Why you don’t need thousands to own stocks

Various common myths about investing continue to keep people on the stock market’s sidelines. You’ve probably heard that investing is just like gambling or thought you need a few thousand dollars to begin investing. These and other persistent myths prevent many people from benefiting from the stock market and growing their wealth.

However, the reality is that modern investment platforms have made the market more accessible than ever, while research consistently shows that long-term investing has historically rewarded patient investors. Even the idea that you need significant money to start investing has been rendered obsolete by fractional shares and commission-free trading.

While all investments carry risk and don’t guarantee returns, one of the keys to a successful long-term strategy is to separate facts from fiction and avoid emotional reactions. Let’s examine five of the most common investing myths and uncover the facts behind them.

In this article:

Myth #1: “You need a lot of money to start investing”

Gone are the days when investing required thousands of dollars to get started. Modern investment platforms have dramatically lowered the barriers to entry, making it possible to begin building wealth with just a few dollars.

“There is a common misconception that investing is only for rich people, either because financial institutions will refuse service to people in one’s income bracket or because of a perceived fee for entry. The most popular retail brokerages offer no-fee, fractional share investing for as low as $1 invested,” explains Thomas Maluck, an NFEC-accredited personal finance instructor in Columbia, South Carolina.

Even traditional brokers have eliminated fees and trading commissions on stocks and exchange-traded funds (ETFs), making investing more accessible than ever. Plus, most investing platforms now offer fractional shares, allowing you to buy a portion of a stock rather than the whole thing. For example, instead of needing $230 for one share of Apple (AAPL) stock, you could invest $10 and own about 4.3% of a share.

🔍 What are ETFs? An ETF is a basket of stocks and other assets that you can buy all at once. When you purchase an ETF share, you’re actually buying tiny pieces of hundreds or thousands of companies. For example, an S&P 500 ETF lets you own a slice of America’s 500 largest companies with a single purchase. Mutual funds work similarly but are typically more actively managed and may require higher minimum investments.

This combination of commission-free trading, fractional shares and diversified funds has revolutionized investing for everyday people. Here’s what you can expect to pay and how much you’ll need to start at some popular investment platforms:

💡 Expert Tip: If you’re new to investing, start with micro-investments of $1 to $10 through platforms like Acorns, SoFi Invest and Wealthfront to build good habits, then graduate to traditional brokers like Vanguard or Fidelity as your portfolio grows. Some micro-investing platforms, including Acorns, even round up your debit card purchases to the nearest dollar and invest the difference, making investing automatic and painless.

Here’s what different recurring investment amounts can get you:

• $1 to $5. Fractional shares of stocks or ETFs.

• $50 to $500. A diverse portfolio of fractional shares across multiple stocks and ETFs.

• $1,000+. Access to most mutual funds.

The key is staying consistent, regardless of the amount you begin with. This simple approach, known as dollar-cost averaging, is a tried-and-true way to build toward your goals and mitigate risks. “Your investment strategy should reflect your unique goals and risk tolerance, not just how many dollars you have to invest,” explains Marcel Miu, CFA, CFP and founder of Simplify Wealth Planning advisory service in Austin, Texas.

Dig deeper: Saving vs. investing: How to choose the right strategy to grow and protect your money

Myth #2: “You need years of experience before starting to invest”

Investing today feels as simple as placing an online order through a shopping website. Modern investment platforms have transformed buying assets into a straightforward process that doesn’t require an economics degree or years of market experience.

These platforms not only give you access to stocks but to various broad market funds that automatically invest in hundreds or even thousands of companies at once. This means that you don’t need to be an investment expert to benefit from the market’s growth, as these funds allow you to tap into the stock market with minimal effort on your part.

