For many people, the word “investing” recalls images of men in suits, monitoring the exchange of millions of dollars on a stock ticker.
The truth is: You don’t need to be the Wolf of Wall Street to start investing. Even if you only have a few dollars to invest, your money will grow with compound interest.
The key to building passive income sources is developing good habits—like regularly saving a part of your earnings. You need to develop your saving skills, try to identify the most meaningless dispenses you are used to doing, and cut them from your journey. Try to entertain cheaply it’s very important, for example instead of having dinner at a restaurant stay home prepare the same meal by yourself, it will be funny and gainful parallelly. Pay yourself first always trying to save more and more money and finally one day you will be prepared for the first investment.
Afraid of difficulties that investment process can cause? In 2021, you can get a date, a ride, or a pizza with the touch of a smartphone screen. Investing is no different. If you can automatically manage your bills, why not your investments? It’s just as easy. You can choose between various online investment platforms.
With a Robo-advisor or savings account, you can make your money work while you play. With a stock trading app, you can try with a little money and learn valuable investing lessons at the same time. If you have the necessary time you can become an expert in this field if not your funds can be managed by an experienced trader how already provide great profitability.
With so many different options, investing for beginners is simpler and more uncomplicated than ever before. You don’t need to be financially literate to begin your investor career all you have to undertake is a little observation of investment tools ready to serve you. Once invested you will soonly enjoy the process of growing your own funds.
First and foremost you need to save in order to make your first investments. That will take a lot less time than you think, and you can do it in very small steps.
If you’ve never been a saver, you can start by putting away just $10 per week. That may not seem like a lot, but over the course of a year, it comes to over $500.
Try putting $10 into an envelope, shoebox, a small safe, or even that legendary bank of first resort, the cookie jar. Though this may sound silly, it’s often a necessary first step. Get yourself into the habit of living on a little bit less than you earn, and stash the savings away in a safe place.
The electronic equivalent of the cookie jar is the online savings account; it’s separate from your checking account. The money can be withdrawn in two business days if you need it, but it’s not linked to your debit card. Then when the stash is large enough, you can take it out and move it into some actual investment vehicles.
Start with small amounts of money, and then increase as you get more comfortable with the process. It may be a matter of deciding not to go to McDonald’s or passing on the movies, and putting that money into the cookie jar instead.
Chime currently offers a strong 0.50% APY for its online savings account. There is no minimum deposit required and the yield is earned on all balances (no minimum balance required).
Chime is also a top choice for your savings because they include a bevy of other features that really focus on the individual saver.
- 38,000 fee-free ATM’s
- Spot Me feature that means you won’t be charged an overdraft fee if you overdraw your balance
- Direct deposit that gets you paid 2 days faster
And if you need a little boost to start saving while earning your APY, Chime can round up your purchases to the nearest $1 to help you save faster and earn faster.
Chime Disclosure – Chime is a financial technology company, not a bank. Banking services provided by, and debit card issued by, The Bancorp Bank or Stride Bank, N.A.; Members FDIC.
You can also ensure your checking account brings some extra money in. Juno offers an impressive 1.20% Bonus on your deposits. The Bonus Rate is credited to your online checking account on the first of every month and only applies to balances up to $5,000. Balances from $5,000 to $100,000 earn 0.25% (an important note: this bonus is subject to change at any time).
Here are a few features that make OnJuno stand out.
- Earn 5% cashback on your spending with the five brands that you choose. Brands include popular retailers like Walmart, Target, and Starbucks. Basic account holders get 5% cashback on up to $500 in purchases each year, equal to $25 per year. But if you upgrade to a Metal Membership, you’ll get 5% cashback on up to $3,000 per year, earning you as much as $150 per year.
- No hidden fees or opening balance requirements.
- Fee-free cash withdrawals at 85,000 AllPoint and MoneyPass ATMs.
If you’re looking for automatic savings with budgeting built-in, Empower is another great option. You’ll get a slick Automatic Savings feature. Simply tell Empower your savings goals, and Empower will automatically transfer small amounts of money over to savings, without you having to lift a finger.
In addition to Automatic Savings, Empower offers a few other features that will help you manage your money.
