Do you need thousands to invest in the sharemarket?

I love money.  I also like a good old game of risk, though I'm not a fan of the actual game risk.  Unlike millions of people living in Australia and New Zealand I don't see the appeal with property.  Some people love it because it's safe and just sits there increasing in value but the thing with property as the New Zealand Herald reported today, is that if you make a bad call such as by buying a new house before the old one has sold, you can lose everything and in order to enter the property market you have to have substantial savings and get into debt.  With other investments you can have smaller capital and you do not need to get into debt.

An article from the Sydney Morning Herald says that although the minimum amount needed to invest is $500, you shouldn't invest any less than $10,000.  They say this is because of the necessity to diversify.

The Motley Fool however says that although you don't want brokerage fees eating into your investment returns, it's okay when you're starting out and that saving regularly and investing in the sharemarket can have long term rewards.  This is based on increasing your investment by 10% and investing a further $1000 each year.  The other thing the Sydney Morning Herald failed to take into consideration was that once you start investing it becomes exciting and you want to invest more, that starting is the hardest part but continuing is easy.

It's for that reason I disagree with the Sydney Morning Herald that you shouldn't invest until you have $10,000 or more.  You see, if you have the money in a regular bank account you're more likely to spend it than if you have it in shares.  This is partially because of psychology but also because when cash is there in cash format it has less prestige.  When your money is tied up in shares it's more likely to stay there because although cash is hard earned, you've worked harder to get those shares.

There's an old saying, a penny saved is a penny earned meaning that your money is working for you and you have a stake in a business so the sooner you invest the sooner you can start enjoying the growth you'll get on the sharemarket (though you have to prepare to weather the short term losses) and be increasing your net worth.  Once you start investing you're going to want to invest faster. It's amazing how once you're going you want to keep going and building your wealth.  

And remember, most successful business people started with very small capital but over time built their wealth.  When you think $500 is all you need to start that is very achievable compared to $5000 for term deposits or hundreds of thousands for your first home,  and with the small investment growing you'll soon (2-3 years) have enough for a home deposit and to continue on the sharemarket.  Once you are started remember it is best to diversify as soon as possible and keep an eye on your stocks.  I also recommend you monitor the markets and stocks you're interested in.  Most services like NABTrade and commSec allow you to create watch lists and charge $19.95 per trade.