How to Start Investing With Little Money
When it comes to making investments, most people believe that you need a lot of starting money in order to accelerate your wealth and actually make a living from it. Making a $10 profit from something over a week might not seem like much, but when you multiply that by 100 or 1,000 times, it suddenly seems more enticing. But what if we said that it’s possible to start investing with only a bit of money?
What if there was a way for you to get involved with investing so that you can build up your experience and skills before you decide to commit more of your money? In this post, we’ll be teaching you a couple of important tips on how to start investing with little money.
Saving for Your Very First Investment
You can’t invest if you don’t have money – it’s really as simple as that. You need to start saving or at least putting money towards a fund so that you can make a worthwhile investment. This is the basis of any investment strategy, and it encourages you to use your own money instead of borrowing just to invest.
But what are some ways to start saving for your very first investment? Here are a couple of tips that you could consider.
- Put money towards your investments on a regular basis. For example, you could put $10 into a savings account every week. You can consider this the investment fund that you’ll use when you’re ready to commit it to something. This won’t sound like a lot of money, but it certainly adds up.
- It might even help to have a physical representation of your investment money, or even just use a shoebox or jar to put your money into. This is also a great way to “round up” your purchases if you’re using cash. For instance, if you buy something and receive $5.42 in change, then put that all into a money jar and consider it to be your investment money for the week. You can then deposit it into a savings account or just keep hold of it until you’ve gathered enough money to make some kind of investment.
- Cut out unnecessary purchases. This usually means avoiding any high-cost nights out, being frugal about the food you eat, and also holding yourself back from purchases due to a fear of missing out (like cinema tickets to a new film or buying a brand-new video game). FOMO is also an important factor in investing because it can trick investors into buying stock or investing in something that has already been saturated.
These are just a few tips to help you start saving up for your first few investments. Whether you’re just rounding up your purchases or dedicating a bit of your salary every week or month, it’ll add up over a long period of time. Before you know it, you’ll have a decent chunk of money to invest with. Saving money and investing are two things that go hand-in-hand, so it’s important to think about them both.
Fractional Shares and Exchange-Traded Funds
There are many investment apps out there nowadays that offer fractional shares. This allows anyone to invest in a company that might be too expensive when considering the price of a single share. For example, a single Tesla share is worth around $1,000 at the time of writing.
A fractional share might be a tenth of that, which is a lot more manageable for most people. This essentially allows anyone to invest without worrying too much about the popularity of a stock. It means you can invest in basically any company that you believe in regardless of its current situation.
Buying stocks for such a low initial investment might not seem ideal, since brokerages used to charge a few dollars on every transaction. These days, though, many platforms offer zero-commission trading. This means you can make as many small transactions as you want.
This is another reason why fractional shares and ETFs are now a favorite for many small investors who enjoy trading with little money or people who want to slowly grow their wealth through trading.
Consider Real Estate Investments
Real estate might sound like a daunting market to consider, but the reality is that there are a number of ways for people to start making real estate investments with little money. The most common way to do this is to invest in “real estate crowdfunding.” This is similar to fractional shares in that a large number of people invest a small amount of money to buy shares in a large commercial property without the responsibility of being a landlord.
Crowdfunded investments like this can be fairly risky depending on how much you’re willing to put down. Some crowdfunded real estate investments may require thousands of dollars, but some cheaper options may only need a few hundred dollars per fractional share.
You’ll be required to pay administration fees because someone else will be managing the investment, but you’ll be sharing the risk with other investors and will receive regular reports so you know how your investment is going. You also don’t have any responsibilities when it comes to maintaining the property, and there’s almost no paperwork.
Real estate investments like this can be a good way to diversify your portfolio. They can feel like a form of automatic investing since there’s little manual work involved. However, it might not be appealing to everyone because you won’t own a physical property like you would with a traditional real estate investment.
Cryptocurrency Could Be a Good Option
Trading and investing into cryptocurrency has become a massively popular option in recent years. It’s especially enticing for people who only want to invest a little bit of money, because some cryptocurrencies are extremely affordable, often costing just cents per coin.
However, not all cryptocurrencies can offer high returns. Many of them will eventually lower in price and fade away, while others might soar into the hundreds or even thousands. Not every cryptocurrency can be like Bitcoin, but there are some cryptocurrencies that offer a surprising amount of stability in their value.
