The short answer is "no"—you can buy a single share of any publicly traded company if you want to. Thus, if you have a small amount of money to invest, you can, in fact, buy a small number of shares of a public company. Many brokers will process a trade for a few shares of common stock, as they receive a commission for their services anyway.
However, just because you can invest your savings this way, does not mean that such an investment will be a good one. You have two major obstacles that must be mitigated before going ahead and buying a small number of common shares: diversification and transaction costs.
First, you need to strongly consider the costs of under-diversification if you are going to begin your investment portfolio with a single stock. If you have no other investments, investing in only one company exposes you to an excessive amount of company-specific risk (i.e. if your chosen company is the next Enron, you could lose virtually everything). Thus, if you have a small amount of money to invest, a much more efficient portfolio can be constructed by buying into a mutual fund. A mutual fund is essentially a large basket of investments bundled together and will provide growth opportunities for a reasonably low amount of risk.
Second, even if you can stomach the risks of under-diversification, your next hurdle is a high one: transaction costs. Suppose your brokerage charges you $30 commissions for each trade. If you plan to buy and (hopefully) sell a stock for a profit, you will incur $60 of transaction costs. If you only had $200 to invest, your investment would need to gain 30% ($60/$200) simply to break even—an extremely inefficient investment. Conversely, if you invested the same $200 in an open-ended mutual fund, you would likely only be charged a small management fee of, for example, 3%. This would leave you with 27% of the 30% you would have had to spend on a single stock purchase.
When combined, transaction costs and the risk of under-diversification usually prove to be too costly for those who only have a small amount of money to invest. Therefore, rather than purchasing a few shares of a public company, buying mutual funds is often a much better option.
Advisor Insight
Dan Stewart, CFA®
Revere Asset Management, Dallas, TX
In today's world of online discount brokerage firms, buying as little as one share is more feasible, but the trade would still cost around $8 in fees. If you choose this approach, stick with the best, strongest companies in the world. You could first buy a couple of shares of a high-tech stock, say, and then next time buy shares of an industrial or consumer stock so that you aren't concentrated within one sector. Your portfolio will be more volatile, but you could easily make more money in the long run.
Alternatively, you could invest in an ETF or a conventional mutual fund and get immediate diversification with one trade. Mutual funds typically have minimums of $500 to $3,000 initially, but then you can add in $500 dollar increments. If it’s for an IRA, the minimums are usually lower.
FAQs
The short answer is "no"—you can buy a single share of any publicly traded company if you want to. Thus, if you have a small amount of money to invest, you can, in fact, buy a small number of shares of a public company.
Is there a minimum number of shares you have to buy? ›
While there is no minimum order limit on the purchase of a publicly-traded company's stock, it's advisable to buy blocks of stock with a minimum value of $500 to $1,000. This is because no matter what online or offline service an investor uses to purchase stock, there are brokerage fees and commissions on the trade.
Is there a minimum to buy shares? ›
Key Takeaways. There is no minimum order limit on the purchase of a publicly-traded company's stock. Investors may consider buying fractional shares through a dividend reinvestment plan or DRIP, which don't have commissions.
How many shares should you buy when investing? ›
What's the right number of companies to invest in, even if portfolio size doesn't matter? “Studies show there's statistical significance to the rule of thumb for 20 to 30 stocks to achieve meaningful diversification,” says Aleksandr Spencer, CFA® and chief investment officer at Bogart Wealth.
Is there a minimum amount to invest in stocks? ›
How much money do you need to invest in a stock exchange? There's no minimum amount to invest; but you should remember that trading carries many fees and commissions, like for executing orders, purchasing and clearance. If your investment is small, fees could by and large affect your returns.
What is the minimum share price to invest? ›
There is no minimum amount that you need to trade in the stock market. India has two main stock exchanges—the Bombay Stock Exchange and the National Stock Exchange. Stock prices range between ₹1 to ₹75,000. You can buy any stock in any quantity.
Can you buy less than 1 share? ›
Instead of buying a whole share of stock, you can buy a fractional share, which is a "slice" of stock that represents a partial share, for as little as $5. For example, if a company's stock is selling at $1,000 a share and you were buying $200 worth of it, you would own 0.2 (20%) of a share.
How much do you need to invest in shares? ›
How much do you need? Most brokers would require the first trade to be at least $500 which would be referred to as the 'minimum marketable parcel of shares'. The size of increments or additional purchases thereafter would be at the individual broker's discretion.
Can I buy just a few shares of stock? ›
Thus, if you have a small amount of money to invest, you can, in fact, buy a small number of shares of a public company. Many brokers will process a trade for a few shares of common stock, as they receive a commission for their services anyway.
Can you buy a stock with $1? ›
With fractional share trading, you can still invest in that company without spending the full $50—even if you invest $1 or $5, you still own a piece. Over time, as you have more cash available you can buy additional stock to build your investment portfolio even more.
There might be other practical considerations that limit the number of stocks. However, our analysis demonstrates that, whether you own ETFs, mutual funds, or a basket of individual stocks, a well-diversified portfolio requires owning more than 20-30 stocks.
How many shares to buy for beginners? ›
Most experts tell beginners that if you're going to invest in individual stocks, you should ultimately try to have at least 10 to 15 different stocks in your portfolio to properly diversify your holdings.
What is a decent amount of shares to buy? ›
Diversification is key: Aim for at least 10-15 different stocks in your portfolio to spread out your risk. This means investing a smaller amount in each company. Percentage of portfolio: Ideally, a single stock shouldn't make up more than 5-10% of your total investment amount.
Is $10 enough to invest in stocks? ›
Stocks trading under $10 can be attractive for investors looking to scoop up some cheap shares. Unfortunately, quality stocks trading in that price range are few and far between and can be a red flag that something serious is wrong with a company.
Can I invest in stocks with only $100? ›
The democratization of investing means investors with as little as $100 can start building their retirement nest eggs immediately. Online discount brokerages make it easy to buy and sell shares.
Can I start trading with $10? ›
It is possible to begin Forex trading with as little as $10 and, in certain cases, even less. Brokers require $1,000 minimum account balance requirements. Some are available for as little as $5. Unfortunately, if your starting amount is $10, this may prevent you from getting the higher quality, regulated brokers.
Can I buy 0.5 share of stock? ›
Fractional shares cannot be traded in the market and cannot be bought or sold.
What is the minimum stock requirement? ›
Minimum stock, also known as safety stock or reserve stock, is the amount of stock that must always be available to ensure a company's ability to meet customer demand, even during seasonal peaks and unexpected supply issues.
Can you invest 1 dollar in stocks? ›
So, even if you can only start with $1, do it today. Many brokerage firms allow you to buy fractional shares, which are partial shares of stocks or ETFs, so you really don't have to wait long to start buying investments. Then, your money can start working for you.
