5 Tips to get started
Investing is often mistakenly seen as something that only the rich — or at least those with plenty of disposable income — can afford. However, this is not the case. You can invest with little money to spare. You simply have to be smart about how you do it! The sooner you start investing your money, the better, even if you can only afford to invest a few dollars a month.
On that note, here are some key tips for investing when your funds are limited.
1. Start by saving.
While there are ways to invest very small amounts of money, it is much easier to start with at least a few hundred dollars. So your entry into the world of investing is often best begun with increased dedication to saving. Consider putting a jar on the counter and putting any $5 bill that comes your way inside it. Or have a small portion of every paycheck auto-deposited into a separate savings account, so you are not tempted to spend it. When you reach $200 or $300, you're ready to start following the additional tips below.
2. Consider using robo-advisors.
Robo-advisors are relatively new on the financial scene, and they work really well for people who are brand new to investing and don't have a lot of funds to work with. Basically, these services take your initial funds and invest and trade it for you. You don't have to know a thing about stocks or bonds to participate. There are many robo-advisors available to choose from, and each service has a different minimum investment amount. Some are as low as $50, and others are as high as $500.
3. Buy a stock you are interested in.
You don't have enough money to buy a whole portfolio of stocks, but every portfolio has to start with one stock! One fun way to get started with investing is to purchase stock in a single company you're interested in. For example, you might find a company that is designing a new technology you find interesting or one that is pioneering eco-friendly products you find helpful. Buying just one stock will teach you a lot about investing in the stock market without too much risk. As your income grows, you can buy additional stocks, and you'll learn more with each purchase.
4. See if your employer matches funds.
Many employers actually match your funds if you contribute to a retirement account, such as a 401k. In other words, if you invest $100 a month into this account, your employer will also contribute an additional $100. By taking advantage of this matching, you are immediately doubling your money. See how much your employer is willing to match, and then contribute to their sponsored retirement account before you contribute to other, non-matched investments.
5. Keep investing.
Whether you buy single stocks, use a robo-advisor, or take a different investment route, the secret to success when you invest with little money is to keep investing. Sure, you may only have an initial investment of $300, but if you put an additional $50 or $100 in every month, the value of your investments will grow faster than you realize. As your income increases over the years, you can increase the amount you invest each month, which will lead to even larger gains.
You don't have to be wealthy to invest, but investing is the number one way to build wealth. Follow the tips above to invest with little money, and your account will grow accordingly.