Is it wise to invest small amounts of money short-term?
You can expect about a 7% return when investing in the general market if your horizon is ten years or more. The market fluctuates, which means that you should be absolutely fine with losing 10% or more of your invested money during this period. You say yourself that: I have been setting aside money (...) into a savings account earmarked for that purpose (repairs/maintenance) so that I don't have to take out loans. It's obvious from your question that the purpose of this money is not savings, this is money that you are already investing, not in stocks or bonds but in your house. While this money sits around, of course you could put it into the market and hope that it grows. It all depends on your horizon, which in your case sounds like about 1 year. Is that long enough to be fairly sure you will make a profit? From what I've written so far, hopefully you can gather that the answer is no. If you choose to invest $6,000 but you need that money back in one year, you need to be aware of the risk that you'll instead end up with $5,400 or even less. Your options are then to: If you're asking for personal advice, my opinion would be this: you're already investing in your house. The housing market, like most markets, fluctuate. Whether you like it or not, you're already a victim (or benefactor) of this value fluctuation. The difference is that a house is something you'll live in for a long time (probably), that will give you daily joy in a way stocks and bonds won't. Of course, saving up money and investing them is always a good idea anyway. You should still save a small amount every month and put it into low/medium risk bonds, in my opinion. This is slightly opinion based. Is it appropriate to invest small amounts for short periods of time?  At your age and the time period, I would say NO. This is because although the index fund do return 6-7% on average, there are several times it blips and goes negative as well. Stock Markets in short periods like 6 months can be unpredictable. At times a downturn will remain stagnant for periods of 2-3 years before suddenly zoom ahead. If you are not to particular about the time when you need the changes done; i.e. the changes can in worst case wait for few years; then yes investing in Index fund would make sense.  Else you are well off keeping this in savings. Try CD's if they can offer better rates for such durations. Even straight index funds grow at about 6-7%. on average, or over long periods of time.  In short time periods (quarters, years), they can fluctuate anywhere from -10% to +20%.  Would you be happy if your bank account lost 10% of its value the week before you had to pay the bill for the repairs?   Is it appropriate to invest small amounts for short periods of time? In general, no.  Most investments are designed for long term appreciation.   Even sophisticated financial companies can't do any better than 1 or 2% (annualized) on short-term cash reserves. Where you can make a huge difference is on the cost side.  Bargain with suppliers, or wait for sales on retail items.  Both will occasionally forego their margin on certain items in order to try to secure future business, which can make a difference of 20% or more in the cost of repairs. I would agree with the other answers about it being a bad idea to invest in stocks in the short term. However, do consider also long-term repairs. For example, you should be prepared to a repair happening in 20 years in addition to repairs happening in a couple of months. So, if it is at all possible for you to save a bit more, put 2% of the construction cost of a typical new house (just a house, not the land the house is standing on) aside every year into a long-term repair fund and invest it into stocks. I would recommend a low-cost index fund or passive ETF instead of manually picking stocks. When you have a long-term repair that requires large amounts of money but will be good for decades to come, you will take some money out of the long-term repair fund. Where I live, houses cost about 4000 EUR per square meter, but most of that is the land and building permit cost. The actual construction cost is about 2500 EUR per square meter. So, I would put away 50 EUR per square meter every year. So, for example, for a relatively small 50 square meter apartment, that would mean 2500 EUR per year. There are quite many repairs that are long-term repairs. For example, in apartment buildings, plumbing needs to be redone every 40 years or so. Given such a long time period, it makes sense to invest the money into stocks. So, my recommendation would be to have two repair funds: short-term repairs and long-term repairs. Only the long-term repair fund should be invested into stocks.
