Investing

How To Invest $50 In The Stock Market: A Beginners Guide To Investing Like A Pro

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Most people wait to start investing until they have a significant amount of money saved up. This made sense a few years ago for two reasons:

  1. Mutual fund companies had high account minimums — some were as high as $3,000.
  2. Brokerage firms also charged high fees, which ate up the returns of small accounts.

But now there are high-quality, low-fee investment providers that let you get started for $50 (or even less, in some cases).

If you’re wondering how to invest $50 in the stock market (or any small amount, for that matter), this article can help. 

Article Summary

  1. The easiest way to get very wealthy is by making investing a habit.
  2. You don’t have to wait until you’re rich to start investing. Investing is how you get rich!
  3. Pay off your high-interest debt (such as credit card debt) before beginning to invest. It’s a guaranteed rate of return that no investment can match. 
  4. The secret to getting rich through investing is time, because it’s time that allows your investments to compound.
  5. The odds of your investments going down at some point are 100%. Knowing this empowers you to stay invested through good times and bad.
  6. Investing isn’t about picking stocks. In fact, most people who pick stocks underperform compared to those who leverage a simpler and less stressful approach known as index fund investing. 
  7. The best investors focus on what they can control, like how much they invest each month and having a strategy that allows them to continue investing through good times and bad. 
  8. Tax-advantaged accounts, like 401(k)s and IRAs, allow you to pay less in taxes over time (and therefore, they allow your investments to grow more).
  9. If your employer offers a 401(k) match, investing enough to get that full match is the best place to start.
  10. If you don’t have access to an employer match, or are looking to contribute beyond that amount, the next best account is a Roth IRA.
  11. The vital next step after making the first contribution to your retirement account is setting up an automatic deposit — a practice known as dollar cost averaging. 
  12. SoFi Invest is our #1 choice for those looking to invest a small balance.

How to Invest $50 in the Stock Market

Before You Start Investing

Before you start investing in the stock market, you want to make sure it makes financial sense.

The #1 reason why you shouldn’t start investing is high-interest debt. If you still have high-interest debt (like credit card balances), it’s in your best interest to hold off.

Why?

The stock market has returned an average of about 7% per year after inflation. 

So, if you have debt at a higher interest rate than 7%, getting out of debt as fast as possible is your best investment. It’s also a guaranteed rate of return — something the stock market can’t provide.

Next is understanding that investing in the stock market is a long-term commitment. Warren Buffett (one of the greatest investors of all time) famously said, “our favorite holding period is forever.”

In other words, go in with the mindset that you’re going to hold your investments long-term (or at least five years).

If you’re going to need your money in a month or even a year, the stock market isn’t the right place to put it.

Related reading: What buying Tesla shares for $26 taught me about investing.

Taxable Accounts vs. Retirement Accounts

There are two primary types of investment accounts.

  1. Taxable Accounts
  2. Retirement Accounts

In a taxable account, any income earned is (as the name suggests) taxable. That includes dividends and gains if you were to sell. Examples of taxable accounts include standard brokerage accounts, like the ones you’d get by signing up with Robinhood.

With retirement accounts, such as IRAs and 401(k)s, taxes are either deferred or paid upfront.

The difference between these account types is huge!

Let’s say you invested $50 per month for 40 years (between the ages of 25 and 65). If you placed those funds in a taxable account, you might end up with a figure around $50,000. If you placed them in a traditional retirement account, that figure might be closer to $75,000. 

These figures are completely hypothetical and used here for teaching purposes only. Your actual returns would vary depending on many factors, including your investment choices and the overall economic environment. However, these figures (as illustrated in the chart below) show the impact of fees and taxes on the value of your portfolio over time. 

How To Invest $50 In The Stock Market

Taxes eat away at your gains, so it’s important that you pick the right investment account. If your employer has a 401(k) and offers an employer match, this is a great place to start. You won’t come close to matching the returns your employer’s 401(k) match will provide. 

If you don’t have access to a 401(k) with an employer match, I’d recommend a Roth IRA. A Roth IRA allows you to contribute after-tax money today, then withdraw that money tax-free starting at the age of 59 1/2.

Here’s a guide that explains more about the differences between traditional and Roth IRAs.

Why You Don’t Want to Pick Stocks

You might be thinking that you want to take your $50 and invest it in a company like Amazon, Facebook or Tesla. But if maximizing your returns is your goal (which it should be), that may not be in your best interest.

Few investors are able to pick individual stocks and beat the market. They might get lucky once or twice, but study after study has shown that few succeed in the long run.

To quote Warren Buffet again:

“Just pick a broad index like the S&P 500. Don’t put your money in all at once; do it over a period of time. I recommend John Bogle’s books — any investor in funds should read them. They have all you need to know….if you invested in a very low cost index fund — where you don’t put the money in at one time, but average in over 10 years — you’ll do better than 90% of people who start investing at the same time.”