For instance, stablecoins are a unique type of cryptocurrency that are backed by mainstream currencies like the US dollar. Each coin is backed by a single dollar, which means they can easily be converted back to a dollar at any time.
Stablecoins can be very accessible to people who are both new to cryptocurrency and want to invest with relatively little money, and they even allow you to earn interest. This makes stablecoins a fantastic low-cost investment opportunity, but do keep in mind that investments are never a sure thing; there's still a chance that you could lose your money if something goes wrong.
While stablecoins might not offer the same level of profit as a more established and popular cryptocurrency, their stability means that they can give you a little more peace of mind. However, if you’re willing to go for a high-risk, high-reward investment strategy, then regular cryptocurrencies can be an option too.
Investing Doesn’t Need to Be About Stocks or Taking Risks
There is always some kind of risk associated with investing. If you’re going to purchase stocks and shares with the intention of trading them in the future, there’s a chance that their value will go down instead of up. Sometimes, the price won’t ever recover and you’ll essentially be losing money over a long period of time.
That kind of risk can make it really difficult for people to start investing, because they’re naturally worried about the possibility of losing their money. You can mitigate much of this risk by doing proper research, but there’s really no telling what could happen.
However, investing doesn't always need to be about stocks and taking risks. In fact, it doesn’t need to be about spending your money or putting it towards assets.
Consider an Employment Plan
Investing simply means putting your money into something with the intention of achieving a profit. While the most simple form of investment would be something like trading shares, it can also mean something with a much lower risk, such as a retirement plan.
For instance, you could consider enrolling in a company retirement plan. This usually involves investing a portion of your salary into an investment plan that is managed by your company.
One of the great things about an employment plan is that you personally don’t need to do anything; you just commit a small percentage of your earnings to an account that you can keep track of.
You might even have options to increase the percentage, but most people consider a low percentage to be the best, since you probably won’t notice that small contribution. Some employers even offer a matching contribution to encourage you to invest.
Consider Your Own Retirement Plan
Some people prefer to invest in their own retirement plan, such as an individual retirement account (IRA). An IRA is a savings account that offers numerous tax advantages to people who use it for a long period of time. Much like an employee retirement plan, an IRA is designed to encourage people to save for their retirement.
As an investment, this usually means gradually increasing your wealth as a way to protect against inflation on your savings, but it could actually give you considerably more money than you invested. This makes it a fantastic low-risk option to invest with.
For all intents and purposes, an IRA is considered an investment that doesn’t carry the same high risks as stocks and shares, yet can still offer a decent return if you’re diligent about investing in it.
Investing your money is a smart financial decision, but many people get the wrong idea and believe that it’s always about buying stocks and shares in order to trade at a later date and make a huge profit. In reality, investing can be something you do very gradually. For some people, the goal of investment isn’t so much to make a huge amount of money, but rather to protect their savings from inflation and ensure a secure financial future.
Whatever your reasons for investing on a small budget, we hope that this article has given you some great options for investing with little money so that you too can protect and grow your wealth over time.
How do I start investing with little money?
There are a few ways to begin investing with little money. You could try to save up and get into stocks and shares, or you could even commit some of your salary to a retirement plan. There are also cheaper stocks and shares to consider.
Can I invest as little as $100?
Yes. In fact, you can invest with as little as $1 depending on what kind of goals you have in mind. There are investments suitable for any amount of money, and it generally depends on what your investment goals are.
What investments can I make with little money?
People who invest with little money still have many different choices to pick from. For example, there are stocks and shares that don’t cost much money, and you’ll also find certain cryptocurrencies that are very affordable. There are also investments you can make by using your salary. Retirement plans typically take a small percentage of your earnings each month so you’ll hardly feel the money going into an investment.
What can you invest in with $100?
Here are a few examples of things you can invest in with just $100:
- Retirement accounts
- Stock market
- Real estate market
- Peer-to-peer lending
- Low-initial-investment mutual funds
As you can see, many of these investments are actually very similar to the investments that are commonly spoken about in the media. Whereas wealthy companies might invest in a property, someone could also invest in real estate through real estate investment trusts or crowdsourcing platforms. Likewise, someone could buy a single Bitcoin for thousands of dollars, or they could consider cheaper options like Dogecoin, which is worth around $0.15 at the time of writing.
I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.
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