Investing can be a scary subject. The word “investing” may sound intimidating, but it’s not. Think of it as saving money with benefits. And anyone can start doing it — today! You don’t have to have a lot of money to get started. In fact, I’ve compiled a list of 6 ways you can start investing today with less than $100.
Why You’re Investing
You must first figure out your “why.”
There are a handful of reasons people invest. Here are the three most common:
- Retirement – This is the number one reason people invest. You need to have something there when you don’t want to [or can’t] work anymore. Investing for retirement puts you in that position, that’s why this is the most important investment decision.
- Big Purchases – If you’re saving for a large purchase that you plan to make within the next five years, stick with a savings account. If you’re saving for something large enough to need more than five years, dump the savings account and invest the money.
- Education – There are 529s, ESAs, and even IRAs that you can use for your children’s [or your own] education. You have plenty of options. It’s never too late to start investing for your children’s education. The younger the better, but starting is what’s important.
Minimums and Fees
I know you’re excited about these six ways to invest, and you want to get on with it, but before we go on, there are some things you need to know.
The only thing that makes it difficult to start out with less than $100 is minimums. For example, many mutual funds have a minimum of a few thousand dollars. After that, you only have to invest $50 or $100 a month, but that $1000 minimum can be a roadblock. That’s why we’re going to start with $100 and get to those high minimums in the future.
I’ve listed several ways below to avoid high minimums. Another thing to think about is fees.
There are always fees. Some higher than others, but they’re always there. There are fees to buy stocks, and fees to own mutual funds. You need to watch out for the fees, because they can eat away at your investments. Fortunately, there are plenty of great options with very low fees, but you must always keep an eyes on the fees. They can always change.
1. Your Employer Retirement Plan
This is your first stop.
Your employer likely offers their own retirement plan, such as a 401(k) or a TSP.
If your employer retirement plan offers a match, invest enough to get the full match. That match is free money — 100% return!
We’re talking about investing for less than $100, which is why your employer account is great. You should be able to invest as much or as little as you want.
Talk to your boss or the finance department of your company. You should be able to have this deducted automatically.
2. Mutual Funds
There are thousands of mutual funds available, and while many of them do have high minimums, there are a few that don’t.
When you’re investing in a mutual fund that has a low minimum, it’s likely that it won’t be the best mutual fund out there. Generally, the mutual funds with higher minimum are going to produce better results, while the mutual funds with no minimums may not give you a great return.
The idea is to start with a low or no-minimum fund and work your way up until you can invest in a better fund.
Index funds are almost always better than actively managed funds, but you may have to start out with an actively managed fund, until you reach the minimum amount required for a good index fund. There is another way to invest in index funds with no minimum, but we’ll save that for the last point!
ETFs are one of your best options to start investing for under $100.
An ETF is similar to a mutual fund, but it’s traded more like an individual stock. So it’s still a conglomeration of companies, and often there is an accompanying ETF to mutual funds, but you can buy it one share at a time.
When you buy one share of an ETF, often the price is well below $100. This is a great way to invest in a solid index. Simply purchase an index ETF.
4. Individual Stocks
If you’re not looking for the conglomeration of an ETF or a mutual fund, you can always just buy a share in one company.
Many good and popular individual stocks trade for under $100/share.
You might even be able to get several shares for $100.
Individual stocks are a good way to get started, but be sure to diversify across different sectors.
A DRIP is a specific way to buy an individual stock.
When you buy a DRIP, you’re purchasing stock (as little as one share), and having the dividends automatically reinvested, which is always a good idea. With a DRIP, you can get started for as little as the price of one share, and let your money keep growing.
You can add to it by buying more shares in the future, or just leave the one stock and let it grow.
There is no minimum balance or minimum investment with Betterment.
Betterment is my favorite option for investing small amounts of money, because they put your money into low-cost index funds.
You put in your information and Betterment invests in the best things for your specific situation. This is the easiest, and most cost effective way to get into index investing, and you can get started with much less than $100.
Check out these 5 things to beware about Betterment.
There is no excuse for not investing, especially when you see how many options there are.
As you let your money grow, you can invest in bigger and better things, but you have to start somewhere.