If your goal is invest small amounts of money online, your number one objective should be to find a broker with very low to no minimum required investment. Typically, brokers do require at least $1,000 minimum investment, but there are many that require less.


Currently, online brokers that have no minimum initial investment include TD Ameritrade, Capital One Investing, First Trade, TradeKing, and OptionsHouse."Small Amounts of Money" varies between investors. For investors with slightly higher minimums, E*Trade requires a $500 minimum, and Charles Schwab requires $1,000.
Note that investing less than $500 is often not recommended, since there is typically a fee per trade of over $5, which means a $500 investment essentially starts off with a 1% loss due to the fee.
You can avoid brokerage fees — and sometimes a broker entirely — by enrolling in a dividend reinvestment plan (DRIP) directly thorough an underlying company. Instead of receiving your dividends in the form of cash, the dividends will be automatically reinvested in the company for price appreciation and compounding. Some DRIPs are free, while others require a small fee.;
, Unfortunately, investing online is not free, and brokers do charge a variety of fees. These fees are typically charged per trade (meaning you are charged once when you buy something, and once when you sell). These are known as commissions


Before opening an account, it is important to look at the fees charged on stocks, mutual funds, and ETFs (Exchange Traded Funds). These are the three main types of investments that are appropriate for those investing small sums.Typically, commissions on stock transactions for small trades range from $4.95 to $10.00, whereas mutual fund commissions range from $15 to $80. ETFs are often offered commission-free by brokers. Since mutual funds and ETFs are important types of investments for those investing small sums of money, you should select a broker with low mutual fund fees, and commission-free ETF trading.
Websites like Stockbrokers.com can be a valuable resource for comparing fees between brokers. You can use this website to look at all the brokers mentioned above to choose the one with the lowest cost.
 Once you select a broker that has both low minimums (allowing you to invest small sums), and low fees for stocks, bonds, and mutual funds, you will need to choose an account type to open. While there are many types, the main ones to know are Individual, Traditional IRA, and Roth IRA.



Individual account. These are offered by most brokers, and they are standard accounts with no special tax privileges. This means any profits you make while investing and any income you earn from your investments will be taxed at appropriate rates.

Traditional IRA. A traditional IRA is a type of retirement savings account. Money deposited into a traditional IRA grows tax-deferred (meaning you don't pay any tax until you withdraw it), at which point it is taxed at normal income. With a Traditional IRA, you cannot withdraw money until you are at least 59.5 years of age, or you will receive a penalty. Contributions to a traditional IRA are usually tax-deductible.

Contributions to IRAs, whether traditional or Roth, are limited by income earned.



Roth IRA. A Roth IRA is also a type of retirement savings account. Like a Traditional IRA, earnings grow tax-free, except contributions are not tax deductible. The main benefit is that when you withdraw the money, you do not pay any taxes on your contributions (since they were paid on your income before you contributed). You can also withdraw your initial contributions any time with no penalty or taxes.Which to choose? The answer depends entirely on when you need the money and your goals. If you are starting a retirement account and do not plan on using the money until you are 59.5, the Traditional IRA may be appropriate. If you need the money sooner, a Roth IRA or individual account are likely better options.
Select a broker with low account minimums.
Examine fees carefully.
Select an account type to open.
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