New investors often face the dilemma of having little money to start with. How can you get started in investing when you don't have a lot of money?
Thankfully, there are investing strategies that can work for you, even if you don't have a lot to start with.
Investing essentially boils down to swapping out a chunk of your money for a bigger piece of a pie later down the line, while funding the ideas and pursuits you believe in.
Of course, there’s a big risk factor involved, and your investments don’t always wind up being so simple and great at the end of the process.
The fact is if you’re going to need small investment opportunities that are safe and smart, especially if you don’t have much money to part ways with.
Why is Investing Important?
Before we get started, let’s briefly address one key question: why invest?
If you've been watching the news you have seen that inflation is eating away at the purchasing power of money. Inflation has hit a 40 year high last month of 8.6%.
Investing is one way to ensure that your money keeps up with inflation. Over time, investments have historically grown faster than inflation. This means that if you invest $500 today, it will be worth more in the future after inflation.
So, just why is investing so important?
Many people think that investing is only for wealthy people or for those who are saving for retirement. However, investing can be a great way to build wealth over time, and it can be a helpful tool for anyone who wants to reach their financial goals.
When you invest, you are essentially putting your money into something that has the potential to grow over time. This can be done through stocks, bonds, mutual funds, and other types of investments.
Over time, these investments can compound, which means that they can earn interest on the original investment plus any previous earnings. This can help you to build wealth more quickly than if you simply let your money sit in a savings account.
In addition, investing can also provide you with income and protection against inflation. By diversifying your portfolio, you can minimize your risk while still having the opportunity to earn a return on your investment. For this reason, investing is an important part of building long-term wealth.
It's time to look at the best time to begin investing once you understand why you should be doing it (hint: it's earlier than you think).
When Should You Start Investing?
Personal finance isn't so difficult. It's mostly common sense. You know that you should be saving for retirement and you have a good idea of how much you'll need to have saved.
But what about investing? How do you get started? And when is the best time to start investing?
The answer may surprise you. The best time to start investing is now!
Of course, this doesn't mean that you should invest all of your savings into penny stocks or meme stocks like GameStop (GME) or AMC. But it does mean that you should begin learning about investing and consider putting some of your money into investments such as individual stocks, mutual funds, and exchange traded funds (ETFs).
Investing can seem daunting, especially if you've never done it before. But there are plenty of resources available to help you get started, including books, websites, robo advisors and even investing apps.
One of the best ways to learn about investing is to simply start doing it. Thanks to technology, it's easier than ever to invest without paying high fees or commissions.
Here is how to invest your money and build a diversified portfolio with very little money.
How to Invest Money with Limited Funds
It’s difficult to argue against the benefits of long-term investing.
Historically, most people who have taken a long-term view of investing have ended up making money.
The most important thing is to make sure that you are armed with the right information and the best possible investment options before making any decisions.
Here are a few ways to help you start investing with little money.
1. The Good Ol’ Fashion Cookie Jar Approach
Saving and investing go hand-in-hand. Your first step before investing is making sure you have emergency savings built up. If you don't, make that your first step before investing anything.
Just like you would save your money in a cookie jar as a child, you can now save it in a savings account that acts the same way.
It even pays to stash your cash in a savings account nowadays. A savings account gives you the opportunity to earn a certain amount of interest every month. Moreover, you do not risk losing your money at all.
The best savings accounts are those which grow your money, give you the freedom to do with it as you like and don't cost a lot to maintain.
Consider opening a new high-yield savings account today and start maximizing your interest.
Here are the top savings accounts for 2022
2. Dividend Stocks are Key
Dividends are a great way to start earning money from your investments without having to put in a lot of work.
Dividend stocks are shares of a company's stock that are paid out to shareholders on a regular basis. Typically, dividend stocks are issued quarterly (every three months).
The benefit of owning dividend stocks is that you can receive regular payments without having to sell your shares. This is a great way to build long-term wealth and generate income from your investments.
Furthermore, dividend stocks tend to be less volatile than non-dividend stocks, which means they are less risky and they are easier to monitor by using free dividend trackers.
There are companies whose performance on the stock market is consistently good. These companies offer dividends to their shareholders.
These are the highest dividend-paying stocks in the S&P 500:
- Philip Morris International Inc (PM)
- Vornado Realty Trust (VNO)
- Simon Property Group Inc (SPG)
- International Business Machines Corp (IBM)
- Oneok Inc (OKE)
- Kinder Morgan Inc (KMI)
- AT&T Inc (T)
- Altria Group Inc (MO)
You can start small by buying just one stock or a fractional share and reinvesting the dividend you earn to buy more. This is a brilliant way to build your investment portfolio without crippling your bank account.
