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How to Invest in the Stock Market on a Budget

This article is about how to invest in the stock market as a complete beginner and on a budget if you need to! It will review the basic concepts associated with how to invest, things you can invest in, and what to look out for when investing.

As a reminder, this is for educational purposes only. It is not investing advice. Capital is at risk.

How to Invest in the Stock Market

In this article. I’m going to show you how to create a simple investment strategy that aligns with your unique timeline and goals.

This information is GLOBALLY relevant so it doesn’t matter where in the world you’re buying or what brokerage you’re using. It’s what you can buy and the tax-advantaged accounts that change from country to country. 

Remember: the more complex an investing strategy is, the less likely it’ll be profitable.

In this article, we’re going to discuss:

  • How to set up a brokerage account
  • How much money you should invest each month
  • Whether you should invest vs pay down debt 
  • How to invest $1000 in 100 days

Join my ‘How to Invest’ free workshop! I’m going to teach you how to invest $1000 in 100 days in a live workshop held on Crowdcast. Come meet me IRL. 

1. Join my FREE ‘How to Invest’ Workshop

If you’re interested in a more personal touch when it comes to financial education and learning how to invest, sign-up for my FREE investing workshop!

I’ll be talking about, how to open a brokerage that’s right for you, how to pay as little tax as possible on your investments, what I buy in my investment accounts, and so much more!

When it comes to complex financial information, sometimes it’s just easier to have a human being in real-time explain these complicated ideas!

There’s no shame in that at all. Click here to join the workshop!

2. Open a Brokerage Account

In order to invest in the stock market, you’ll need to open a brokerage account. 

broker is an individual or firm (i.e. brokerage) that charges a fee or commission for executing buy and sell orders submitted by an investor (this is you). More on Investopedia.

If this is confusing to you, let’s use a metaphor!

At a basic level, a brokerage is like a house and your stocks and shares are the things that you buy to fill the house up.

If you just buy the house and don’t fill it up with anything, it defeats the purpose of the house in the first place. 

For example, Fidelity can be the brokerage (i.e. the house) and you can buy index funds and some individual company stocks (furniture) to fill up the brokerage. 

how to invest in the stock market on Fidelity

Before you pour any of your hard-earned money into a specific brokerage, you need to consider the following: 

  • How much is the account maintenance fee?
  • How much is it to trade? 
  • How quickly can I trade? 
  • What types of funds or stocks can I buy on this platform?
  • If there is ‘zero commission’ trading, how does this brokerage make money?

In order to keep the lights on, brokerages will charge monthly percentage fees for their services.

This is a very normal occurrence, BUT these fees can eat into your profits very quickly.

These financial institutions are for-profit businesses so there’s no way to get around this. 

WARNING: If you’re not paying a standard fee to use your brokerage or its services, understand that YOU are the product, and your data is probably being sold to cover costs.

Common types of fees:

  • App Fees (% of portfolio)
  • Trading Fees ($0-$15 USD)
  • Regulatory fees (%)
  • Fund/ETF Management (% of cash in that fund)
    • Also called an ‘expense ratio’

If you’re interested in investing apps specifically (as most young people are lol), read my review of popular investment apps in the industry.

I also go into specifics about which brokerages are best, why, and what I specifically buy in my Money Master Class. Click on the banner below for more information. 

learn how to budget, smash debt, invest & more in 6 weeks!

3. Set Up A Investing Budget

Putting a budget together is the first step to creating a successful portfolio because it helps you understand where your money is coming from and what you’re doing with it.

Instead of wildly investing $1000 a month and then going into credit card debt to cover everyday costs, first set up a tangible monthly budget. 

If you’re not a ‘budget person,’ I would recommend setting up a Zero-Based Budget at the very least. In a Zero-Sum Budget, every dollar has a job.

At the end of the month, your budget should be equal to ZERO to prevent waste and maximize your income.

So basically, if you have $3000 every month to spend, then you can break up your budget into 3 general pieces

  • $1000 goes to housing, bills & utilities 
  • $1000 goes to fun, living costs, eating out, etc
  • $1000 goes into savings and investing  

Creating and implementing a Zero-Sum Budget is easier than it sounds. It requires a little basic math, but you got this!!

Notice that I created a separate savings and investment part of the budget because it is important to pay yourself before you pay others.

Thanks to a Zero-based budget, you know that you have about $1000 to invest or save each month. 

Read my article on Zero-Based Budgeting. 

budgeting template how to budget budget tool budgeting etsy

New to Budgeting?

If you’re just starting out on your journey, check out my Beginner’s Budget Dashboard. It’s a Google Sheets template that tracks your expenses, income, investments, savings, and more!

There’s even a free video tutorial to help you get started.

Click here to find out more info.

Debt Repayment vs Investing

If you’re currently in credit card debt, investing should potentially take a back seat until that’s cleared.

The average credit card APR (or interest) in America fluctuates around 16% according to creditcards.com and those with poor credit have been known to pay upwards of 24% interest!

If you’re in credit card debt, the interest that you pay on that debt will likely far exceed any immediate capital gains (or earnings from your investments) that you might make in the short run. 

For example, if you have $10,000 in an Index Fund with an annual return of 7% and you also have $10,000 in credit card debt with an annual APR of 16%. By the end of the year, 

  • You would have earned  $700 from your Index Fund investment 
  • You would owe an additional $1,600 to your credit card company

That means you essentially lost $900.

