Ask a Fool: How Much Money Do I Need to Start Investing?

By Matthew Frankel Markets Fool.com

Q: How much money do I need to start investing?

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The short answer is that you don't need much at all, especially if you're going to invest in exchange-traded funds (ETFs) or mutual funds, as opposed to individual stocks.

Many mutual fund companies are willing to waive their minimum initial investments ifyou're willing to commit to future investments. For example, Charles Schwab typically requires a minimum investment of $1,000 to open a new account and directly invest in its mutual funds, but you can get started with as little as $100 if you set up an automatic monthly transfer.

If $100 doesn't seem like a significant amount of money, keep in mind that if you're 30, every $100 you invest now could be worth $2,400 by the time you turn 65, and that's if your investment simply matches the stock market's historical performance. If you invest $100 every month from now until you're 65, you could build up a nest egg of more than $300,000.

If you're investing for retirement, you could get started with even less. Many online brokers will let you open an IRA with as little as $1, and commission-free ETFs are becoming more widely available. For example, TD Ameritrade has no minimum investment requirement for IRAs and offers more than 100 commission-free ETFs, several of which have share prices under $30 -- so you don't need much money to make your first investment.

The bottom line is that while it's not possible to efficiently create a properly diversified portfolio of individual stocks without at least a couple thousand dollars, you can get started investing in high-quality funds for less than the cost of a tank of gas.

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Matthew Frankel has no position in any stocks mentioned. The Motley Fool owns shares of and recommends TD Ameritrade. The Motley Fool has a disclosure policy.