3. Peer-to-Peer Lending with Low Initial-Investment Amount
Peer-to-peer lending is a newish form of investing. It involves lending money to others via an online platform.
You can start with as little as $25 and watch your money grow over time. The average return on investment for peer-to-peer lending is around 8%, which is higher than what you would earn from most savings account interest rates.
Companies such as Prosper and Lending Club offer automated programs where you can invest as little as $25.
You can lend to a number of people and earn a higher rate of returns from the interest. In addition, your risk is spread out over many people, which lowers the chance of losing your original investment.
4. Start a Business with Little Money
Starting your own business is a great way to invest in yourself and make money. With the rise of the internet, it's easier than ever to start a business with little money.
Blogging is a great way to make money from home. You can start a blog for as little as $3 per month with Bluehost. Once you've started your blog, you can monetize it with affiliate marketing, ads, or selling digital products.
If you're looking for something more hands-off, you could start an eCommerce store. Shopify offers a 14-day free trial after which plans start at just $29 per month, and you can use their platform to sell physical or digital products.
Dropshipping is another great option for those looking to start an eCommerce business. With dropshipping, you create an online store and partner with a supplier who will handle the inventory and shipping for you.
There are a ton of small investment ideas for you to consider.
5. Use a Robo Advisor and Invest with Only $10
We all heard the old saying “make your money work for you” right? Investing can sound tough if you don't have a lot of money lying around. But micro-investing can be for everyone — even if you only have $10 to spare, to begin with.
With a robo advisor, you can start investing with little money. A robo advisor is an online service that will automatically invest your money for you.
The best robo-advisors like Titan, M1 Finance, and SoFi can take care of many of the tedious tasks that you would normally work with a normal advisor on, such as account management, goal setting, and portfolio management.
Robo advisors are a great way to start investing with little money because they are low-cost and easy to use. They will also automatically invest your money for you, which makes it a hands-off way to grow your investment portfolio.
6. Sponsored Retirement Plan (401k)
If your employer offers a 401k plan, this is one of the best ways to start investing with little money. Most 401k plans have a minimum contribution amount of $25-$50.
With a 401k, you can choose to have your contributions automatically deducted from your paycheck. This makes it easy to save and invest for retirement without thinking about it.
Your employer may also offer a matching contribution, which is an added bonus. A matching contribution is when your employer matches a certain percentage of the money you contribute to your 401k, up to a certain amount. It can be considered free money to some people.
For example, if your employer offers a 50% match on contributions up to 6% of your salary, and you make $50,000 per year, your employer would contribute $1,500 to your 401k account (6% x $50,000 = $3,000; $3,000 x 50% employer match = $1,500).
7. Personal Retirement Plan (Traditional or Roth IRA)
You can open a Traditional IRA or a Roth IRA. Both have different rules and benefits, but both are great ways to save for retirement.
With a Traditional IRA, you can make tax-deductible contributions. This means that your contribution amount will be reduced by the amount of taxes you owe.
For example, if you owe $1,000 in taxes and you contribute $3,000 to your Traditional IRA, your taxable income will be reduced by $2,000 ($3,000 – $1,000 = $2,000).
With a Roth IRA, you don't get a tax deduction for your contributions. But, your withdrawals in retirement are tax-free.
For example, if you contribute $3,000 to your Roth IRA and it grows to $10,000 by the time you retire, you can withdraw the entire $10,000 tax-free.
You can open an IRA with any investment company, such as Vanguard, Fidelity, or Charles Schwab. Most companies require a minimum $1,000 investment to get started.
Additionally, you may want an additional plan to ensure that your retirement years are well taken care of adequately. You can see different types of IRAs that can help you build your retirement nest egg.
8. Flipping Money
There are a number of different ways that you can make money by flipping it. This means that you find an opportunity where you can purchase something for a low cost and then sell it for a higher price.
You may be able to find items to flip at garage sales, thrift stores, or online marketplaces. Once you find an item, you will need to list it for sale at a price that is higher than what you paid for it.
Use selling apps, such as OfferUp and Facebook Marketplace, to list your items for sale and get a profit.
If you are good at finding items to flip and selling them quickly, you can make a nice profit. Just be sure to factor in the cost of your time when pricing items.
9. Treasury Securities
Treasury securities are a type of government bond. They are considered to be very safe investments because they are backed by the full faith and credit of the US government.
Treasury securities come in different forms, such as Treasury bills, notes, and bonds. They all have different maturity dates and interest rates.
You can purchase treasury securities directly from the US Treasury through their website.
You can also purchase them through an online broker. Treasury securities are a great way to invest your money if you are looking for a safe investment.
