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If you're going to invest in the stock market,

you're either going to invest in a specific stock like

Apple or Tesla, or you're going to invest in a

fund which probably contains many stocks. To buy a specific

stock, it used to be that you had to buy

at least one share in that stock. So if Apple

stock was priced at $150, you needed at least $150.

These days, some platforms allow you to buy fractional shares,

so you could buy part of a share for just

one dollar. I suppose that could be useful for teaching

you how to buy a share, but its not going to

teach you much about the emotions of investing. If the

stock doubles in value,

you've made an extra dollar, which wouldn't even buy you

a cup of coffee. If your platform charges you to make stock

trades,

you could have spent 5 pound or $5 just to buy $1

of stock, which doesn't make sense. It's worth emphasising

here, that in my opinion, investing in individual stocks is

not a good way to save towards your retirement. Individual

stocks are far too risky,

and there's a reasonable chance that you lose money or

at least don't make very much. So don't think that

buying a stock has got you started on a path to investing for

your future, more like it's a bit of fun to

see if you can pick a stock that does well.

If you need to scratch that stock-picking itch,

don't let individual stocks become more than 10% of your

stock portfolio for your retirement, and that includes stock from

your employer. The rest of your portfolio should be boringly

sensible funds, where risk is diversified across many different

stocks. So how much does it cost to buy these?

Well,

it's worth considering both upfront costs and ongoing

fund management costs. There are two types of stock funds that

you can buy: mutual funds and exchange traded funds, ETFs.

The structural differences between them aren't that important,

but they can have different costs associated with them. Mutual

funds are like the dinosaurs of the investing world.

There's nothing wrong with them,

but I find them a bit annoying. The price of the fund

changes only once per day,

so you never know exactly what you're going to pay

for them. The mutual fund may be actively managed or

passively managed. An actively managed fund hires some clever people to

try to pick stocks and try to beat the market.

Sadly,

they don't beat the market very often but these clever people

are expensive so you are going to pay 1 to

3 percent per year. A passively managed fund is just

going to track the market index,

so it's much cheaper, between

0.05%

and 0.5%

per year. Most mutual funds have a minimum investment amount.

On some UA platforms,

this is as low as $1 for certain funds. Many

other banks have a minimum of $100 or $500 and some are

much higher. If you want to invest in the Vanguard lifestrategy

mutual fund while living in the Middle East the minimum

is 75,000 pounds!

Another problem with mutual funds is that they can have

initial upfront charges as high as 5% and exit charges

as well. Some platforms waive these charges,

but it's always worth checking. There may be an annual platform

fee for you to hold them also.

Exchange traded funds, ETFs, are mostly passively

managed and as their name suggests, you buy them on a

stock exchange like an individual stock. They're sometimes available in fractions,

so you could in theory start with $1. ETFs from

the London Stock Exchange or European stock exchanges however,

are typically not sold in fractions and their price varies

from around $5 to $150. There aren't any

initial fees, platform fees or exit fees for ETFs but you

will have to pay a trade commission each time you

buy yourself,

just like a stock. The size of this commission varies

hugely across different platforms and it's one of the main

costs of investing.