When many people begin to have an interest in investing, oftentimes the assumption is you need a lot of money to get started.
At first when you invest with little money, your results and progress will be a bit slow. But the longer you continue to invest, stay consistent, and let compound interest take over — you’ll be surprised at how much your money can grow!
As you make more money and budget, you should also increase how much you invest. But it’s okay to start small and work your way to larger contributions.
In this article, you’ll find tips to start investing with little money and your best options to get started.
How Can I Start Investing With Little Money?
So you are ready to start investing, but want the best options that have low minimums to get started — what are your options?
Fortunately, with financial regulations and new investing platforms, you have quite a few choices to consider.
And pending the amount of money you can afford to invest, your personal finance goals, and risk tolerance — some platforms and apps might be better for you then others. Read through these options carefully and pick the ones best suited for you.
1. Via online banking
I know, you might be thinking that online banking features are not what you think of when it comes to investing. But hear me out.
You technically have options to add your money that collects interest and can compound like traditional investing. Plus, it’s less risky.
Of course with less risk, comes less big returns. But that’s okay!
Your online banking options might be the best place for you to start investing with little money first. Here are two investment account types you might want to consider:
High-Yield Savings
The average interest rate for savings accounts is 0.1 percent according to Bankrate. Ouch! And during COVID-10 pandemic, you’ve probably seen many banks drop interest rates as well.
But if you are looking to build your emergency fund or saving for a big purchase but want to collect some interest, a high-yield savings account is the way to go.
These are typically online-only banks that can offer much higher interest that average banks. Ranges can be close to 1% and even closer to 3%.
Certificates of Deposit (CDs)
Another option with banking is investing into a certificate of deposit or a CD.
Your money will be locked in for a set period of time, but you can get a fixed rate which will help you see how much money you can expert once your CD reaches the mature date.
Essentially, you loan the bank a set amount of money and after a period of time, you get that back plus interest.
Again, you won’t get returns like you would in the stock market, but there is much less risk involved and doesn’t take a lot of money to get started. Typically the lowest you can go is $500-$1,000.
You can open a CD with CIT Bank, which offers various options for you. Learn more and get started here.
2. Employer’s retirement plan
Naturally, one of the best places to typically invest first is if your employer offers a retirement plan, like a 401k.
Many businesses will even offer a company match on your investments up to a certain percent, which can elevate your retirement savings.
With most 401ks, you will have access to individual stocks, bonds, ETFs, and mutual funds. These can all have various share prices and pending your retirement provider — different fees.
Index funds and mutual funds typically have minimum investments to get access to it, like $1,000. But you can also invest with less money in ETFs, which give you similar diversification. Many will cost a fraction of a mutual fund to invest in too.
3. Micro investing apps
In the past few years, new financial companies have emerged to change the game for the everyday investors.
These platforms are typically dubbed micro investing, which allows the investor to purchase shares of stocks or ETFs at the fraction of the price.
Now you can still own great stocks or funds, even if you don’t have the full trading amount or asset price.
One of the leaders in this space is Robinhood, which sort of paved the way for this niche. However, they’ve certainly had their fair share of controversies too.
Other solid micro investing platforms include:
- Acorns — Allows you to invest with no minimums, invest spare change, and more. Get $10 towards your first investment when you sign-up and invest $10.
- Stash – Start investing in fractional shares with just $1, round up spare change, etc. Get $5 towards your first investment when you sign-up!
- Public – Public is a social investing app that makes it possible to own the companies you believe in, with any amount of money. Like the others, you’ll buy slices of stocks or ETFs. And you can invest based on themes like American Made, Green Power, Gene Therapy, and more. Learn more and sign-up for Public.
4. Robo-Advisors
Not everyone is interested in managing or learning everything about investing. This has led to the creation of robo-advisors, which will automatically invest and rebalance based on your specific goals.
Pending which platform you choose, each will have different (or similar) investment requirements to get started. But these usually allow you to start investing with little money. Here are some great options to consider.
- Ally Invest – their managed portfolios allow you to invest with as little as $100 and no advisory fees. You choose the portfolio that matches your needs, and Ally Invest does the rest. Learn more and sign-up here.
- M1 Finance – allows you to invest in fractional shares or “slices” of stocks or ETFs for as little as $100. Offers complete automatic investing with rebalancing and other support features. Learn more and sign-up here.
- WealthSimple – investing on auto-pilot, so you can spend less time worrying about investing. Auto-investing, rebalancing, and human experts as well to answer any questions. You can invest based on your values, invest spare change, and more. You can actually open an account with $0 and invest as much as you want. Learn more and sign-up here.
5. Real Estate
You probably saw real estate on here and were a bit confused at first. But yes, you can invest in real estate with little money as well.
While you aren’t necessarily buying the properties directly, you can own a piece and deal with none of the maintenance or headaches with property management.
With real estate crowdfunding, you can invest as low as $10 and others you’ll need a minimum of $500, pending what kind of real estate you are interested in.
For example, with Groundfloor you can invest with just $10 into short-term loans for single family homes. It’s a cheap way to dabble in real estate, without risking a ton of money.
Your other options are investing in commercial buildings, apartment buildings, etc. through popular sites like Fundrise and DiversyFund. Both have a minimum $500 entry, which is still a bit of money, but is much lower than trying to buy properties yourself.
Both those platforms have pros and cons, but are great ways to invest with little money and diversify your assets, as these don’t typically correlate with the stock market movement.
6. Alternative Investments
While investing in the stock market and real estate might be the more popular choices, you can invest with little money in alternatives too. These are investments that do not follow the traditional assets like stocks or bonds.
It’s better for you to start with traditional outlets before alternative investments, but as you get more comfortable and want to diversify, looking into other options to invest can be a good idea.
And once again, crowdfunding strikes with ways for you to start investing with little money in other asset classes.
For example, thanks to Masterworks you can invest in well-known fine art for as little as $20 per share. Some art pieces may have minimum investment amounts, but you can own a piece of history from artists like Any Warhol, Vincent Van Gogh, and others their art experts purchase.
Tips to Invest With Little Money
Depending where you are financially and your income, what constitutes as “little money” is viewed quite differently from person to person.
But most of the ways you can invest with little money can start as low as $10 and go up to about $1,000. While the latter may seem like a lot currently for you, don’t worry!
As you learned from above, you still have plenty of options that won’t cost that much up front.
When you are investing with little money, you want to be smart about your investments. Here are some additional tips to think about as you get started.
- Avoid unnecessary risks in individual stocks
- Create a budget and work on finding extra money you can start investing
- Be consistent with your investment amounts, slowly increase over time
- Keep your investment portfolio simple, no need to overcomplicate it
While investing has risks, not investing or starting puts you at more of a risk when your future retirement is here.
Don’t worry about having a lot of money to get started, as you can see from above it’s possible to develop good financial habits and start investing with little money.