🎯 Research shows that most new investors find trading easier than expected

The perception that investing requires years of experience keeps many people on the sidelines. However, research from Commonwealth, a nonprofit focused on building financial security and opportunity, with support from the Nasdaq Foundation, tells a different story. As many as 71% of new investors found investing easier than they initially thought once they started, revealing that hands-on investing experience, even with small amounts, can quickly overcome the feeling that investing is too complex to try.

Modern investing platforms have noticed this trend, too. Many now offer built-in educational tools and features that explain concepts in plain language as you go. In fact, 67% of new investors used these educational resources, with 85% finding them helpful for learning key investing terms and concepts, according to a 2024 Commonwealth study of over 800 new investors.

Some of the most popular broad market funds that you can use to dip your toes into the stock market include:

💰 How to invest in a market fund. Just like shopping websites let you add items to your cart, investment platforms let you buy fractional shares of these funds and more with a few clicks.

1. Open your investment platform or app

2. Search for a fund you want (like VOO for the S&P 500)

3. Enter a dollar amount — even $5 works with fractional shares

4. Review your order details

5. Place your order, and you’re done

You can even set up automatic weekly or monthly investments. Your chosen amount gets invested automatically on schedule, helping you grow your portfolio without requiring constant attention.

This broad market fund approach has historically provided steady returns for investors, regardless of their experience, while spreading their risk across many companies and industries.

📈 How to build wealth through simple habits. When placing your first order, you can begin developing good habits instead of focusing on mastering complex strategies. Here’s what successful long-term investors typically do:

• Start small and stay consistent. Rather than trying to time the market, set up automatic monthly investments — even $50 or $100 at a time adds up.

• Keep it simple. Begin with a few broad market funds that give you instant diversification before exploring other options.

• Focus on costs. Choose low-fee index funds over actively managed ones since fees eat into your investment returns over time.

• Ignore short-term noise. Daily market news and temporary swings don’t matter when you’re investing for years or decades.

⚠️ A note about risk. While investing has become much more user-friendly, understanding your personal risk tolerance and investment timeline remains important. Broad market funds have historically provided steady long-term returns while spreading risk across many companies and industries. However, all investments carry risk of loss, and past performance doesn’t guarantee future returns. If you’re unsure about managing risk yourself, consider working with a financial advisor who can manage your portfolio for you.

Dig deeper: How to find a trusted financial advisor

It’s easy to equate investing to placing bets at a casino, considering how movies often portray Wall Street investors, but this fundamentally misunderstands how markets work. While dramatic scenes of traders shouting on the floor and making split-second decisions make for exciting entertainment, they represent speculation rather than long-term investing.

The reality of successful long-term investing looks much more boring — it’s about owning pieces of profitable businesses and letting them grow over time.

❓ We asked a financial advisor: How is the stock market any different from a casino?

This fundamental difference between gambling and investing becomes clear when we look at how each activity actually works in practice. Here’s how investing differs from gambling:

💡 Expert tip: Aim to stay invested for the long run to avoid the effects of short-term volatility. Historical market data shows the power of patient, long-term investing. “The S&P 500 has averaged 10% per year for a century. Yet, the average intra-year decline is -14% before the market ultimately turns positive 3 out of 4 years,” says Joe Favorito, CFP.

There are four key differences between the speculative nature of frantic trading you see on TV and in movies versus long-term investing:

• Time horizon and goals. Speculation aims to make quick profits by betting on short-term price movements through frequent trading based on market trends or news. Investing builds wealth gradually by owning quality companies or funds for years, letting compound growth work in your favor.

• Research and analysis. Speculation chases hot tips and market rumors while relying heavily on technical charts and attempts to time market swings. Investing studies company fundamentals like earnings, debt levels and competitive advantages to identify sustainable businesses positioned for long-term success.

• Risk management. Speculation takes on high risks through concentrated trades and leverage in hopes of scoring big short-term gains. Investing spreads risk across various assets while staying focused on steady, long-term returns rather than quick profits.

• Value creation. Speculation operates as a zero-sum game where profits come at other traders’ expense. Investing generates real wealth through ownership of productive businesses that create value through products, services and innovation.

