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Jul 20

Why you don’t need a lot of money to start trading stocks and how you can make a little go a long way when starting out

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Investing some spare cash is a good idea for most people. It will often bring a better return than leaving it all in your bank savings account and can help you build wealth more effectively. There are many different markets for investors, but stock trading remains one of the most popular. Trading stocks is not only easy to understand but can also be done from the comfort of your own home. As long as you have an internet connection and a device to trade from (i.e., smartphone, tablet, laptop or PC), you can get started.

The two other things stock traders need is an online broker to trade with and some starting capital. Finding a safe online broker is very easy and can be done by using a site like the AskTraders website. This site contains masses of broker reviews to work from and answers questions like, is Plus500 any good?

Having money to invest to start with is obviously essential. Many people wrongly think you need lots of starting capital as a trader, but that is just not true. Many online brokers, for example, do not have a minimum amount you need to fund your account. It is perfectly possible to get going as a trader and make money without investing a lot to start with. Much of this relies on making your money stretch as far as you can. Begin with the tips below.


Use leverage sensibly

Trading stocks is one of the best ideas for making money online and comes with something known as leverage. This allows you to open much bigger trade positions even if you do not have the actual cash in your account to fund them. The online broker provides credit to traders to trade with the extra money they do not have. Many brokers will enable you to access leverage when opening trades, and you can set the amount with which you are comfortable.

It can be a great way to make your money stretch further and get greater exposure to the market, even with a small amount of starting capital. However, it is vital to remember that caution is essential, and you must use leverage in a sensible way.


Trade in fractional shares

New traders with small amounts of starting money can make it go further by investing in fractional shares. As the name implies, this way of trading is when you buy a fraction of one share for a fraction of what one share would cost. If you think that a single Amazon share would cost you north of $3,500 at the time of writing, you can see why this is such a good tip!

There are some superb brokerages and platforms about which make investing in fractional shares simple. As the cost you pay is a fraction of what one share would usually set you back, it is a superb way to access the market but with less money in your account.


Go for long term trades

In the early stages of your trading journey, it makes sense to pay attention to broker fees. These are the fee charged by your broker every time you make a transaction with them. These fees might seem low to begin with but can soon mount up if you trade frequently.

Trading like this can eat into your small amount of starting capital, and it might not go as far as you would like. A better idea, therefore, is to cut back on transaction fees by holding trades for longer. You pay less in fees because you make fewer trades, and it also helps you ride out the short-term fluctuations in the stock market.


Stock trading does not need masses of capital initially

The fact is you do not need lots of money to get started when it comes to trading stocks. Where you plan to be active on London Stock Exchanges Main Market or any of the other global stock markets, that is true. It is often better to not risk too much when you are new to trading and are picking up much-needed experience in the market. Whether you prefer to invest less, to begin with, or only have a small amount of cash spare to get started, the above tips will help you make it go a lot further.


Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.


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