How can you invest when you have more than a few dollars, but not the thousands that traditional investment vehicles typically require? That is the question I want to address in this article.
I had a similar misconception when I started investing that you needed thousands of dollars to get started, therefore I wondered how to invest $10K or $100K.
You can also check out my post on the best short-term investments for your money!
I can now help you with these similar concerns and thoughts because I know more about the financial sector.
I was amazed to learn that I could start using mutual funds to make investments in the stock market with just $50 a month.
That’s exactly what I did as well. Even though I later discovered that the mutual funds were at best mediocre, the fact that I began making investments in myself was really important to me.
And for many, it’s that initial move that keeps them from later accumulating riches.
Investing in yourself doesn’t cost thousands, it just takes getting started.
Small quantities of money will be defined for this discussion as anything greater than $100 but less than $1,000. Here are 15 ideas for investing small sums of money based on that criterion.
Do you require assistance acquiring some extra money to do your investment? Take a look at this advice on how to make money fast!
1. Use the Betterment ETF Portfolios to automate your investing
Numerous “Robo Advisers,” or online investment platforms, provide expert portfolio management for relatively minimal costs.
Betterment is among the finest for novice investors.
You begin by responding to an online questionnaire that the website uses to gauge your risk tolerance.
Your portfolio is built for you using an allocation that comprises many different exchange-traded funds based on your evaluation (ETFs). ETFs are essentially a diversified portfolio of stocks that you don’t have to manage when you buy them.
Due to this allocation, you just need to finance your account; choosing your investments or rebalancing your portfolio are not your concerns.
With its Betterment Core, Goldman Sachs Smart Beta, and Innovative Technology portfolios, they currently provide a range of investment options:
These portfolios give you access to well-known ETFs from iShares and Vanguard, two well-known names in the investment world.
Actually, there is no minimum initial account deposit requirement for Betterment Investments. And in case you overlooked that…
At Betterment, you may begin investing with just $0.
By agreeing to make monthly donations of as low as $100, you can start an account. On accounts with balances under $100,000, the annual administration fee to retain your account is 0.25 percent of your account balance.
They also have a “No-fee” checking account that pays a competitive variable rate higher than what your bank is offering (currently 0.35%) if you aren’t ready to invest.
A sliding scale determines the maintenance cost, which decreases as your account balance increases.
2. M1 Finance’s Balanced Stock Portfolio
A fantastic new viewpoint on investing has been introduced by M1 Finance. Similar to Betterment, they let you invest automatically in a variety of sectors, but the brokerage also lets you trade stocks and ETFs without paying any fees. Free, that’s right.
By far, M1 Finance offers the broadest selection of no-fee investments of any brokerage.
Additionally, M1Finance enables you to buy stock in fractional shares. Accordingly, if Apple stock is now trading at $400 a share, you can invest $50 in the company and own 12.5% of a share.
Finally, before making any investments, M1 Finance offers a free financial analysis.
3. Create a $10 real estate portfolio
Real estate investing is simple with Fundrise.
You can invest in real estate through this real estate investment trust without flipping homes or taking on rental property. Fundrise is an easy way to invest in real estate projects. You benefit whenever they gain financial gain.
You could wonder, exactly how much money? Depending on the project you participate in, your returns will vary, but Fundrise investors made an average return of over 11% last year owing to technology that identifies valuable real estate projects for you to invest in depending on your objectives.
The low minimum of Fundrise is arguably its best feature. Real estate investing isn’t cheap, as you may have discovered if you’ve ever tried your hand at it.
However, Fundrise provides a platform for investors who might not have access to thousands of dollars. Fundrise accepts investments starting at just $10. Normally, you would need $1,000 in order to invest with them, but their “Starter Portfolio” is presently allowing smaller investors in.
Fundrise will invest in the most suitable initiatives for you, but you can also take a more active role by picking the projects you want to support.
4. Paying Off Debt
To repay debt, there are two good reasons. The first is that if you have debt, especially unsecured debt, you shouldn’t invest.
The second justification is that paying down debt is the best approach to assure an above-average return on your investment.
