Easy Ways To Start Investing With Little Money

Long gone are the days where you needed thousands of dollars to invest. Now, thanks to Robo-Advisors, low-cost mutual funds, high-yield savings accounts, and more, you can invest with just a few bucks. Start Investing With Little Money by using this tried and tested methods.

Many people mistakenly think you have to be rich to invest. But what if you could learn how to invest with little money? It’s possible!

Some methods require as little as $5 to start. And the sooner you start investing, the faster your money will grow, too.

For many people, the word “investing” conjures up images of men in suits, monitoring the exchange of millions of dollars on a stock ticker.

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I’m here to tell you: you don’t need to be the Wolf of Wall Street to start investing. It’s okay if you’re more of a mouse of Main Street. Even if you only have a few dollars to spare, your money will grow with compound interest.

The key to building wealth is developing good habits. Like regularly putting money away every month and nixing your Planet Fitness membership that you haven’t used in years (that alone saves you over $100/year).

Once you have a little money to play with, you can start to invest.

How To Start Investing With Little Money: Leverage Savings First

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The key to learning how to invest with a small amount of money is to realize the value of saving money. Some of the tips below may not even feel like investing, but if you see a return on your ‘investment,’ you’re investing!

1. Automate Your Savings: Start Investing With Little Money

Think about the last time you saved money. Did you set aside a specific amount of your paycheck the day you got paid, or did you save AFTER you spent money all month?

We’re all guilty of it – we save after we spend. But what happens when there’s nothing left to save? Instead, take the bull by the horns and save before you spend by paying yourself first.

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Create a budget and determine how much money you can set aside monthly. Make it a line item in your budget. Treat it like a bill, only automate it.

Most employers offer direct deposits. Instead of putting your entire check into your checking account, have some diverted to your savings account.

Believe it or not, you no longer need a lot of money (or even good credit) to invest in real estate.

A new category of investment known familiarly as “real estate crowdfunding” makes it possible to own fractional shares of large commercial properties without the headache of being a 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.

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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 pitiful bond yields.

3. Drip-feed Your Cash Into Investments

You don’t need to have a lump sum to start investing. Actually investing small amounts of money regularly is better than investing a large lump sum in one go.

By investing a small amount of money each month you are less vulnerable to market fluctuations.

You also inevitably end up buying more shares when they are cheap and fewer when they are expensive (which is known as pound-cost averaging).

4. Start Investing In The Stock Market With Little Money

When it comes to investing in the stock market, 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 charges 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.

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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.

5. Invest For The Long-Term: How To Start Investing With Little Money 

Investing small amounts of money every month might seem insignificant, but over 20 or 30 years, you could have built a very significant pot.

If you intend to keep your money invested for decades, you can afford to take more risk than someone who might need access to their cash in the next few years.

Investing is for the long-term because the longer your investment horizon, the more time you have to ride out the bad times as prices will recover.

6. Let a Robo-Advisor Invest Your Money For You

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 very little cash 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.

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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.

7. Open A High-Yield Savings Account: Start Investing With Little Money Today

While lots of savings accounts are currently paying next to next to nothing, you could get a better deal if you don’t mind tying your money up for months or even years.

The best rates tend to come from regular saver accounts but they often have conditions attached, such as saving up a certain amount each month.

Here is a list of the top savings accounts where fixed term bonds and regular saver accounts emerge the winners.

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.

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Automatic investing is a common feature with mutual fund and ETF IRA accounts. 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.

Employer-sponsored 401(k)s are great, but they don’t offer the same tax benefits as other retirement accounts, which is why opening an IRA is also important.

For starters, you’ll have more control over your account, since you’re opening your own personal IRA rather than going through your employer, who determines your investments for you.

In addition, one of the very best benefits of an IRA (a Roth IRA specifically) is its ability to grow tax-free. Your account will both grow without being taxed and you’ll be able to make tax-free withdrawals starting at age 59½.

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 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% contribution, you can increase it gradually each year.

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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.

11. Investing in Your Own Skills

Are there any skills that you could acquire that could bring you up to the next level in your career? Think in terms of learning a new computer application, a foreign language, or taking a public speaking- or sales-course.

