How much money do you need to start investing in stocks?

Work out how much you can invest each month

Start from your budget, not from the market. Take your monthly income, subtract your fixed costs and what you set aside for emergencies. What is left, and what you won't miss, is the amount you can invest.

If you don't have an emergency fund for 3-6 months of spending yet, build it first. Otherwise, the first unexpected bill could force you to sell your investments, maybe right after a fall.

Buy fractions, not whole shares

Some shares cost hundreds or thousands of dollars each. Many brokers let you buy just part of a share or an ETF, called a fractional share. You invest an amount of money and the broker gives you the matching fraction.

With fractions, you gain and lose in proportion, exactly like a shareholder with whole shares, and you receive your share of the dividends. Check with your broker, though: not every stock or ETF is available in fractions, and sometimes you can't move fractions to another broker.

Check the minimum deposit and the costs

Many brokers no longer ask for a minimum deposit, but their costs vary a lot. On small amounts, three costs matter most:

• The trading commission per order: a fixed fee of, say, $1 is 2% of a $50 order, but only 0.2% of a $500 one.
• Currency conversion: if your account is in one currency and you buy in another, the broker converts your money with a markup.
• The ETF's yearly cost: it is called the TER and is taken automatically from the fund's value. For large ETFs, it is usually under 0.25% a year.

All the costs are explained in detail in the guide to what investing really costs.

Set up a monthly investment plan and stick to it

When you invest the same amount every month, whatever the price, you are using dollar-cost averaging. You buy more units when the price is low and fewer when it is high, without trying to guess the right moment. Over time, your gains earn gains of their own: that is compound interest.

The calculation uses an average return. In real life, some years bring big gains and others losses. What matters is that a monthly amount, even a small one, only becomes large if you leave it for many years.

Increase the amount when you can

You don't need the perfect amount to start. Begin with what you can afford now and raise it when your income grows. A simple habit: when you get a raise, add part of it to your monthly investment.

• Waiting to save up a large amountYou lose years of compound interest, which matters more than the starting amount.
• Investing your emergency moneyAt the first problem you have to sell, maybe at a loss.
• Ignoring fees on small amountsOn a small order, a fixed fee can take 2-3% of your money, a large part of a year's gains.

When you are ready, follow the steps in the starter guide and the guide to buying your first stock.