With treasury securities, your principal is protected from market upheavals. You can buy short-term or long-term securities but beware that long-term ones involve a risk of principal should you sell before maturity.
10. Dividend Reinvestment
Also known as DRIPS, these plans make it possible for investors to invest small amounts of money into stocks that will pay dividends.
You are not required to pay any kind of investment fees. If you like certain companies, you can invest in their stocks directly.
When you earn your dividends, your money is reinvested right back into the company. You can build a large amount of money with time.
11. Buy Books
Buying books is on this list because it can be a great way to invest in yourself. By reading books, you can gain knowledge and wisdom that will help you in all areas of your life.
This includes your personal life, your professional life, and your financial life.
When it comes to your finances, there are a lot of great books out there that can teach you how to save money, invest money, and make wise decisions with your money.
There are many self-help books that can arm your skills to improve yourself and by extension, your financial state.
The best personal finance books that can help change your mindset for the better include:
- Think and Grow Rich by Napoleon Hill
- Rich Dad Poor Dad by Robert T. Kiyosaki
- Total Money Makeover by Dave Ramsay
12. Buy Individual Stocks
Imagine buying Amazon, Disney or Netflix years ago…
If you want to invest in stocks, but don't want to pay a lot of fees, you can use an online broker. An online broker is a website that allows you to buy and sell stocks without having to pay a commission.
This means that you can buy and sell stocks for a lower cost. There are a number of different online brokers that you can choose from.
You'll want to stick with one that is reliable and has low fees. Since you are investing with little money, you'll want to make sure that you don't have to pay a lot in fees.
Here are the best online brokerages for stock trading
13. Invest in Your Own Business
While it is great to invest in large conglomerates that can earn you dividends, nothing beats investing in your own ventures.
You can invest in your business by adding inventory or purchasing a much-needed item.
Moreover, you can invest that money into a website for your business and learn to sell your products or services online.
Cryptocurrency is a type of digital money that uses cryptography to secure its transactions. Cryptocurrency is decentralized, which means it is not subject to government or financial institution control.
Bitcoin, Litecoin, and Ethereum are all examples of cryptocurrency.
Cryptocurrency is a great way to invest your money if you are looking for something that has the potential to grow in value.
Just be sure to do your research before investing, as the market can be volatile. The best place to buy Bitcoin is through a Bitcoin exchange like Coinbase, TradeStation, or Gemini.
Fees: 0.5% (lowest)
Crypto exchanges are online platforms that allow you to buy and sell Bitcoin. Investing some money into crypto can be a great way to grow your money.
15. Real Estate Investing
There are many real estate investing apps that can help you get started with little money. These apps allow you to invest in real estate without having to put down a large amount of money.
Real estate investing historically has been a great way to build wealth. However, it can be difficult to get started if you don't have a lot of money.
Thankfully, there are now many real estate investing apps like Fundrise that can help you get started with little money.
Fundrise is a real, much better and desirable alternative to stock market investment. With Fundrise, you deal in the private real estate market that allows you to invest just like the super successful institutions.
You don’t have to be a millionaire to invest in these types of properties. You can now invest in large-scale real estate for as little as $10 with Fundrise.
Through their real estate investment products, investors earned an average of 8 – 11 percent on their money last year, and all without painting a wall or dealing with unruly tenants.
There is a reason why they currently have over 200,000+ users, this is a great way to invest that really pays you even if you have modest funds.
16. Invest Your Spare Change with Acorns
Acorns automatically invests your spare change and lets you invest as little as $5 any time or on a recurring basis into a portfolio of ETFs.
CNBC calls it “the new millennial investing strategy.”
Once you connect the app to a debit or credit card, it rounds up your purchases to the nearest dollar and funnels your digital change into an investment account.
Once you get the process automated, Acorns investments make your digital change work for you. Remember, you’ll get a $10 bonus when you sign up and make your first investment.
The sooner you start investing, the sooner your money can start to grow toward your goals.
This is one of the best ways to start investing with little money. Sign up to try it risk-free with a $10 sign up bonus.
17. Play it Safe with Mutual Funds
The next useful tip is to be risk-averse with your investment capital (even if it's small) and consider investing in mutual funds. These allow you to invest in a professionally managed investment fund that pools money from many investors to purchase securities.
This is a safer method of investing, as you’ll be part of a group of shareholders overseen by an expert rather than going it alone. As with anything, the first rule is to be safe and happy, and mutual funds help with that.
18. Put Your Money in Exchange-Traded Funds (ETFs)
Exchange Traded Funds are another straight and narrow investment method. Depending on which broker you choose, you can choose between high risk or low-risk investments, lump sums or a series of regular monthly investments.
