investment strategy.
Can I invest as little as $100?
With fractional share trading, you can invest with as little as $1. Compare brokers that offer fractional share trading to find the right broker for you.
Matt Miczulski is an investments editor at Finder. With over 450 bylines, Matt dissects and reviews brokers and investing platforms to expose perks and pain points, explores investment products and concepts and covers market news, making investing more accessible and helping readers to make informed financial decisions.
Before joining Finder in 2021, Matt covered everything from finance news and banking to debt and travel for FinanceBuzz. His expertise and analysis on investing and other financial topics has been featured on CBS, MSN, Best Company and Consolidated Credit, among others. Matt holds a BA in history from William Paterson University. See full bio
Matt's expertise
Matt has written 207 Finder guides across topics including:
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