How Much Money do You Need to Create a Portfolio?

Fundamentals · Jun 10, 2019

A lot of people have a misconception about the amount of capital required to start investing and they think that only the rich people can be investors and traders. Actually you can create a new real investment portfolio with a relatively small sum of money. These days, you can start with just a few dollars, but there are some things you have to consider before you begin.

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In this article, we’ll explain what is the minimum required capital to start investing and how you can begin building your first financial portfolio with a modest amount of money.

What is the Minimum Amount of Money to Start Investing?

Technically speaking, you can start investing with purchasing just one share of any company and it can cost you something from a few cents to a few thousands of dollars. The problem is, the ordinary people don’t have direct access to the financial market and you would have to do everything through a broker firm, which usually has minimum capital requirements.

This ‘bar’ of initial capital requirements can tell you something about the firm. If it’s too low, much lower than other firms offer, it can be a bad sign. However, if capital requirements are too high, it might be a sign of a certain management inefficiency, but it also depends on various other factors.

Many banks can offer their own investment solutions to their clients and they usually have relatively moderate requirements of around $3000 - $5000 in order to start investing. Those are commercial banks, the investment banks might have much bigger capital requirements.

A good solution for a beginner might be to find a small, but old and trusted (it’s quite hard to check these days) firm and to start working with it. Such companies usually have their own platform and they can offer nice starting deals that require $300, $500 or even less.

Also, those companies are competitive, therefore they usually have relatively low fees. Working with small investment companies can indeed be challenging and they might have some issues with money withdrawals or something else, but it’s a good start overall. Later, you might move your capital to a bigger firm to play it safe in the long run.

Heather Long in her CNN article wrote that the short answer to this popular question is $5, but realistically speaking $500 is a better minimum amount to start investing, but she also emphasized that you should only start when you have built up your emergency savings.

Matthew Frankel at fool.com answered to this common question by mentioning that Charles Schwab typically requires a minimum investment of $1,000 to open a new account.

capital   trading   investing   income   portfolio   personal finance   money

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