Also, you can even keep track of your performance daily. In the end, there’s a bit more flexibility here, as well as something of a safety net in case things go wrong.
In the end, ETFs are used as safe investment vehicles and are a good way to invest small and large sums of money.
What are the Best Investing Strategies for Beginners?
The best investing strategy for beginners is to start small and invest in a mix of different asset types. This will help you build up a diversified portfolio that can weather market ups and downs.
Once you have a solid foundation, you can start adding more aggressive investments like stocks and real estate. Just remember to keep your overall risk level in mind so that you don't get in over your head.
You'll likely want to start investing through your employer's retirement plan.
Start with Your Employer’s Retirement Plan
If your employer offers a retirement plan, such as a 401(k) or 403(b), that’s often the best place to start investing. That’s because many employers offer matching contributions, which can give your investment a boost.
For example, if your company offers a 50% match on 401(k) contributions up to 6% of your salary, that’s effectively like getting a 50% return on your investment – not too shabby!
Another advantage of employer-sponsored retirement plans is that they typically offer a wide range of investment options, which can make it easier to diversify your portfolio. And if you leave your job, you’ll usually have the option to roll over your account balance into an IRA, which will give you more control over your investments.
Bottom line: If your employer offers a retirement plan, it’s generally a good idea to take advantage of it.
What are the Worst Investing Strategies for Beginners?
Most experts suggest avoiding include putting all of your money into one asset, investing based on emotion instead of analysis, and taking on too much risk.
These strategies often lead to quick losses that can be difficult to recover from. If you're just starting out, it's important to take things slow and steady so that you can build a solid foundation for your future success.
Ready to Start Investing with Little Money?
If you’re investing with little money, then chances are you may not have much to spare. That’s okay and there’s no shame in that, and while there are still avenues to explore, it’s important not to rush into anything.
It's important to be completely aware of the ‘little money’ side of things, because, in the world of investing, it can always be tempting to add that little bit of extra money when the mildest scent of a good deal drifts your way.
I hope you found this article helpful for those of you looking to start investing with little money. It's easy to find the world of stocks, bonds and mutual funds intimidating, but the sooner you start investing, the greater your ultimate benefit. See how you can start investing for beginners in our recent and easy to follow article.
How much money do I need to start investing?
You can start investing with as little as $1 with fractional investing. You just have to find a broker that offers fractional share investing. Fractional investing is where you can buy a fraction of a share, rather than having to buy an entire share. This allows you to start investing with little money.
Investing with little money can be a great way to get started in investing. It can also be a good way to diversify your investment portfolio. When you start investing with little money, you can start building a solid foundation for your future investments.
What is the best way to invest $500?
The best way to invest $500 is to start small and gradually increase your investment over time. You can start by investing in a mutual fund or exchange-traded fund (ETF) that tracks a broad market index, such as the S&P 500.
This will give you exposure to a variety of different stocks and help you to diversify your portfolio. If you're not sure where to start, you can always use a robo advisor, which will help you to choose the right investments for your goals.
When it comes to investing, there is no one-size-fits-all approach. The best way to invest $500 will vary depending on your individual circumstances and investment objectives. However, starting small and gradually increasing your investment over time is a good strategy for many investors.
How can I double my money?
There are a number of ways to double your money, but some of the most common include investing in stocks, mutual funds, and real estate. While there's no guarantee that you'll make money by investing, it is one of the smartest and most efficient ways to grow your wealth over time.
If you're looking to double your money, here are some tips to get started:
- Start with a small amount of money: You don't need a lot of money to start investing. In fact, you can start with as little as $20-$50 per week.
- Invest in a diversified mix of assets: Diversification is key to reducing risk and ensuring that your portfolio grows over time. When you invest in a mix of assets, you're less likely to lose all of your money if one particular asset class takes a hit.
- Consider using dollar-cost averaging: When you invest a fixed amount of money into a security or mutual fund on a regular basis, you're essentially averaging out the price of the security over time. This helps to reduce risk and can result in higher returns in the long run.
- Stay disciplined: It's important to stick to your investing plan and not let emotions dictate your decisions. When markets are down, it can be tempting to sell all of your investments, but this is usually a mistake. If you have a well-diversified portfolio, chances are good that it will rebound in time.
Investing can be a great way to grow your money, but it's important to do your research and develop a solid strategy before you get started. With a little discipline and patience, you can start building your wealth today.
How can I become a millionaire?
There is no surefire way to become a millionaire, but some methods include investing in stocks, mutual funds, and real estate.
Your best bet though is to start your own business. While it may not make you a millionaire right away, owning your own business can be a great way to increase your income and net worth over time.