"shouldn't withdraw stock investments for at least 5 years would be better re-phrased as: ""don't invest money in stocks if you (really) need it within next few years"". The underlying principle is: stocks are one of the higher-risk investment classes out there.  While that's exactly what you want over a long time horizon (longer than the ebb and flow of the broader economy); if you know you'll definitely have to withdraw $50k (or any large chunk) of it within just a few years, it's possible that a great long-term vehicle like stocks, could actually rob you of money on a shorter time horizon. So if you want to start a business 2 years from now, you'll probably want to retain some of that $300k initial pile in lower-risk investment vehicles (e.g. bonds, CDs, certain ETFs and mutual funds aimed at ""capital preservation"", etc). That said, interest rates are so low, that if you're flexible with how much money you'll need to start that business, I'd probably keep as much as you can stomach in diversified stocks (per your original plan)." If you need the money in the short-term, you want to invest in something fairly safe.  These include saving accounts, CDs, and money market funds from someplace like Vanguard.  The last two might give you a slightly better return than the local branch of a national bank. "First: what's your risk tolerance? How long is your investment going to last? If it's a short-term investment (a few years) and you expect to break even (or better) then your risk tolerance is low. You should not invest much money in stocks, even index funds and ""defensive"" stocks. If, however, you're looking for a long-term investment which you will put money into continually over the next 30 years, the amount of stock you purchase at any given time is pretty small, so the money you might lose by timing the market wrong will also be rather small. Also, you probably do a remarkably poor job of knowing when to buy stocks. If you actually knew how to time the market to materially improve your risk-adjusted returns, you've missed your calling; you should be making six figures or more on Wall Street. :)" Yes though I'd likely put a caveat on that. If you take short-term investments and extrapolate the results to get an annual result this can be misleading. For example, if a stock goes up 10% in a month, assuming this will continue for the next 11 months may not be a great idea. Thus, beware of how much data do you have in making these calculations. When looking at long-term investments, the compound annual growth rate can be quite useful for comparison. "Yes... but it is a matter of balancing risks.  It is wiser to keep a small amount of ""ready cash"" as an emergency/buffer -- and to suffer the gradual loss to inflation...  Than it is risk becoming ""stuck"" in an emergency with zero dollars in any (low or no cost) source of funds -- those kinds of ""emergencies"" ($500 or $1,000 ""unexpected/unbudgeted"" expenses) are fairly frequent and virtually inevitable.  You lose vastly MORE money when you are forced to borrow those amounts (interest -- even **low-rate** loans -- is virtually always higher than the average inflation rate)." "Safe short term and ""pay almost nothing"" go hand in hand.  Anything that is safe for the short term will not pay much in interest/appreciation. If you don't know what to do, putting it in a savings account is the safest thing.  The purpose of that isn't to earn money, it's just to store the money while you figure out where to move it to earn money." "You need to have 3 things if you are considering short-term trading (which I absolutely do not recommend): The ability to completely disconnect your emotions from your gains and losses (yes, even your gains but especially your losses). The winning/losing on a daily basis will cause you to start taking unnecessary risk in order to win again. If you can't disconnect your emotions, then this isn't the game for you.  The lowest possible trading costs to enter and exit a position. People will talk about 1% trading costs; that rule-of-thumb doesn't apply anymore. Personally, my trading costs are a total 13.9 basis points to enter and exit a $10,000 position and I think it's still too high (that's just a hair above one-eighth of 1% for you non-traders).  The ability to ""gut-check"" and exit a losing position FAST. Don't hesitate and don't hope for it to go up. GTFO. If you are serious about short-term trading then you must close all positions on a daily basis.  Don't do margin in today's market as many valuations are high and some industries are not trending as they have in the past. The leverage will kill you. It's not a question of ""if"", it's a when.  You're new. Don't trade anything larger than a $5,000 position, no matter what. Don't hold more than 10% of your portfolio in the same industry. Don't be afraid to sit on 50% cash or more for months at a time. Use money market funds to park cash because they are T+1 settlement and most firms will let you trade the stock without cash as long as you effect the money market trade on the same day since stock settlement is T+3." In addition to what quid said, I think your risk tolerance should depend on how likely you are to need the funds in the near future. Say that you have $100k saved up and you want to decide how to invest it. Then you should ask yourself: The idea here is that if you invest say in stocks (high risk) then the value of your position could drop significantly and you'd potentially have to wait for a long time before it recovers. If you are forced to sell you could make a substantial loss. If you don't urgently need this cash, however, then you can feel relaxed and just wait for the market to reverse again. This is viewing risk through the lens of how likely it is that you'll have to wait a long time to get a substantial amount of your money back, which itself is a function of how likely it is for a substantial downturn to occur in a certain market. I like your enthusiasm and initiative. However, there are a few things you need to consider that you haven't yet thought about. First, it is important to remember that trading with fake money is not the same as trading with real money.  In the fake world, you have $100k.  With this fake money, you can do reckless things with it, such as put it all on one stock.  If you lose, it costs you nothing, so you don't have an emotional attachment to it.  With real money, it will feel different, and that is something you haven't experienced yet. Second, you mentioned that you are good at making picks.  With all due respect, I suggest that you aren't old enough to make that determination.  You haven't been trading for long enough to determine if you are doing well at it.  :)  That having been said, I don't want to completely discourage you from trying something new. Third, you mentioned long-term investing, but you also said that you need to make your money back quick and mentioned trading daily.  Those things aren't really compatible.  I wouldn't consider what you are doing as long-term investing.  With the type of investing you are doing, picking individual stocks and hoping for the value to go up in a relatively short time-frame, it is similar to gambling.  The risk of losing is very much there, and you shouldn't be investing money this way that you aren't prepared to lose.  If you need the money for something soon, don't put it in the stock market. Never forget this.  