What Is an Index Fund and Why Should You Invest in One

An index fund is a mutual fund that holds a collection of stocks. For example, an S&P 500 index fund holds stock in all the companies that make up the S&P 500 (which includes the 500 largest companies in the U.S.).

There are a number of advantages to investing in index funds, especially for those wondering how to invest $50 in the stock market:

  • Low fees: instead of paying a commission every time you invest, index funds charge one very low rate.
  • Tax efficient: because they don’t trade a lot of stocks, index funds incur minimal taxes.
  • Low maintenance: you get a totally hands-off investment that beats 80% of investors.

Further reading: The best investing books for young adults.

Where To Invest as Little as $50

The one downside to getting started with as little as $50 is that you’re limited to certain investment providers.

Many investment firms still have minimum deposits that start at $1,000.

Fortunately, there are a few good options I’d recommend to someone looking to invest a small amount.

Option # 1: SoFi Robo-Advisor Investing

SoFI has a $0 account minimum and 0% account management fee, two factors that make it an ideal place to start investing with $50. They also have the option to invest in both a traditional IRA and a Roth IRA.

What’s really unique about SoFi is that all clients, regardless of their account balance, get unlimited access to SoFi’s team of financial advisers at no charge. These advisers are non-commissioned and held to a fiduciary standard (and they hold the CFP® certification). 

After you sign up, SoFi asks you a few questions to help determine your ideal portfolio based on your risk tolerance and goals. After you finish the questionnaire, SoFi recommends one of their 10 done-for-you portfolios.

Plus, your portfolio will automatically rebalance whenever it moves 5% from your target allocations. So if your recommend target portfolio is 90% stocks/10% bonds, your portfolio will rebalance back to 90% stocks when the ratios are 85%/15%.

SoFi also has a great app, making it easy to set up automatic transfers.

Visit SoFi.

Option #2: Betterment

Betterment is strictly a robo-advisor.

One of the reasons why I recommend Betterment is because getting started is incredibly simple. Instead of making you pick from among hundreds of mutual funds, Betterment starts you off with a risk tolerance questionnaire. Then, they give you options based on your risk profile.

Their portfolios are made up of index funds, so you’re getting quality investments.

Just as important, their fees start at only 0.25%, and they have no minimum investment amount. That means you can get started for as little as $1.

Learn more about the company in my comparison of Betterment vs. Vanguard.

Option #3: M1 Finance

An alternative to Betterment is M1 Finance.

M1 Finance allows for a bit more customization of your portfolio. For example, if you wanted to invest 90% of your portfolio in index funds and 10% in individual stocks, the platform allows you to do so. (By the way, that 90/10 ratio is a decent compromise for those wanting to pick at least a few individual stocks on their own.) 

You can read more in my detailed M1 Finance Review.

Related reading: Seven tips for being a disciplined investor in every market.

What To Do After You Invest

Once you’ve made your first investment, you may be wondering what to do next.

First, you want to set up an automatic deposit into your investment account.

Ideally, set up a recurring transfer from your checking account to your investment account for the day after your paycheck hits. This will help you make sure you actually move the money over.

Next, challenge yourself to increase the amount you’re investing.

If you increase the amount you invest by $10 each month, you’ll be up to $170 per month after just a year.

After that, it’s a matter of being patient.

Investing is a long-term game. Those who win are those who are patient. This isn’t gambling, and you’re not going to find the next Google or Amazon — your goal is steady, consistent gains that compound over time. That may sound boring, but it’s the the best way to get rich

You may want to check in every month or so to see how your investments are doing. That’s fine! Just don’t get too concerned if your portfolio value drops. Down markets are inevitable. Be patient. The last thing you want to do is sell when your investments have bottomed out.

And remember, that dip is just one brief moment in time. Remember the financial crash of 2008, when investors lost billions upon billions of dollars seemingly overnight? Well, here’s how that dip looks a little over 10 years later, on a chart showing the ups and downs of the S&P 500: 

S&P 500 Market Index

The worst crash in market history looks like little more than a blip on the radar. 

So stick with it and have faith, even when things are looking ugly. That trend line is sure to take a sharp turn down at some point sooner or later, and that’s just fine — you’re in this for the long haul. 

R.J. Weiss
R.J. Weiss is the founder and editor of The Ways To Wealth, a Certified Financial Planner™, husband and father of three. He's spent the last 10+ years writing about personal finance and has been featured in Forbes, Bloomberg, MSN Money, and other publications.

2 Comments

  1. Bogle’s best invention ever was the three-fund portfolio. It couldn’t get more simple than that. It performs very well also.

    1. Couldn’t agree more. Has stood the test of time, and the improvements we have today are very marginal.

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