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5 Easy Ways To Start Investing With Little Money

Investing even very small amounts can reap big rewards. Here are 5 ways you can start investing with little money today.

How to Start Investing With Little Money

Many people put off investing because they think you need a lot of money—thousands of dollars!— to start investing. This just isn’t true. You can start investing for as little as $50 per month.

The key to building wealth is developing good habits—like regularly putting money away every month. If you make investing a habit now, you’ll be in a much stronger financial position down the road. You won’t miss the relatively small amounts you put away now, and you’ll thank yourself later.

Don’t believe me? Here are five ways you can start investing with very little money:

1. Try the cookie jar approach

Saving money and investing it are closely connected. In order to invest money, you first have to save some up. 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.

Marcus Bank currently offers a strong 2.25% APY on their online savings account. There is no minimum deposit required and no monthly maintenance fees associated with a Marcus Savings Account so the yield is earned on all balances.

The brand also offers high-yield CD’s and a variety of loans if you’re in the market for a place to park your cash or are in need of some capital.

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 The money can be withdrawn in two business days if you need it, but it’s not linked to your debit card.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.

Prefer that money to be invested right away? Acorns is an app that rounds up your credit and debit card purchases and invests the difference. It’s not fancy, but it’s a start. And for people who’ve never been savers, getting that start is all the more important.

2. Let a roboadvisor invest your money for you (stocks, bonds and ETFs)

Roboadvisors were created to make investing as simple and accessible as possible. No prior investment experience is required and set-up is easy. Let their automated intelligence track your investments in the background, and pay lower fees in the process.

Wealthfront: One great roboadvisor that I 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.

M1 Finance: If you don’t have that $500 starting balance, there are still great options for you in the roboadvising 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.

Betterment: 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.

Swell: If it’s important for you to invest in a socially responsible way, try Swell Investing. They also have a low minimum (just $50) and never invest in industries like oil, tobacco, weapons, or private prisons. Instead they have tailor-made portfolios for renewables, green tech, disease eradication, clean water and more.

3. 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 there is a way that you can begin investing in an employer-sponsored retirement plan with amounts that are so small you won’t even notice them.

For example, plan to invest just 1 percent of your salary into the employer plan.

You probably won’t even miss a contribution that small, but what makes it even easier is that the tax deduction that you’ll get for doing so will make the contribution even smaller.

Once you commit to a 1 percent contribution, you can increase it gradually each year. For example, in year two, you can increase your contribution to 2 percent of your pay. In year three, you can increase your contribution to 3 percent 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 percent 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.

Blooom is a great tool for hands-off investment management of your 401(k). They’ll give you a free 401(k) analysis, telling you where and how they can optimize your investments. If you decide to use their services, you’ll be charged a reasonable $10 per month.

4. 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.

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 its 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.

Read more: How To Buy A Mutual Fund

5. Play it safe with 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 excellent place to park your money—and earn 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 they 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.

Summary

There are plenty of ways to start investing with little money, with many online and app based platforms making it easier than ever. All you have to do is start somewhere. Once you do, it will get easier as time goes on, and your future self will love you for it.

Read More:

Start investing today

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About Kevin Mercadante

Kevin Mercadante is a freelance personal finance blogger and the owner of his own personal finance blog, OutOfYourRut.com. A recent transplant to New England, he has backgrounds in both accounting and the mortgage industry.

Comments

We invite readers to respond with questions or comments. Comments may be held for moderation and will be published according to our comment policy. Comments are the opinions of their authors; they do not represent the views or opinions of Money Under 36.

  1. Bernz [email protected] says:

    Good investment tips. Simple and easy to understand. My favorite is #2 which is through your employer’s retirement plan. Max out if you can and watch your retirement nest egg grow. Better if you can access your retirement account, this is an excellent way to start learning investing also.

  2. Arnav Desai says:

    I agree thoroughly with the author. There are countless ways in which you can start investing with just little money. You must be willing to do a little research and find out the right options. You have listed some very nice options but if a person is eager to make money, there are several other options too. Thanks for the share.

  3. antiersolutions says:

    If you have no money or with little experience of the business, you should start some easy ones at the first, such as, affiliate marketing and so on. And if you have master some online marketing skills, you can start some other businesses, like Crypto exchange development etc..

  4. Danial Pervaiz says:

    hello, very nice article. keep up the good work. Will keep coming back!!

  5. Max says:

    As I am interested in trading with options, I do the following strategy: I sell from time to time options on stocks and with this collected money I buy dividend stocks, which generating additional cash to reinvest. But maybe trading with options is not everyone's cup of tea…

    • Realous P. says:

      If that’s working out in your favor, more power to you sir!

      Options can be risky even if you know how option contracts work.

      I would only recommend for people who are experienced investors and who at the very least have an established emergency fund that covers 6+ months of their monthly expenses.

  6. Stefan Ciancio says:

    Great Tips! Such a great information.

    I agree with you that “Investing even very small amounts can reap big rewards.” I have always been facing problems with Making Extra Money and was trying to hire someone to help me.

    I will tweet your post. Thanks a lot for sharing.

    Stefan

  7. Diana says:

    There are many ways to start investing with little money. However, first you may want to assess whether paying off debt or saving for emergencies would be more beneficial for your current financial situation.

    If you do decide that you want to start investing, here are a few options:
    o Invest your money in bank deposit accounts: Though you won’t be able to earn much money at the bank you will have zero risk of principal loss and also earn a bit of interest on your money.
    o Investing in your own skills: This can not only help you gain knowledge but it will also increase your chances of promotion or higher paying position from other employers.
    o Invest through your employer’s retirement plan: These plans often offer an array of investment options and allow you to invest via payroll deduction, so you can start with a little bit each paycheck.

  8. Axel Hansson says:

    It’s all about starting somewhere. Never invest money you don’t have – start safe with less. I’ve had great success with index funds with doesn’t demand much of my time and got a slow but steady increase.

  9. Buck says:

    Great tip to start investing with your employers retirement plan, even at 1% if you can’t do anything more. Some new innovative plans even allow you to increase your contributions as you get raises. They found that people who enter into these eventually contribute more than people who sat down with a financial adviser on day one!

    But the biggest thing is to get started. Can’t make a big snowball without a little one.

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