What can happen is that you start with small amounts of money, do well, and then, thinking that you are good at this, put in larger amounts of money.  You will eventually lose.  If you put in money that you need for something else, you have a problem. If you are trying this out for education and entertainment purposes, that is great.  But when it starts to get serious, make sure that you are aware of the risks.  Educate yourself and be smart. Here is what I would suggest: If you want to try this short-term day-trading type investing, and you understand that the money can easily be lost, I would balance that with investing in a more traditional way: Set aside an amount each month to put in a low-expense index mutual fund.  Doing this will have several benefits for you:  As for your specific questions about stock trading with small amounts: Yes, you can trade with small amounts; however, every time you trade, you will be paying a commission.  Even with a discount broker, if you are trading frequently, the commissions you will be paying will be very significant at the dollar amounts you are talking about.  The only way I can see around this would be to try the Robinhood app, which allows you to trade without paying sales commission.  I have no experience with that app. This is just a pedestrian (my) opinion: Yes, It is wise to invest in bond funds even in a low interest environment. Check out the lazy man's portfolio on bogleheads. The reason is: Assuming you have no new cash to add to your account as gyurisc has suggested, I wouldn't sweat the small amounts – it doesn't hurt to have a little cash sit idle, even if you want to theoretically be fully invested (the wisdom of doing that, or not, perhaps worthy of another question :-) If you try too hard to invest the small amounts frequently, you're likely to get killed on fees.  My strategy (if you could call it that) is to simply let small amounts accumulate until there's enough to buy more shares without paying too much commission. For instance, I don't like fees to be more than 1% of the shares purchased, so with a $10 commission per trade, I prefer to make minimum $1000 purchases. I used to roll small amounts of cash into a no-load money market fund I could buy without commission, and then purchase shares when I hit the threshold, but even putting the cash in a money market fund isn't worth the hassle today with rates of return from money market funds being close to zero. "If you're asking this question, you probably aren't ready to be buying individual stock shares, and may not be ready to be investing in the market at all.  Short-term in the stock market is GAMBLING, pure and simple, and gambling against professionals at that. You can reduce your risk if you spend the amount of time and effort the pros do on it, but if you aren't ready to accept losses you shouldn't be playing and if you aren't willing to bet it all on a single throw of the dice you should diversify and accept lower potential gain in exchange for lower risk. (Standard advice: Index funds.)  The way an investor, as opposed to a gambler, deals with a stock price dropping -- or surging upward, or not doing anything! -- is to say ""That's interesting. Given where it is NOW, do I expect it to go up or down from here, and do I think I have someplace to put the money that will do better?"" If you believe the stock will gain value from here, holding it may make more sense than taking your losses.  Specific example: the mortgage-crisis market crash of a few years ago. People who sold because stock prices were dropping and they were scared -- or whose finances forced them to sell during the down period -- were hurt badly. Those of us who were invested for the long term and could afford to leave the money in the market -- or who were brave/contrarian enough to see it as an opportunity to buy at a better price -- came out relatively unscathed; all I have ""lost"" was two years of growth. So: You made your bet. Now you have to decide: Do you really want to ""buy high, sell low"" and take the loss as a learning experience, or do you want to wait and see whether you can sell not-so-low. If you don't know enough about the company to make a fairly rational decision on that front, you probably shouldn't have bought its stock." Yes, you can indeed become rich by investing even small amounts over time. Let's say that you begin with nothing invested, and you start investing $100 per week. Suppose you choose to put your money in an S&P 500 index mutual fund. The CAGR (Compound Annual Growth Rate) of the S&P 500 over the last 35 years has been about 11%. (That 35 years includes at least two fairly serious crashes.) You may get more or less than that number in the future, but let's guess that you'll average 9%. 35 years from now, you would be a millionaire ($1.2 Million, actually). This math works out for anyone, no matter who your parents are, where you are from, where you went to school, etc. Yes, you have a better chance of becoming wealthy the more you invest, the longer you have to stay invested, and the better choices you make in your investments.  By starting early, you will maximize your time invested, which allows you the flexibility to be more conservative in your investments and to invest smaller amounts.  But for those with a shorter time to invest, it is still doable for most people.  Get your financial life under control by eliminating your debt, setting a household budget, and investing for the future. You have a comparatively small sum to invest, and since you're presumably expecting to go to college.university soon, where you may well need the money, you also have a short timescale for your investment. I don't think anything stock-related would be good for you -- you need a longer timescale for stock market investments, at least five years and preferably ten or more. I don't know the details of Australian savings, but I'd suggest just finding a bank that is giving a good interest rate for a one-year fixed-term savings account. Gold's valuation is so stratospheric right now that I wonder if negative numbers (as in, you should short it) are acceptable in the short run.  In the long run I'd say the answer is zero.  The problem with gold is that its only major fundamental value is for making jewelry and the vast majority is just being hoarded in ways that can only be justified by the Greater Fool Theory.  In the long run gold shouldn't return more than inflation because a pile of gold creates no new wealth like the capital that stocks are a claim on and doesn't allow others to create new wealth like money lent via bonds.  It's also not an important and increasingly scarce resource for wealth creation in the global economy like oil and other more useful commodities are. I've halfway-thought about taking a short position in gold, though I haven't taken any position, short or long, in gold for the following reasons: Straight up short-selling of a gold ETF is too risky for me, given its potential for unlimited losses. Some other short strategy like an inverse ETF or put options is also risky, though less so, and ties up a lot of capital.  While I strongly believe such an investment would be profitable, I think the things that will likely rise when the flight-to-safety is over and gold comes back to Earth (mainly stocks, especially in the more beaten-down sectors of the economy) will be equally profitable with less risk than taking one of these positions in gold.