How Much Does It Cost to Buy Stocks?
It is probably possible to buy shares of stock with almost any amount of money. With as little as a few hundred dollars, you can start investing in stocks. The cost to invest is determined by the stocks you want to buy and the purchase method you select. Direct purchase plans allow you to invest with small dollar amounts, and an online discount brokerage account lets you buy and sell with small commission charges.
Direct Purchase Plans
Many companies offer direct purchase plans to allow investors to buy stock without going through a broker. You can find out if a company has a direct purchase plan on the investor relations pages of the company's website. These plans might also be called dividend reinvestment plans (DRIPs) because any dividends earned from the stocks you buy can be reinvested at no charge into more shares of the stock. A true dividend reinvestment plan requires you to own one or more shares of stock before you can enroll in the plan.
Direct Purchase Amounts
A company sets its own rules for the direct purchase plan. Plans typically have an initial minimum investment amount, then a smaller dollar requirement to make additional share purchases. Initial investment amounts range from $100 to over $1,000, with $250 being a widely used number. Ongoing investment amounts are as little as $25. With a direct purchase plan, you make fixed dollar investments, and the money buys whole and fractional shares. Some plans charge fees to invest, and others do not. The no-fee plans usually require you to invest using electronic transfers from your bank account rather than by check.
Discount Stock Brokers
An account with an online discount stock brokerage company allows you to buy and sell stocks with a $5 to $10 commissions per transaction, depending on the broker. Several online brokerage firms do not require a minimum balance to open an account, such as TD Ameritrade and E-Trade. The stock commission the broker charges will be the same whether you buy one share or 1,000 shares. Although the commission rate would be a significant portion of the investment amount, you could buy shares of low-priced stocks with very small investment amounts. For example, you could buy 10 shares of a stock priced at $5 per share for $50 plus commission.
When you buy stock through a broker, you must buy whole shares of stock, so the cost to invest is a combination of share price and number of shares you want to buy, plus the broker's commission. Share prices of different companies range from less than a dollar to thousands of dollars. A popular example is shares of Apple, trading at nearly $170 dollars as of Feb 2019.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.