How much money do I need to start investing?

How much money do I need to start investing? Tens of thousands? Several hundred? Do I need to give up my smashed avocado on toast to save enough money for investing!?

No! Whether you’re keen as a bean to start investing, or just want to dip your toes with a little bit of money, all you need to get started is $50 (NZD).

How can I invest with only $50?

InvestNow is a website that allows you to invest in a range of funds (over 100 at the time of writing). These funds allow you to invest in a variety of assets – shares in New Zealand companies, overseas companies, commodities, commercial property, bonds, and even shares in emerging markets like China and India.

InvestNow allows you to set up a Regular Investment Plan which allows you to invest into a fund with as little as $50. Their Regular Investment Plan is designed to allow you to automatically invest $50 or more into a fund every week, fortnight, month, quarter or six months. However if you don’t want to commit to investing on a regular basis, you can cancel the plan at any time after your initial $50 is invested.

Another great thing about InvestNow is that they don’t charge you any transaction or account fees.

Wait. What about Sharesies?

Sharesies advertise that you can start investing with only $1! This is fantastic and certainly makes investing even more accessible. But there’s a catch – Here’s why I don’t recommend using Sharesies.

Sharesies charges an account fee

Sharesies pricing structure is:

If you’re just getting started with a $1 investment, fortunately your account won’t attract any fees. But what if you continue to build your portfolio by investing say, $5 every week? After 10 weeks your account might be worth $50, which starts to attract a $1.50 per month fee.

$1.50 doesn’t seem like much, but that’s 3% of your account’s value! Annualised (over 1 year), the fee would equate to $18, which is a whopping 36% of the value of a $50 account.

Account valueAnnualised fee as a % of your account value
$5036%
$2507.2%
$1,0001.8%
$1,5001.2%

It gets even worse when you look at the fee as a percentage of your investment returns. Let’s assume you make 7% in investment returns in one year, on a $50 account – that’s $3.50. Factoring in the account fee, you are losing money when using Sharesies! Even at higher account values you are getting a massive paycut thanks to the fee.

Account valueAnnualised fee as a % of a 7% return
$50514%
$250103%
$1,00025.7%
$1,50017.1%

What if I can only afford the $1 minimum of Sharesies?

I still wouldn’t rush into Sharesies – over time your investment portfolio will grow to over $50 and you’ll start having account fees eat away at your investment returns. Instead, I recommend to do one of the following:

  • Save the money in a bank account until you have $50 to invest into InvestNow.
  • Challenge yourself to save and invest more. For example, instead of putting aside just $5 for investing per week, put aside $12.50 per week. After one month this will give you enough money to go towards a $50 investment in InvestNow.

Is it worth investing with only $50?

Yes. In most cases, investing $50 won’t make us a millionaire, but we all have to start somewhere. Consider investing $50 every month for 10 years. Assuming you earn a 6% return every year, you’d end up with over $8,200 after the 10 years. That might not seem like much for 10 years of investing, but if you were investing for your child, $8,200 would probably mean a lot to them!

If you increased your investment to $50 a week for 10 years, you’d end up with over $32,600 after that time. Like a tree, an investment portfolio starts as a small seed and takes many years to grow big.

Someone’s sitting in the shade today because they planted a tree a long time ago.

Warren Buffet

What are the reasons to not start investing?

So you have $50 to spare, and are considering taking the next step to start investing. Are there any reasons you shouldn’t? A few of reasons come to mind:

  • You have high interest debt like credit card debt, personal loans, hire purchases. These debts should be paid off first, as their interest rates are usually higher than what you could reliably earn through investing.
  • You don’t have any emergency savings. You should strongly consider putting together some emergency savings before investing. Having an emergency fund reduces the chance you’ll have to sell or withdraw your investments in the case an emergency strikes.
  • Investing just isn’t a priority right now. Maybe you are focused on other ways to improve your financial position such as getting a better paying job, or finding ways to reduce your expenses. Or maybe you want to use all your money on things like travel and hobbies. If that’s the case, I hope you consider becoming an investor again soon!

What’s next?

So you’ve read this article and keen to start investing? Now the hard part is choosing which of the 100+ funds to invest in on InvestNow. This article has you covered.

Thank you to Lidia for the topic idea! If you have any suggestions for future topics, send them through to us on Facebook, Twitter or email.

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Disclaimer and final notes

The content of this article is based on my personal opinion and should not be considered financial advice. The information should never be used without first assessing your own personal and financial situation, and conducting your own research. You may wish to consult with a qualified financial advisor before making any investment decisions.

I am not affiliated with InvestNow (although I have invested through this site), nor do I have anything against the great work Sharesies are doing to enable Kiwis of all financial positions to start investing. However, it is my opinion that the Sharesies fee structure is not a good deal for most people just beginning their investment journeys.