When many people begin to be interested in investing, the assumption is you need a lot of money to get started. It's true that most financial advisors would recommend investing with a nice amount of savings, and many may even have investment minimums. However, you can get started investing with just a little bit of money and still start to impact your future financial health.
At first, when you invest with little money, your results and progress will be a bit slow. But the longer you continue to invest, stay consistent, and let compound interest take over — you’ll be surprised at how much your money can grow!
As you make more money and continue to budget, you should also increase how much you invest. But it’s okay to start small and work your way to more significant contributions. In this article, you’ll find tips to start investing with little money and your best options to get started.
How Can I Start Investing With Little Money?
So you are ready to start investing but want the best options with low minimums to get started — what are your options? Fortunately, with financial regulations and new investing platforms, you have quite a few choices to consider.
And pending the amount of money you can afford to invest, your personal finance goals, and risk tolerance — some platforms and apps might be better for you than others. Read through these options carefully and pick the ones best suited for you.
1. Via Online Banking
I know you might be thinking that online banking features are not what you think of when it comes to investing. But hear me out. You technically have options to add your money that collects interest and can compound like traditional investing. Plus, it’s less risky.
Of course, with less risk comes smaller returns. But that’s okay! Your online banking options might be the best place for you to start investing with little money first. Here are two investment account types you might want to consider:
2. High-Yield Savings
The average interest rate for savings accounts is 0.1 percent, according to Bankrate. Ouch! And during the COVID-19 pandemic, you’ve probably seen many banks drop interest rates as well.
But if you are looking to build your emergency fund or saving for a big purchase but want to collect some interest, a high-yield savings account is the way to go. These are typically online-only banks that can offer much higher interest than average banks. Ranges can be close to 1% and even closer to 3%.
3. Certificates of Deposit (CDs)
Another option with banking is investing in a certificate of deposit or a CD. Your money will be locked in for a set period of time, but you can get a fixed rate on your principal which will help you see how much money you can expect once your CD reaches the maturity date (or target date).
Essentially, you loan the bank a set amount of money, and after some time, you get that back plus interest. Again, you won’t get returns as you would in the stock market, but there is much less risk involved, and it doesn’t take a lot of money to get started. Typically the lowest you can go is $500-$1,000. You can open a CD with CIT Bank, which offers various options for you.
4. Employer’s Retirement Plan
Naturally, one of the best places to typically invest first is if your employer offers a retirement plan, like a 401k. Many businesses will even offer a company match on your investments up to a certain percent, which can elevate your retirement savings.
With most 401ks, you will have access to individual stocks, bonds, ETFs, and mutual funds. These can all have different share prices and, pending your retirement provider — additional fees.
Index funds and mutual funds typically have minimum investments to get access to it, like $1,000. But you can also invest with less money in ETFs, which give you similar diversification. Many will cost a fraction of a mutual fund to invest in too.
Tip: Have a 401k or IRA? Make sure you are fully optimizing your retirement and aren’t paying any hidden fees. Blooom’s free retirement analyzer can help you monitor your portfolio and keep you on track.
5. Micro Investing Apps
In the past few years, new financial companies have emerged to change the game for everyday investors. These platforms are typically dubbed micro-investing, which allows the investor to purchase fractional shares of stocks or ETFs.
Now you can still own great stocks or funds, even if you don’t have the total trading amount or asset price. One of the leaders in this space is Robinhood, a brokerage account that has paved the way for this niche with commission-free trades. However, they’ve certainly had their fair share of controversies too.
Other solid micro-investing platforms include:
- Acorns — A micro-investing app that allows you to invest with no minimums, invest spare change, and more. Get $10 towards your first investment when you sign-up and invest $10.
- Stash – Start investing in fractional shares with just $1, round up spare change, etc. Get $5 towards your first investment
- Public – Public is a social investing app that makes it possible to own the companies you believe in with any amount of money. Like the others, you’ll buy slices of stocks or ETFs. And you can invest based on themes like American Made, Green Power, Gene Therapy, and more.
Not everyone is interested in managing or learning everything about investing. This sentiment has led to the creation of Robo-advisors, which will automatically invest and rebalance based on your specific goals. Pending which platform you choose, each will have different (or similar) investment requirements to get started. But these usually allow you to start investing with little money.
Here are some great options to consider.
- Ally Invest – their managed portfolios allow you to invest with as little as $100 and no advisory fees. You choose the portfolio that matches your needs, and Ally Invest does the rest.
- M1 Finance – allows you to invest in fractional shares or “slices” of stocks or ETFs for as little as $100. It also offers complete automatic investing with rebalancing and other support features.
- WealthSimple – investing in auto-pilot, so you can spend less time worrying about it. Auto-investing, rebalancing, and human experts as well to answer any questions. You can invest based on your values, invest spare change, and more. You can open an account with $0 and invest as much as you want.
7. Real Estate
You probably saw real estate on here and were a bit confused at first. But yes, you can invest in real estate with little money as well. While you aren’t necessarily buying the properties directly, you can own a piece, take advantage of the higher returns, and deal with none of the maintenance or headaches with property management.
With some real estate crowdfunding platforms, you can invest as low as $10, and for others, you’ll need a minimum of $500, pending what kind of real estate you are interested in. For example, with Groundfloor, you can invest with just $10 into short-term loans for single-family homes. It’s a cheap way to dabble in real estate without risking a ton of money.
Your other options are investing in commercial buildings, apartment buildings, etc., through popular sites like Fundrise and DiversyFund. Both have a minimum $500 entry, which is still a bit of money but is much lower than trying to buy properties yourself. Both those platforms have pros and cons but are great ways to invest with little money and diversify your assets, as these don’t typically correlate with the stock market movement.
8. Alternative Investments
While investing in the stock market and real estate might be the more popular choices, you can invest a little money in alternatives too. These are investments that do not follow traditional assets like stocks or bonds. That being said, you should start with traditional outlets before alternative investments, but as you get more comfortable and want to diversify, looking into other options to invest in can be a good idea.
And once again, crowdfunding strikes with ways for you to start investing with little money in other asset classes. For example, thanks to Masterworks, you can invest in well-known fine art for as little as $20 per share. Some art pieces may have minimum investment amounts, but you can own a piece of history from artists like Andy Warhol, Vincent Van Gogh, and others their art experts purchase.
Tips to Invest With Little Money
Depending on where you are financially and your income, what constitutes “little money” is viewed quite differently from person to person. But most of the ways you can invest with little money can start as low as $10 and go up to about $1,000. While the latter may seem like a lot currently for you, don’t worry! As you learned from above, you still have plenty of options that won’t cost that much upfront.
When you are investing with little money, you want to be smart about your investments. Here are some additional tips to think about as you get started.
- Avoid unnecessary risks in individual stocks
- Create a budget and work on finding extra money you can start investing
- Be consistent with your investment amounts, slowly increase over time
- Keep your investment portfolio simple, no need to overcomplicate it
While investing has risks, not investing or starting puts you at more risk when your future retirement is here. Don’t worry about having a lot of money to get started; as you can see from above, it’s possible to develop good financial habits and start investing with a small amount of money.
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