The biggest investing myth is that you need a lot of money to get started.

You don’t. You need $500 or less, a brokerage account, and the willingness to start before you feel ready.

Every person I know who has built real wealth through investing started the same way: with a small amount, in a simple account, buying boring funds. The complexity came later — if it came at all.

Here’s the exact blueprint.

Why Starting Small Still Matters

Before we get into the how, let’s talk about why starting with a small amount is worth it.

Compound interest is the most powerful force in personal finance. But it needs two things to work: money and time. You can’t control the market’s returns. You can control when you start.

The difference between starting at 25 and starting at 35 — all else being equal — is often hundreds of thousands of dollars by retirement. Not because of the amounts you contribute, but because of the years of compounding you lose by waiting.

Your $500 today isn’t really $500. It’s $500 with decades of growth potential attached to it.

Step 1: Open the Right Account First

Before you invest a dollar, you need to be in the right account. The account type matters more than the investments inside it — at least in the beginning.

Roth IRA (Start Here If You Qualify)

A Roth IRA is the best account for most beginning investors. You contribute after-tax dollars, and all growth and withdrawals in retirement are completely tax-free.

The 2025 contribution limit is $7,000 per year ($8,000 if you’re 50+). You qualify if your income is below $150,000 as a single filer or $236,000 as a married couple filing jointly.

Open one at Fidelity, Vanguard, or Schwab. All three are free to open with no minimums and no fees on index funds.

401(k) at Work (Always Get the Match First)

If your employer offers a 401(k) match, contribute at least enough to get the full match before anything else. A 50% match on your first 6% of salary is a 50% guaranteed return on that money. Nothing in investing beats that.

Once you’ve captured the match, max your Roth IRA, then come back and contribute more to the 401(k).

Taxable Brokerage Account

If you’ve maxed your Roth IRA and want to invest more, a regular taxable brokerage account works fine. No tax advantages, but no contribution limits or withdrawal restrictions either.

Step 2: Buy One Fund

When you have $500 to invest, you don’t need a complex portfolio. You need one fund.

Specifically: a total market index fund or an S&P 500 index fund.

Here’s why:

  • Low cost. Index funds typically charge 0.03-0.05% in annual fees (called the expense ratio). That’s $0.30-0.50 per year on a $1,000 investment.
  • Diversified. A total market fund owns thousands of companies. One fund is all you need.
  • Outperforms most alternatives. Over 90% of actively managed funds underperform their benchmark index over 15+ years. The boring index fund beats the expert stock picker, most of the time.

Specific funds to consider:

  • Fidelity ZERO Total Market Index Fund (FZROX) — 0% expense ratio at Fidelity
  • Vanguard Total Stock Market ETF (VTI) — 0.03% expense ratio
  • Schwab Total Stock Market Index (SWTSX) — 0.03% expense ratio
  • iShares Core S&P 500 ETF (IVV) — 0.03% expense ratio

Pick one. Buy it. That’s your portfolio.

Step 3: Set Up Automatic Contributions

Investing $500 once is good. Investing automatically every month is how you actually build wealth.

Set up an automatic transfer from your checking account to your investment account on the same day you get paid. Even $50 a month on top of your initial $500 adds up dramatically over time.

At $200 a month in a Roth IRA, invested in a total market index fund earning the historical average return of ~10% annually:

  • After 10 years: ~$38,000
  • After 20 years: ~$153,000
  • After 30 years: ~$452,000

All from $200 a month. That’s the math of consistency.

Step 4: Don’t Touch It

This is where most people mess up.

The market will drop. Probably significantly, at some point. It has dropped before and it will drop again. Every time it drops, there will be convincing reasons why this time is different and why you should sell.

Don’t.

Long-term investors who stay invested through downturns consistently outperform those who try to time the market. Missing just the 10 best days in the market over a 20-year period cuts your returns roughly in half.

The strategy is: buy, hold, add more when you can. That’s it.

What About Individual Stocks?

Maybe. Eventually. But not before you have a foundation of index funds.