- Empower AutoSave will automatically adjust the amount being transferred to savings based on your expenses and account balances. So, when your expenses are higher, Empower will automatically save less.
- With the Empower Card, you can request a Cash Advance of up to $250¹ when you need a little extra money. There are no credit checks required, and you won’t have to worry about paying interest or late fees. You’ll also get up to 10% cashback* on purchases and access to your paycheck up to two days early.*
- Budgeting tools and recommendations help you get out of debt and stay there.
Pair these features with Empower Spend Trackers that help you make sure you’re not overspending in the categories of your choice, and Empower really becomes your one-stop shop for managing your money.
Empower is a financial technology company, not a bank. Banking Services provided by NBC bank, Member FDIC.
2. Use a Robo-advisor to manage your investments
Robo-advisors entered the investing scene about a decade ago and make investing as simple and accessible as possible. You don’t need any prior investing experience, as Robo-advisors take all of the guesswork out of investing.
Robo-advisors work by asking a few simple questions to determine your goal and risk tolerance and then investing your money in a highly-diversified low-cost portfolio of stocks and bonds. Robo-advisors then use algorithms to continually rebalance your portfolio and optimize it for taxes.
There’s no easier way to get started in long-term investing. Most robo-advisors require just $500 or less to start investing and charge very modest fees based upon the size of your account. All offer automated investing plans to help you grow your balance.
If there’s any downside to Robo-advisors it’s cost. Robo-advisors charge an annual fee equal to a small percentage of your balance. The industry average is about 0.25%. So, if you invest $10,000, you’ll pay $25 a year. That’s not a lot of money, but it begins to add up if you amass hundreds of thousands of dollars.
It’s important to note that robo-advisors fees are on top of the fees charged by the exchange-traded funds (ETFs) that robo-advisors buy to make up your portfolio. You can avoid paying the robo-advisor fees by building your own portfolio of ETFs or mutual funds. For the vast majority of investors, however, that’s a lot of additional work and responsibility.
The bottom line? Robo-advisors are cheap and well worth it.
A robo-advisor that I highly recommend to first-time investors is Wealthfront. Their fees are reasonable at 0.25%, but the kicker is that you can get your first $5,000 managed free (specific to MU30 readers).
So if you’re looking to start investing with little money, Wealthfront could be the way to go. You will need $500 to get started though with Wealthfront so keep that in mind. As you get more comfortable with investments, you can pick and choose vetted ETFs or invest by category, like tech, healthcare, and even socially responsible investing.
If you don’t have that $500 starting balance, there are still great options for you in the Robo-advising space. M1 Finance charges no commissions or management fees, and their minimum starting balance is just $100.
You can choose from one of their pre-made diversified portfolios or customize your own by purchasing stocks and ETFs through their platform. The user interface is super easy to use.
If you’re starting out with less than $100, you may want to consider Betterment, which has no minimum starting balance whatsoever. Like M1, it’s also great for beginners as it provides a super simple platform and a hassle-free approach to investing. Plus, you’ll pay just 0.25% as a management fee.
If you’ve got some spare change to invest, Acorns’ Round Up feature allows you to “round up” your purchases to the nearest dollar and automatically invest the difference. Your money will go into an expertly created ETF portfolio.
After setting up your account and linking a card, you don’t have to lift a finger! The Acorns app is a good pick for beginner investors looking to understand what they’re investing in. Acorns have also partnered with CNBC to provide financial literacy content to help out newbies.
3. Start investing in the stock market with little money
When it comes to investing in the stock market, the cost is often the barrier to entry. It takes money to make money, right?
Not anymore. The internet has made it easy for consumers to get started with very little upfront money. That means you can put a few dollars in to familiarize yourself with investing before making a bigger commitment. It’s a great way to learn about investing while putting very little money at risk.
Today, there are increasing numbers of options that have swung open doors to a new generation of investors – letting you get started with as little as $1 and charging no trade commissions.
In the past, stockbrokers charged commissions of several dollars every time you bought or sold stock. That made it cost-prohibitive to invest in even a single stock with less than hundreds or thousands of dollars. In fact, $0 commissions across comp have been so successful they’ve disrupted the entire investing industry and forced all the major brokers – from E*TRADE to Fidelity – to follow suit and drop trading commissions.