It’s possible that you could acquire certain career-enhancing skills that would enable you to either get a promotion on your current job or even transfer to a new, higher paying position with another employer.

A few hundred dollars is often all it takes to take a course to learn that kind of skill.

12. Try The Cookie Jar Approach: How To Start Investing With Little Money

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.

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.

 13. Your Own Business

I’ve discussed investing in other businesses so far, but if you’re looking to invest small amounts of money, investing in your own business could prove to be the best choice of all.

After all, who better to invest in than yourself?

For example, for a few hundred dollars you can buy a decent lawnmower, and start cutting lawns to generate income. With that few hundred dollar investment, you could have more than five thousand dollars to invest in no time.

You could also start a website, dedicated to selling a certain product line. Or you can start a blog and use it to create affiliate sales arrangements.

If it’s something you might enjoy doing, you could go to garage sales, estate sales, flea markets, and thrift stores, and by unusual goods and sell them at a profit on eBay or Craigslist.

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With advances in technology and the growth of the Internet, it’s easier than ever to start your own home based business on a shoestring.

If you only have a few hundred dollars to invest, investing in starting your own business could be the most profitable venture of all. Many business owners start out by picking up a part-time job or side hustle to make extra cash to get their business up and going.

A great side hustle is to become an Uber driver, you can create your own schedule and just sit back and drive and earn extra cash to throw at that dream of yours!

So here you have 15 ways to invest small amounts of money, so there’s nothing stopping you from investing in something. Investing is one of those activities where the most important step is getting started, and here are the ways you can do it.

Conclusion: On Start Investing With Little Money

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There are plenty of ways to start investing with little money. With many online and app-based platforms making it easier than ever. It is possible to invest if you are just starting out with a small amount of money.

It’s more complicated than just selecting the right investment (a feat that is difficult enough in itself), and you have to be aware of the restrictions that you face as a new investor.

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.

FAQS About Investing With Little Money

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Here are some common questions about how to invest with little money.

a). What Is The Best Investment For A Beginner?

If you’re just getting started, you might want to read a beginner’s guide to investing here. The best investment is one that you feel comfortable with considering your:

• Goals
• Experience
• Timeframe
• Attitude to risk

Only choose what you understand. If you know you want to invest in the stock market, but don’t feel confident investing in individual shares, it may be best to let a platform choose for you.

b). Is It Worth Investing With Little Money?

Absolutely! Everyone has to start somewhere. No matter how small you feel your savings are, learning to invest is a vital part of building wealth and working towards financial freedom.

If you don’t have a lot of money to invest in at first, you won’t earn much. But that’s OK. Just get into the habit of diverting part of your monthly income into investments month after month and year after year.

Learning how to invest with little money provides a few benefits.

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The first obviously is a return on your capital. Even if you only make a few dollars in interest or profit, that’s money that you wouldn’t have otherwise.

The next benefit is the experience and knowledge you gain from making a small investment. If you don’t know how to invest $100 right now, you probably won’t know the best way to invest $10,000 later. Or even $1 million later in life.

Every millionaire started small by learning how to invest with little money first.

Lastly, watching your money grow is incredibly empowering. It is proof that you can build wealth, even with a small income or little savings. Learning how to invest with little money is absolutely worth it.

c). Should I Invest Or Pay Off Debt First?

Having debt while trying to build wealth is like running up an escalator that is moving downwards. It’s not impossible to climb your way up, but with each step forward you are still moving backwards a little.

New investments may make you money, but if you carry consumer debt, the interest payment may wipe away all your gains.

Typically, it’s smarter to abolish all high interest debt instead of investing. Pay off your high interest credit cards, car loans, and personal loans as soon as possible.

Paying off debt is a form of investing. It’s risk free, provides an instant return, and can improve your credit score in many ways.

d) You Can Learn How To Invest With Little Money!

You don’t have to be rich to invest.

If you learn how to invest with little money, you’ll see how easy it is to make your money grow. It becomes habit-forming and exciting to reach your financial goals, no matter how large.

The key is to start somewhere, though, even if it means investing your spare change alone. That is How to Start Investing With Little Money