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A common misconception is that investing is complicated and only for people who have a lot of money to invest. However, if you aren’t investing your money, you’re leaving money on the table in the long run. While you think investing seems pointless right now, it’s important to remember that even small investments can grow over time, creating long-term wealth. If you have $1,000 or less to invest, here we’ll teach you how to start investing with little money.
1. Make Small Contributions
While you should always prioritize an emergency fund and paying off high-interest debt first, any other extra money in your budget can be allocated toward investing. Start off with small contributions and find an easy-to-use brokerage platform like Vanguard, Fidelity, or Charles Schwab.
2. Use Micro Investing Apps
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Investing apps like Robinhood and Acorns allow you to invest small amounts of money and buy fractional shares. More than ever, investing has become very user-friendly. You can easily track your investments, trade shares, and see your money grow. You can even use robo-advisors like Betterment and Wealthfront to automate your investing.
3. Consider Real Estate Crowdfunding
Real Estate crowdfunding allows you to own a share of investment real estate properties with other investors. Several sites make real estate crowdfunding possible like Fundrise. Fundrise allows investors to easily get started with real estate crowdfunding and start buying into both residential and commercial properties. The money you invest is pooled into REITs and used to purchase properties, buy land, and develop real estate. It’s important to do your research on an investment before making the commitment.
4. Contribute to a Retirement Account
Contributing to your employer’s retirement plan can be a great first step to investing. If you’re setting up a new account, there are several different options of types of retirement plans. Things like your plan, employer match, time until retirement, and maximum yearly contributions, will determine how much you should contribute to plan for the future.
5. Start with Index Funds
Some consider index funds boring investments, but they are relatively safe. An index fund is a fund that has a group of companies within it and tracks the performance of the entire group. One of the most popular, the S&P 500, consists of 500 companies in the United States across many industries. The average yearly return of the S&P 500 over the last 30 years is 10.7%. So, even with a small investment, over time you will see good returns. You should stay away from mutual funds that have significant management fees.
6. Buy Bonds or Certificates of Deposit (CDs)
Bonds and CDs are a good investment choice due to their low risk and stable returns. Many bonds have very low entry costs, so a small investment is allowed. The same is true with CDs. Most CDs are offered by banks for as little as $100. Both bonds and CDs have varying terms as far as short-term or long-term investments. This allows you flexibility in choosing the length of your investment. You might also consider creating a bond or CD ladder.
7. Invest in Exchange-Traded Funds (ETFs)
An ETF is a basket of securities that seeks to track or outperform an index. You can track anything with an ETF such as a single industry like tech. ETFs trade like stocks so you can buy and sell at any time. Plus, you can buy single shares or fractional shares. Many ETFs have low expense ratios, or fewer fees. They have good long-term potential and minimal risk as well.
8. Start a Money Market Account (MMA)
An MMA is a type of savings account that has higher interest rates than typical savings accounts. If you want a safe place to grow your cash that keeps it accessible, an MMA could be a good choice. There are limits to how much you can withdraw per month and minimum balance requirements.
How to Start Investing with Little Money
Investing doesn’t have to be complicated or require a lot of money. Start with the basics and understand the risks versus rewards of the investments you choose. By choosing low-cost diversified investments and listening to trusted advisors and sources, you can build long-term wealth. So, now that you know how to start investing with little money, choose your investments and watch your money grow.
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