The real long-term investing challenge isn’t picking stocks that win big — it’s managing your emotions and staying disciplined during market swings. As Marcel Miu, CFA, CFP, explains, “Successful investing often hinges on understanding fundamental market principles and maintaining a long-term perspective.” By focusing on solid companies or broad market indexes and staying invested through ups and downs, you’re not gambling — you’re growing wealth systematically over time.

Dig deeper: 7 best low-risk investments for retirees

Myth #4: “Cash is safer than stocks”

While keeping your money in cash might feel safer than investing in stocks, this sense of security often proves misleading. When you factor in inflation — the rising cost of goods and services over time — holding too much cash actually puts your long-term financial security at risk.

💰 What’s the problem with holding too much cash?

The real risk of holding too much cash isn’t that you’ll end up with fewer dollars. Cash enables you to keep the same number of dollars you, but the problem is that those dollars will buy less over time.

One of the Federal Reserve’s core goals is to keep inflation at no more than 2% annually using various tools under its belt, including Fed rate hikes and cuts. However, historical inflation rates since 1914 average about 3.27% annually. Assuming the same average for the next 10 years, here’s how $10,000 would grow or shrink in different scenarios:

This means while your bank statement shows the same number or slightly more, your money’s actual value steadily declines. Even a traditional savings account earning the national average annual percentage yield (APY) of 0.41% wouldn’t keep up with inflation — $10,000 would grow to $10,418 after 10 years but would only buy about $7,552 worth of goods and services in today’s dollars.

Putting your money in a high-yield savings account (HYSA) earning 4.00% APY helps combat inflation while keeping your money secure — your $10,000 would grow to $14,802 and maintain $10,729 in purchasing power, and since these accounts are FDIC-insured, you can’t lose your principal.

Meanwhile, investing your money in an S&P 500 index fund has historically provided the best protection against inflation, with average annual returns around 10% turning $10,000 into $25,937, or $18,801 in real purchasing power after 10 years — though unlike savings accounts, stock investments can lose value and aren’t guaranteed to match historical returns.

That’s why the definition of “safe” depends heavily on your goals. Here’s how you can think about it:

• Emergency funds. Keep three to six months of expenses in a high-yield savings account for immediate needs and unexpected costs. This money should be easily accessible.

• Short-term goals. Use cash equivalent investments like certificates of deposit (CDs) and government bonds for money you’ll need within two to three years, like a home down payment.

• Long-term wealth. Invest money you won’t need for 5+ years in stocks or stock funds to help combat inflation and grow your purchasing power over time.

Dig deeper: How much should you have in your 401(k)? Here’s how your balance compares to others by age

Myth #5: “High risk means high rewards”

This myth has led many people to chase trendy but volatile investments after seeing others profit, only to buy at peak prices and potentially suffer significant losses. From meme stocks to cryptocurrencies, the desire to replicate someone else’s investment success often clouds judgment and ignores fundamental investment principles.

❓ We spoke to a financial planner: Why do people rush into risky investments?

Beyond FOMO, several psychological biases influence investment decisions, often leading to choices based on emotions rather than logic. This includes:

• Anchoring bias. Investors often fixate on a specific reference point, usually a past price, when making investment decisions. For example, seeing bitcoin once reach almost $110,000 might make today’s $97,000 price seem like a bargain, even though that past price may have been inflated by temporary market euphoria.

• Sunk cost fallacy. Many investors hold onto losing investments simply because they’ve already invested significant money, time or emotional energy into them. While broad markets historically recover over time, certain individual stocks or cryptocurrencies might never return to their previous highs.

• Recency bias. Many investors give too much weight to recent events and assume they’ll continue indefinitely. During bull markets, the possibility of downturns gets ignored; during bears, the market seems like it will never recover. This leads to buying high out of optimism and selling low out of fear.