There are no sure venues for the average investor to generate double-digit returns, which is especially true if the interest rate is in the double digits.
Consider that you have a $1,000 credit card balance with a 15.99% annual interest rate. By paying off the card, you’ll essentially lock in a 16% rate of return on your investment.
Consider applying for a personal loan with a lower interest rate and utilizing the funds to pay off the debt with a higher interest rate if you have a debt with a high-interest rate.
You can evaluate personal loans, credit cards, savings accounts, and student loan refinancing possibilities for hundreds of lenders using a business called Fiona. All in a matter of seconds.
5. Savings Accounts
You won’t be able to make much money off of your bank investments, that much is certain.
The benefit that banks provide is that you can open a savings account with very little capital, earn a small amount of interest, and experience no risk of loss.
Sincerely, savings accounts aren’t the most thrilling type of investing.
The best use of a savings account is to use it to store more money in order to make future investments with higher risk/higher reward.
The first investment for some of the investments on this list will be $500 or $1,000. Even if that is a tiny sum of money, if you are just getting started and have a modest investment, it may be advisable to take your time to accumulate a small sum of money and broaden your investing alternatives.
6. Sponsored Retirement Plan by Your Employer
If you have little money or even none at all, this is arguably the simplest way to invest it. This is due to the fact that it’s typically set up as a payroll deduction, allowing you to designate a portion of your income to go toward the retirement plan.
Almost any portion of your income can be designated, from as little as 1% to 20% or more, depending on the employer plan’s restrictions.
The tax advantages are the best part! Your contributions are not only tax deductible, but until you start taking money out of your investments after retirement, the income they generate is also not taxed.
Additionally, if your employer matches your savings, it will be like receiving a gift just for trying to save a little.
No of how much money you have to invest, one of your first moves should be to fund your employer-sponsored retirement plan.
7. Get a Roth (or Traditional) IRA
Start investing with a Traditional or Roth IRA.
You can almost always create your own retirement plan if your employer does not offer one. You only need to have earned income to qualify.
Either a standard IRA or a Roth IRA are the two best options for the majority of people. Any investment gains you make are tax-deferred up until the time you start taking distributions from the account in retirement, much like in an employer-sponsored retirement plan.
Additionally, traditional IRA contributions are typically entirely tax deductible.
Although Roth IRA contributions are not tax deductible, withdrawals are tax-free if you are at least 59 and 12 years old when you make them and have been a participant in the plan for at least five years.
Holla! Roth IRAs provide tax-free money at retirement.
A self-directed traditional or Roth IRA can be held in a brokerage account that provides almost limitless investment options, even though there is no employer-matching contribution (since there is no employer).
A standard or Roth IRA allows for annual contributions of up to $6,000 ($7,000 if you are 50 or older), so you can quickly accumulate a sizeable portfolio.
Additionally, there is a very minimal entry cost with the finest Roth IRA providers. Betterment, M1 Finance, and Fundrise are just a few of the investment alternatives we’ve suggested thus far that all include Roth IRA accounts. For all of the tiny investors out there, this is big!
8. Lending Club
Lending Club is an online peer-to-peer (P2P) lending marketplace where borrowers apply for loans and investors, often known as lenders, fund those loans.
Investors receive a high return on their money in exchange. Double-digit return rates are not uncommon with Lending Club.
A single loan (or note) can be purchased for as little as $25, so with a $1,000 initial investment, you can diversify your portfolio among 40 different notes.
Lending Club’s drawback is that many states have minimum net worth restrictions before you may invest on the programme.
Because of this, even while the actual amount you can invest is little, you might still need to demonstrate a sizeable financial basis in order to take part.
Similar to Lending Club, Prosper also operates online.
You can spread a few hundred dollars among numerous loans by investing as little as $25. Additionally, there is a minimum net worth requirement that varies by state.
According to Prosper, the typical yearly return on a note is close to 16%, which is a fantastic rate of return on a fixed-rate investment.
In the event that one or more of the loans you hold default, you run the risk of losing your principal with Prosper and Lending Club.
Your investment is not protected by the FDIC in the same way that bank investments are. I also completed Prosper reviews for lenders and borrowers. There, you can learn about the platform in its entirety.
