An Online Investment Guide

How much capital and other costs are required?

This online investment guide considers the capital required before you consider value investing.

The investing guide also discusses other costs that may be involved and how they can be minimised.


How Much Capital?

A minimum of $A5,000 of initial capital is considered necessary to get started in creating wealth and to make money by investing in the stock market.

So while value investing for beginners requires some capital to get started, the requirement is much less than for other investments such as property.

Starting with $A5,000 would enable some diversification early on by being able to purchase $A1,000 to $A2,000 holdings of stocks in several companies.

But if investing with little money, $A1,000 could be a start, depending on the minimum buying requirements of the broker who organises the purchase.

As the portfolio grows and confidence builds, the purchase amounts may be increased.

For example, I started with $A2,000 purchases, then increased to $A3,000, then $A5,000 then $A10,000 and so on!

I find it useful to buy in approximate multiples of $A5,000s or $A10,000s. For my online broker, the larger the purchase amount, the smaller is the percentage cost of brokerage.


What Type of Broker?

The services of a stock broker is necessary to buy and sell shares. The choice is between an online broker or a full-service broker.

I use an online broker. Why? Because I take my own advice and mostly do my own research.

You may wish to do the same in order to minimise costs and also to be in control of your own financial destiny.

Membership with online brokers is usually free, and you pay reduced brokerage charges compared to full-service brokers.

For some brokers, if your purchase or sale cost exceeds a certain figure, you may have to pay more brokerage. In my case, I stay slightly below $A10,000 in order to reduce brokerage fees.

Of course, if you are using an online broker you will need access to the internet.


Other Potential Costs

This online investment guide suggests that to track performance, it would be useful to have an Excel spreadsheet that comes with the Microsoft Office software package.

You will also need to locate sources of information and advice. My online broker provides quite a lot of free information, but advice usually costs money.

However, quite an amount of information is available free through the various sources outlined in the link above and some online stock brokers do provide limited stock advice from stock market advisors.


Other Considerations

This online investment guide would not be complete without mentioning the need for new investors to consider their overall financial position before investing in the stock market.

Having debt such as with credit cards or home loans makes it more risky to invest. Investors don’t have to be entirely debt-free, but there is good debt (debt that helps to earn income and reduce taxes) and bad debt that is used to fund a luxurious lifestyle.

It is a good idea to have a back-up fund in place equivalent to six months of living expenses that will minimise the need to sell stock if the stock market is down.

If money is short, there are various ways to accumulate some. For example ...

• budget to save a regular amount
• working longer hours or getting a second or part-time job
• if you have a special interest or passion for some activity, consider earning passive income by developing a website to share the interest with others.

This online investment guide indicates a minimum amount that is needed to get started.

Costs can be controlled to some extent depending on how much advice you are prepared to purchase.

And you need to consider what financial commitments you have that could create a concern if you have to sell stock to meet a commitment when it is not a good time to sell stock.

Return from Online Investment Guide to Beginners Guide to Investing