• Confirmation bias. After making an investment decision, many investors actively seek information that supports their choice while dismissing contradictory evidence. This might mean joining online communities that share bullish views on a stock or crypto while ignoring legitimate warnings about risks.

Here is how some popular high-risk assets have performed since reaching their peaks:

⚠️ Reality check: As Joe Favorito, CFP, eloquently puts it, “The market is the only place where nobody wants to buy when it’s on sale, and everybody wants to buy when the sale is over.” The key isn’t finding the next big winner — it’s building a diversified portfolio that matches your risk tolerance and time horizon. High-risk investments might have a place in your portfolio, but they shouldn’t dominate it. Make sure to keep most of your investments in broadly diversified, lower-cost mutual funds or ETFs.

Dig deeper: Set it and forget it: How to automate investing with robo-advisors

How to choose an investment platform that fits your needs?

Selecting the right investment platform helps you navigate the stock market with ease while aligning your investments with your financial goals. While no platform can provide a guarantee of future results, understanding key factors like fees, asset class options and risk of loss can guide your investment strategy.

Consider these key factors when choosing an investment platform:

• Account fees and minimums. Prioritize platforms with low minimums and fees, especially if you’re starting small. Some platforms like Acorns and SoFi Invest charge small membership or advisory fees for managing your portfolio for you. However, if you prefer doing it yourself, consider opening a $0 commission self-directed account.

• Investment options and allocations. Look for a platform that offers access to diversified asset classes, including fractional shares, mutual funds, ETFs and even Treasury securities.

• User experience and tools. Choose a platform with an intuitive interface that simplifies investing and tracking your portfolio’s performance. It’s a plus if the platform you choose also has market analysis tools and educational content.

• Account types and flexibility. Find a platform with the right account types for your goals — retirement accounts (IRAs) suit long-term growth, while taxable accounts align with short-term needs. Some platforms also offer bank accounts for seamless transfers.

• Client guidance and support. Choose a platform that offers financial planning tools or access to a financial professional. For instance, SoFi Invest provides free consultations with an investment advisor, while Wealthfront offers a financial plan builder tool in its app that helps you chart your future goals.

Learn more about investing and growing your wealth

FAQs: Investing and your money

Find out more about how to start investing and grow your wealth and explore our growing library of personal finance guides that can help you save money, earn money and grow your wealth.

Is $1,000 too little to invest?

No. Starting with $1,000 is more than enough to begin investing. With most brokers offering fractional shares and commission-free trading, you could invest in a diversified portfolio of ETFs or use a robo-advisor to automatically manage your investments. Even setting aside $100 per month into broad market index funds can help you benefit from the stock market’s growth.

What are the best stocks to buy as a beginner?

It’s difficult to tell which stocks are best for beginners as the best performing stocks today may include overvaluation risks or react strongly to company earnings. Rather than picking individual stocks, consider starting with low-cost index funds that track the broader market, like S&P 500 ETFs. These funds instantly give you ownership in hundreds of major companies while spreading your risk. You’ll avoid the stress of choosing individual stocks while historically earning solid returns.

What’s the safest place to put your money?

High-yield savings accounts and certificates of deposit (CDs) offer the best combination of safety and returns for money you can’t risk losing. These accounts are protected by FDIC or NCUA insurance for up to $250,000 per bank. While they historically don’t match stock market returns, they can still help your money grow while taking on little to no risk.

Sources

About the writer

Yahia Barakah is a personal finance writer at AOL with over a decade of experience in finance and investing. As a certified educator in personal finance (CEPF), he combines his economics expertise with a passion for financial literacy to simplify complex retirement, banking and credit topics. He loves empowering people to make informed financial decisions that improve their everyday and long-term wellness. Yahia’s expertise has been featured on FinanceBuzz, FX Empire and EarnForex. Based in Florida, he balances his love for finance with freediving, hiking and underwater photography.

Article edited by Kelly Suzan Waggoner