10. US Treasury Securities
You can invest in US Treasury Securities if you’re searching for a more cautious investment where your money is shielded from market fluctuations.
These are debt instruments that the US Treasury Department has issued to pay off the country’s debt. Securities can mature between 30 days and 30 years (longer-term maturities do involve a risk of principal if you sell before maturity).
Through the portal Treasury Direct, run by the US Treasury Department, you can invest in these assets. You can purchase US government securities using the platform in amounts as low as $100.
There are no early withdrawal penalties if you sell your securities there as well.
You can purchase Treasury Inflation-Protected Securities (TIPS) through Treasury Direct as well. In addition to paying interest, these also periodically update the principle balance to reflect inflation based on changes in the Consumer Price Index.
11. Investing in Your Own Skills
Are there any talents you could learn to help you advance to the next stage of your career? Consider taking a public speaking or sales course, learning a new computer program, or learning a foreign language.
You might learn particular career-enhancing abilities that would help you advance in your current position or even move on to a different, higher-paying job with a different employer.
It usually only costs a few hundred dollars to enroll in a course to obtain that kind of talent.
12. Dividend Reinvestment Plans
These programmes, also referred to as DRIPS, let you put small sums of money into dividend-paying company stocks.
If you want to invest directly in stocks and you prefer particular firms, you can invest in those companies – typically without having to pay any form of investing fees – because many significant corporations provide DRIPS.
DRIPS often allow you to gradually increase your investment by making small, regular installments. Payroll deductions can frequently be used to accomplish this.
This is a great technique to dollar cost average your way into making sizable investments in well-known corporations. Additionally, your dividend earnings will be automatically reinvested to purchase additional shares of the company.
13. Low Minimum Investment Mutual Funds and ETFs
The minimum initial investment varies between mutual funds and ETFs. While many do need that you have several thousand dollars to open an account, some let you do so with much less.
The Schwab Total Stock Market Index is one illustration (SWTSX). With such a low needed minimum, you could distribute $1,000 among ten different funds.
To find out whether funds are available with a minimum initial commitment of $1,000 or less, you can check with any big mutual fund family and even certain investment brokerage businesses.
Since index funds are the best play on the market as a whole, they can be your best bet.
14. Online Brokerage Firms
The fact that you may actually start an account with an internet brokerage business for $1,000 or less may come as a surprise to many modest investors.
For instance, opening an account with Charles Schwab requires a $1,000 minimum initial deposit, but even that can be waived if you set up a direct deposit or Schwab MoneyLink automatic monthly transfer of $100, or if you open a Schwab Bank High Yield Investor Checking account linked to your brokerage account.
Additionally, there is no minimum initial deposit required to start a brokerage account with TD Ameritrade.
The benefit of investing through a brokerage company is that you will have access to a greater range of investment options than you would typically have with just direct investments.
15. Your Own Business
I’ve talked about investing in other companies so far, but starting your own firm may be the greatest option if you just have a little sum of money to invest. Who better to invest in than yourself, after all?
For instance, you might purchase a quality lawnmower for a few hundred dollars and start mowing lawns to make money.
You may quickly accumulate more than $5,000 to invest with just few hundred dollars of investments.
You might even launch a website with the exclusive purpose of selling a particular product line. Or you might develop affiliate sales agreements using a blog that you start.
If it seems like fun, you could visit garage sales, estate sales, flea markets, and thrift shops, or you could shop for interesting items and then sell them on eBay or Craigslist for a profit.
It’s simpler than ever to launch your own home-based business on a budget thanks to technological advancements and the expansion of the Internet.
Starting your own firm with just a few hundred dollars to spend could be the most successful investment of all. A lot of entrepreneurs start out by taking on a part-time job or working on the side to earn extra money to get their firm off the ground.
Being an Uber driver is a terrific side job since you can set your own hours, relax while you drive, and make extra money towards your ambition.
So here you have 15 ways to invest small amounts of money, so there’s no restrictions on your ability to invest. Here are several methods you can use to start investing, one of those hobbies where starting is the most crucial stage.