Ramsey Brock: How Much Money Do You Need to Start Investing? (It’s Less Than You Think…)

For many households, the idea of investing seems like a far-off option that will only be possible when they have a lot more money. When trying to figure out effective budgeting or how to manage rising costs, investing may seem like something that is only reserved for those in a much higher income bracket.

However, you don’t actually need as much money to start investing as you think. I recently had the opportunity to interview Ramsey Brock, president of Brock Asset Management, and as his insights reveal, just about anyone can start investing today.

How Much Do You Actually Need to Start Investing?

“To put it simply, if you have $1, you can start investing,” Brock says. “It has never been easier to begin investing, as investors now have the ability to purchase fractional shares, rather than needing to purchase a full share. In addition, many brokers offer accounts with no minimum investment requirements and minimal or no fees for accounts below a certain investment threshold. Essentially, you can use whatever you feel comfortable investing to start making monthly contributions.”

Digital brokers and micro-investing apps have helped lead the charge in making investing more easily accessible to all, including those who have relatively little to invest. This has also led to other brokers offering more investment options that cater to a broader range of individuals.

It is worth noting, however, that brokerage programs (particularly those that use a robo-advisor or financial professional to build a portfolio) do still have minimum deposit requirements. These amounts vary based on the type of account and level of management.

What to Consider Before You Invest

While the possibility to begin investing is certainly exciting, Brock recommends that new investors should still do their due diligence, even if they are only investing a small amount.

“Before you start investing, you should ensure that you have a sufficient emergency fund that can cover at least three months of expenses,” he advises. “In addition, it’s also advisable to address any high-interest debt before using money for investments. Paying off high interest debt like credit card debt first will ensure that accumulating interest from your debts won’t offset any investment growth. Finally, you should develop some basic financial goals and a timeline to guide your investment strategy.”

For example, as of October 9, 2024, the average variable credit card interest rate stood at 20.55%, roughly double the S&P 500’s average annualized return of 10.26%. In this case, paying off the credit card debt first would have a greater financial impact than investing a similar amount.

Once you have established a situation where investing makes financial sense, the next question becomes where to place those funds. Brock recommends, “Start with retirement accounts. Many people have access to an employer-sponsored 401(k), in which the employer will match their contributions up to a certain level. This is an excellent way to increase the power of your investments. Outside of employer-sponsored accounts, IRA and Roth IRA funds with target retirement dates offer a straightforward solution to start investing for retirement. These passive funds automatically adjust from being more aggressive to more conservative as you get closer to your planned retirement date, allowing for a more hands-off approach to asset allocation.”

Of course, new investors can also invest in individual stocks, bonds, mutual funds, and ETFs for financial goals other than retirement. Brock recommends that investors understand the risk profile, management fees and potential returns of these options, even when investing a small amount.

The Value of Starting Early

Regardless of how much you are able to invest, Brock lauds the value of starting to invest as early as possible. “Even if you are only able to invest a small amount each month, starting early gives your money more time to grow,” he explains.

“As it generates returns, you will then be able to accrue additional interest from those initial returns. Compounding interest — particularly when you let your money sit in an account for years — can cause those initial contributions to grow surprisingly large. Time is your most valuable asset in saving for retirement and other financial goals, so be sure to take advantage of it.”

Brock’s advice echoes a growing number of sources that recommend beginning to invest for retirement and other financial goals in your 20s to take advantage of compounding interest. Investing a smaller amount now also means that you won’t need to invest as large a percentage of your income in the future to reach your financial goals.

While you should increase how much you invest each month as your budget allows, starting with small and consistent contributions will have a lasting impact on your finances. With automatic withdrawals, investing can become second nature.

Improving Your Financial Future

As Brock’s insights reveal, even if you aren’t able to invest a significant amount of money right now, making those small initial investments can have a noteworthy payoff in the years to come. Making investing a habit now and increasing how much you contribute as you are able will put you on course for greater financial stability and enable you to achieve your long-term money goals.