Plus the ability to invest in companies with fractional/partial shares is a complete game-changer with investing. With fractional shares, it means you can diversify your portfolio even more while saving money. Instead of investing in a full share, you can buy a fraction of a share. If you want to invest in a high-priced stock like Apple, for instance, you can do so for a few dollars instead of shelling out the price for one full share, which, as I write this, is around $370.
J.P. Morgan Self-Directed Investing
If you’re willing to do a little leg-work on your own, J.P. Morgan Self-Directed Investing can offer you no-fee investing with unlimited $0 trades. If you’re a DIYer, you’ll love that you can manage your investments from both the Chase Mobile® app and Chase’s site.
You’ll have the option to invest in stocks, ETFs, mutual funds, options, and fixed income and you won’t pay any commission on most of those as well. And while you’re at it, if you’re looking to invest specifically for retirement (which you really should), you can opt for traditional or Roth IRAs.
If you really don’t like the idea of having to manage everything yourself, J.P. Morgan Automated Investing offers a robo-advisor for just a 0.35% advisory fee (which is somewhat low compared to the competition). The only thing you’ll need is $500 to invest.
Public, an investing app, offering thousands of stocks and ETFs with no commission fees on trades and no account minimums. With Public, you can purchase most stocks through what Public calls “Slices”- so you don’t have to plunk down thousands of dollars to become a shareholder in huge companies that you want to invest in but cannot otherwise afford.
The public makes investing easy and user-friendly: you simply pick your stocks and ETFs, enter the amount of money you’d like to invest, and Public “slices” off a portion of a share to fit the amount you’ve chosen.
The public also offers a social investing experience making it a great option for beginner investors. You become more financially literate while watching what others are doing with their investments. It’s like peeking into someone’s investing account for ideas – but it’s what everyone is doing and totally legit.
Robinhood is also designed for young traders new to investing, and Robinhood is currently rolling out fractional share investing to make it easy to start investing with little money.
And the best part? Robinhood gives you one free stock just for joining. That gives your portfolio a small headstart at no cost to you.
Importantly, Robinhood promotes equality of access with a $0 account minimum and no transaction fees. Robinhood also has free options for trading. Users who opt for the premium account Robinhood Gold pay $5 a month for access to extra perks like after-hours trading.
Unlike robo-advisors, Robinhood supports and encourages active stock trading. In my mind, trading stocks is not the same thing as investing money for the long haul. But trading is fun and a great way to learn about how the market works and how companies are valued. And if you can try your hand at trading with small amounts of money, it’s even better. Robinhood’s platform makes trading a snap.
4. Dip your toe in the real estate market
Maybe it’s hard to believe, but you no longer need a big amount (or even good credit) to invest in real estate. A new category of investment known generally as “real estate crowdfunding” makes it possible to own fractional shares of large commercial properties without the urge of being a fortunate landlord.
Crowdfunded real estate investments require larger minimum investments than robo-advisors (for example, $5,000 instead of $500). They’re also riskier investments because you’ll be putting that entire $5,000 into one property rather than a diversified portfolio of hundreds of individual investments.
The upside is owning a piece of a real physical asset that’s not necessarily correlated with the stock market.
As with robo-advisors, investing in real estate via a crowdfunding platform carries costs that you wouldn’t pay if you bought a building yourself. But here, the advantages are obvious: You share the cost and risk with other investors and you have no responsibility for maintaining the property (or even doing the paperwork to buy it!)
I think real estate crowdfunding can be an intriguing way to learn about commercial real estate investing and also diversify your assets. I wouldn’t lay all of my money on these platforms, but they do make an intriguing alternative investment especially in these times of unprecedented market volatility and miserable bond yields.
With Fundrise’s really easy-to-use online platform, you simply need a starting minimum investment of $500. So if you’re an unaccredited investor, you can buy properties without paying those very large fees that end up being a deal-breaker if you want to start dabbling in real estate. By managing your own portfolio, the fees come to just 1%, and Fundraise always offers a 90 days satisfaction guarantee.