Student loan debt and mortgages are a different story, however. Many financial educators recommend that if your debt is higher than 5% or 6%, focus on the debt first.

However, investing is a very personal journey and you need to do what’s best for you long-term. 

In my case, I currently have student loan debt with the federal government BUT I’m still investing while paying down that debt.

The interest rate is 5% and I’m more interested in taking advantage of compound interest at the moment. You can always get back the money, but you can never get back time. 

Learn more about effective ways to smash debt at hyper-speed in my Money Master Class!

You’ll even get a free debt-smashing calculator with your purchase so you can compare strategies for paying down debt more quickly.  

Smash Debt Faster

If you’re just starting out on your debt repayment journey, check out my Debt Repayment Calculator.

It’s a Google Sheets template that will calculate the most efficient way to pay off your various debts based on size, interest, and how much you can contribute per month! 

Click here to find out more info.

debt repayment calculator

How to Buy Stocks & Funds

Don’t forget, you also need to buy stocks or funds with the money that you’re putting into your brokerage account! You’ll want to find the ‘Trade’ button in your brokerage platform and then buy something. Types of things you can buy in your brokerage include:

  • Stocks
  • Bonds
  • Funds
  • Crypto
  • CDs
  • ETFS
  • etc

These options are found under ‘Transaction Type’ for Fidelity (pictured below) and most brokerages. Then you need to pick the Symbol of the type of fund/stock you want, tell the system if you want to buy or sell, and then specify the number of shares/the dollar amount. 

cash available to trade on the stock market on Fidelity

Even though fractional share trading sounds like fun (i.e. you invest small amounts at a time), I typically recommend that my clients only buy/trade amounts over $100.

This is because there are sometimes transactional fees or other hidden costs associated with trading. You want to get the best deal possible!

I go into detail about what I personally buy, buying and selling strategies, and specific recommendations in my Money Master Class.

There’s no need to pour over investing blogs, news, and day-trading platforms!

I’ve included low-touch options for those who want to invest, but don’t want their lives consumed by it.

Don’t forget to invest in ‘tax-advantaged accounts’ when given the chance!

Basically, ‘tax-efficient’ accounts can all you to defer or even skip paying tax altogether! I get more into tax-advantaged accounts in my money master class.  

learn how to budget, smash debt, invest & more in 6 weeks!

How I Pick My Stocks

I have a full-time job and a 9 to 5 so I don’t have time to be chasing the dragon and doing loads of research all the time.

Instead, I invested in a Motley Fool subscription where they make recommendations based on research and analysis.

Each week, I get recommendations and news sent straight into my inbox so I can make better decisions about when to buy or sell company-specific stocks.

I paid $99 for an annual subscription and this is where I start my research 100% of the time. 

stock advisor on Motley Fool

How to Invest $1000 in 100 Days

Once you have your budget set up and you’ve eliminated any expensive consumer debt, you’re ready to start considering investing.

But before you actually put money into the market, do you have a fully funded Emergency Fund? If there’s an emergency, you don’t want to have all your disposable cash in the market. 

Read about emergency funds here. 

Okay, so let’s assume you have an emergency fund and you move forward with setting up a brokerage account. What’s next?

Investing is a math game. If you want to invest $1000, then your best bet is to break it up into little pieces.

For example:

  • If you invest $71 dollars a week, then you’ll reach $1000 in 100 days. There are 14.2 weeks in 100 days.  
  • If you invest $10 a day, you’ll have $1000 in your brokerage account in 100 days.

More often than not, brokerages will charge a percentage or 1-time fee to make trades and sell stock. For that reason, you’re going to want to limit the frequency at which you buy and sell.

However, brokerages rarely charge you money to upload money into your account. It’s only when you buy actual stocks do they charge you!

If you know that you’re easily tempted by a fuller bank account, schedule a deposit of $71 every Thursday into your brokerage account.

This can be an automatic deposit that you can schedule on whatever brokerage app or website you use. This way, you won’t have access to this money over the weekend. 

Join my FREE ‘How to Invest’ Workshop

If you’re interested in a more personal touch when it comes to financial education and learning how to invest, sign up for my FREE investing workshop! Here’s what I’ll be talking about:

  • The steps involved in opening a brokerage
  • How to set up an investing budget
  • How you buy stocks, ETFs, etc in a brokerage
  • Should you be paying off debt or investing?
  • How to invest $1000 in 100 days
  • and so much more! 

When it comes to complex financial information, sometimes it’s just easier to have a human being in real-time explain these complicated ideas! There’s no shame in that at all. Click here or the photo below to join the workshop!

how to invest in the stock market

Read More Expat Money Tips:

Jamie

Friday 5th of March 2021

Hi Vanessa, great tips! I just wanted to ask regarding Brokerage firms... when using Fidelity, do you have a US address associated to your account? From what I understand, as of 2018, Americans abroad are not allowed to invest in (American) Mutual Funds, ETF's, Annuities, Life Insurance, etc, but can continue to invest "temporarily" by keeping a US address on file with the broker. Temporary has not been specified! More long-term... Americans can hire a non-US investment advisor as an intermediary that can continue to invest in all the above mentioned funds for you. Is that your understanding as well? Thanks