So you have $1,000 set aside, and you're ready to enter the world of investing. In this article, we'll walk you through getting started as an investor and show you how to maximize your returns by minimizing your costs.

What Are the Account Minimums?



Stockbrokers come in two flavors: full-service and discount. As the name implies, a full-service broker provides much more in the way of service, but it only deals with higher net-worth clients. It's common to see minimum account sizes of $50,000 and up at full-service brokerages.

This leaves the $1,000 investor with the option of a discount broker. Discount brokers have considerably lower fees, but don't expect much in the way of hand-holding. Fees are low because you are in charge of all investment decisions - you can't call and ask for investment advice. With $1,000, you are right on the cusp in terms of the minimum deposit. Some discount brokers will take you and others won't. You'll have to shop around.

You also could purchase shares directly from a company through direct stock purchase plans (DSPPs). Some of these plans have a minimum investment amount restriction, which ranges between $100 and $500.

With the advent of online trading, there are a number of discount brokers with no (or very low) minimum deposit restrictions. One of the most popular online trading sites is Scottrade. You will, however, be faced with other restrictions and see higher fees for certain types of trades. This is something an investor should take into account if he or she wants to invest in stocks.

Mutual Funds and Bonds

If mutual funds or bonds are investments you would like to make, it is simpler in terms of minimum deposit amounts. Both of these can be purchased through brokerage firms, where similar deposit rules apply as for stocks. Mutual funds also can be purchased through your local bank, often for less than $1,000 when you have an existing relationship with the bank.

If you want to purchase government bonds, this can be done straight from the government through TreasuryDirect. The only restriction here is the minimum purchase amount of the bond, which can range from $100 to $1,000.

Learn the Costs of Investing


Before you open an investment account, you must also consider the costs that you will incur from purchasing investments once the account is open. In most cases, every time you purchase an investment, it will cost you money (through commissions). With a limited amount of funds, these transaction fees can really put a dent on your $1,000.

Investing in stocks can be very costly if you trade constantly, especially with a minimum amount of money available to invest. Every time that you trade stock, either through buying or selling, you will incur a trading fee. Trading fees range from the low end of $10 per trade, but can be as high as $30 for some discount brokers. Remember, a trade is an order to purchase shares in one company - if you want to purchase five different stocks at the same time, this is seen as five separate trades and you will be charged for each one.



Mutual Fund Fees



Reduce Risk with Diversification

Diversification is considered to be the only free lunch in investing. In a nutshell, by investing in a range of assets, you reduce the risk of one investment's performance severely hurting the return of your overall investment. You could think of it as financial jargon for "don't put all of your eggs in one basket."


This is where the major benefit of mutual funds comes into focus. Mutual funds tend to have a large number of stocks and other investments within the fund, which makes the fund more diversified than a single stock.

A Small Step Toward a Large Future

It is possible to invest if you are just starting out with a small amount of money. It's more complicated than just selecting the right investment (a feat that is difficult enough in itself) and you have to be aware of the restrictions that you face as a new investor.

The Bottom Line


If you are looking for more information about what to do with $1,000 dollars, Investopedia's Ask an Advisor tackles the topic by answering one of our user questions.

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