Like Fundrise, DiversyFund also allows you to invest in real estate with as little as $500. With zero management fees and no net worth requirement, the company is dedicated to making investments in real estate affordable and accessible for everyone, not just the top 1%. DiversyFund also features plenty of educational resources to help you learn more about real estate investing and gain the tools you need to grow your wealth.
5. Enroll in your employer’s retirement plan
If you’re on a tight budget, even the simple step of enrolling in your 401(k) or other employer retirement plan may seem beyond your reach. But you can begin investing in an employer-sponsored retirement plan with amounts so small you won’t even notice them.
This is one step that everybody should take!
For example, plan to invest just 1% of your salary into the employer plan.
You probably won’t even miss a contribution that small, but what makes it even simpler is that the tax deduction that you’ll get for doing so will make the contribution even smaller.
Once you commit to a 1% contribution, you can extend it progressively each year. For example, in year two, you can increase your contribution to 2% of your pay. In year three, you can increase your contribution to 3% of your pay, and so on.
If you time the increases with your annual pay raise, you’ll notice the increased contribution even less. So if you get a 2% increase in pay, it will effectively be splitting the increase between your retirement plan and your checking account. And if your employer provides a matching contribution, that will make the arrangement even better.
6. Put your money in low-initial-investment mutual funds
Mutual funds are investment securities that allow you to invest in a portfolio of stocks and bonds with a single transaction, making them perfect for new investors.
Wondering what to do with your investments when the stock market drops?
The trouble is many mutual fund companies require initial minimum investments of between $500 and $5,000. If you’re a first-time investor with little money to invest, those minimums can be out of reach. But some mutual fund companies will waive the account minimums if you agree to automatic monthly investments of between $50 and $100.
Automatic investing is a common feature with mutual fund and ETF IRA accounts. It’s less common with taxable accounts, though it’s always worth asking if it’s available. Mutual fund companies that have been known to do this include Dreyfus, Transamerica, and T. Rowe Price.
An automatic investing arrangement is particularly convenient if you can do it through payroll savings. You can typically set up an automatic deposit situation through your payroll, in much the same way that you do with an employer-sponsored retirement plan. Just ask your human resources department how to set it up.
7. Prefer to play Safe? Try Treasury securities
Not many small investors begin their investment journey with US Treasury securities, but you can. You’ll never get rich with these securities, but it is an extremely safe place to park your money—and earn at least some interest—until you are ready to go into higher risk/higher return investments.
Treasury securities, also known as savings bonds, are easy to buy through the US Treasury’s bond portal Treasury Direct. There you can buy fixed-income US government securities with maturities of anywhere from 30 days to 30 years in denominations as low as $100.
You can also use Treasury Direct to buy Treasury Inflation-Protected Securities or TIPS. These not only pay interest but also make periodic principal adjustments to account for inflation based on changes in the consumer price index.
And as is the case with mutual funds, you can also arrange to have your Treasury Direct account funded through payroll savings.
Unfortunately, the yields on treasuries have been getting closer and closer to 0% for a while now, and there’s no end in sight to their lackluster performance. This makes treasuries mostly a place to stash cash for safekeeping rather than a way to grow your money.
8. Play reasonably with Hyip projects
What an absurd thing may you say how can reasonable people invest in such kind of insecure projects, but the reality is they invest and invest big money. Take a look for example at this project https://bithourinv.com/, you can see clearly how big amounts were invested in this project. All you need to succeed is a good strategy. The “Hit and Run” strategy, or literally from the English “grab and run” – is the most understandable, simple, and safe strategy. It is easy to guess that a cunning investor is an investor who does not stay with the project for a long time and forgets about its existence as soon as he takes off his profit. He is not interested in whether the project has prospects or not, the cunning person does not make any further plans for cooperation and stays with the HYIP for no longer than one round. If we talk about the positive side of this strategy, then yes, it works and minimizes risks as much as possible. The investor jumps into the project at the start, receives income, and goes in search of a new HYIP that is just beginning its journey. The strategy is partly correct, and for some projects, it is the only possible one, but it should not be considered basic.
As you see there are various ways to start your investor career with little money, all these online and app-based platforms make it easier than ever. Just take action and start somewhere. Keep up investing and working parallelly on your normal job and one day you will gain your financial freedom.