You don’t need a lot of money to start investing.
In fact, with as little as $100 in your bank, you can start your investing journey.
It is a common myth that you need lots of money to even start investing. That’s just not true.
I started my investing journey when I have only $100 in bank. Even if you don’t have a lot of money to invest, you can too start building your portfolio and grow your wealth.
Here are the few easiest ways you need to know how to make a difference in your financial future even if you don’t have much money to invest.
9 Easy Ways to Invest when you have little money
Understand that every investor was a small investor before they become rich and successful. It is totally alright for you to start investing in small sum.
What’s important is that you have to start investing.
Going out of your comfort zone and start investing is always the hardest, but once you start, keeping the ball rolling will be much easier.
(I totally understand how hard it is to start when you have little money to spare, because I started my investment small as well)
Starting early is extremely important if you want to be wealthy, the more time your money is in the market, the more time you allow your money to compound.
Check out this article later to learn why you should invest young. I myself do regret that I have not start investing young enough.
When you are ready, here are the easy ways to invest when you have little money.
1. Pay Off Debt
Paying off your debt will be the first and most important thing you should do when you have little money to invest.
But wait, is that investing?
Yes, paying off debt is invest for your future.
But before I continue on explaining what do I mean by investing for your future, you need to understand a bit more about debt.
There is 2 types of debt:
- Bad Debt – Debt that takes money from your pocket
- Good Debt – Debt that helps you earn money
Here when I mention about paying off debt, I am talking about paying off the bad debt you got from your payday loan, credit card debts etc. To understand more about bad debt and good debt you can check out our article on good debt vs bad debt.
2 reasons why paying off bad debt is important when you have little money to invest:
- First, bad debt can affect your credit score. People with a bad credit score are seen as higher default risk, which banks may requires you to pay a premium in interest for the loan you apply for your mortgage.
- Secondly, paying off debt is the best way to have guaranteed above average return on your money.
This is especially true if you are having credit card debts. Interest charged by credit card company is in the double digits.
Let’s say you have credit card debt of $1,000 with an interest rate of 12% per annual. By simply paying off your credit card debt, you have just lock in a guaranteed 12% return on your money!
There is no guaranteed invest that gives you a double digit return on your investment anywhere, apart from paying off your debt.
Compound interest can work 2 ways:
- Work for you, when you invest.
- Work against you, when you take up debt.
2. Saving Accounts
Saving account may not be exciting, but it is one of the best place to accumulate your capital. Although the interest they give might be tiny in compared to many other investment vehicles.
Putting your money in the saving account allows you to have zero-risk return on your money, while you can accumulate your capital and prepare for a good investment opportunity in the future.
Most importantly, putting money in your saving accounts helps you to build up your emergency fund.
Building up an emergency fund can be just as important as to invest your money. Because having an emergency fund is an investment in your financial security. Emergency fund can help prevent you from being forced to sell your investment at a bad time because of some unforeseen events.
Having 1% for bank interest per annual may not sound exciting. But with the added benefit of acting as an emergency fund, this is an investment you should consider.
3. Employer-Sponsored Retirement Plan
Probably the easiest way to invest is to join the employer-sponsored retirement plan. Basically you just need to set-up a payroll deduction plan with your employer.
Choose to a set a percentage from your paycheck contribute to the retirement plan. How much you choose to contribute, depends on your needs and level of comfort.
You can either choose as low as 1% to as high as 20% of your salary. Sometimes, the percentage allowed is also dependent on each company.
If you are lucky, some companies offers matching contribution for each dollar you put into the retirement plan. It is basically free money for your retirement.
And here is something even more exciting than free money.
Not only all your contribution is tax-deductible, but what you earn from your investment through this employer-sponsored retirement plan will not be subjected to income-tax until you withdraw your money at your retirement.
Why tax benefit is it exciting?
Generally, an employee pays 15% to 40% in tax. With your contribution that is tax-deductible, you are basically having 15% to 40% return on your investment.
Furthermore, you will have an opportunity to allow 15% to 40% more of your money to compound for the next 30 to 40 years.
This can mean the difference of retiring rich as a millionaire, or retiring with just enough to get by.
4. Retirement Plan
Retirement planning should start as early as possible, even when you have little money to invest. When you are at the age of 70. You may want to thank yourself for starting your retirement planning early.
Similar to employer-sponsored retirement plan, it allows you to have a tax-free compounding on your investment.
Investment compounded for 30 to 40 years can be a huge retirement sum.
5. U.S. Treasury Bonds
U.S. Treasury bonds (T-bond) are marketable, fixed-interest government debt securities. The government will be committed to pay the owner of the bond on the fixed-interest for a certain number of years. At the end of maturity, the government will pay the owner of the bond their principle.
This form of investment is commonly regards as a risk-free investment due to very little risk of the government defaulting the bond.
With as low as $100, you can start subscribing to these T-Bonds. Whats more, you can sell your bonds anytime with no early withdrawal penalties.
You can view it like a fix-deposit of the bank, without the downside of early withdrawal penalties.
6. Dividend Reinvestment Plan
Dividend Reinvestment Plan (DRIP) automates your reinvestment of the dividend you get from the stock to buy more of the company’s shares.
Although, DRIP is only available to stocks that pays a dividend. In most cases, companies that offers DRIPs allows you to reinvest into their companies without any form of fees, unlike buying stock from the open market.
Even with little money to invest, DRIP allows you to grow your portfolio over time.
Best advantages of DRIP is that, it allows you to performed dollar cost averaging in an automated way. A totally passive way of investing where you can basically allow it to grow for years.
This is a good option for people who wants a more hands-off approach to investing.
But caution have to be taken, as all investment comes with a certain level of risk.
Not only you should only invest in a great dividend paying company if you want to do this approach, but you should do a periodic review of your investment at least once per quarter.
You can learn how to find a good dividend paying stock in my other articles.
7. Low Fee ETFs
Exchange Traded Funds (ETFs) allows you to invest in a bucket of stocks that represents that sector or industry.
Investing in EFTs is especially good for investors who don’t know much about investing but wish to start their investing journey. With a limited amount of investing knowledge and cash, ETFs allows you to invest much more safely.
This is because ETFs helps you to diversify your portfolio which helps to reduce your risk.
But always remember, choosing an ETFs with low fees is important, as fees alone can cause you thousands of dollars when you add them all up years later.
Beginner investors should not pick stocks, as they are very likely to commit one of the 7 deadly sin of beginner investors. Which may end up losing all their money.
Instead, you should start your investing this way:
- Buy a low fee ETFs to allow youself to start on your investment journey.
- While you are investing, read up books and articles on investing like this one.
Enrich yourself on the knowledge on investing before you start buying individual stocks.
Knowledge is the difference between, getting a profit from investing and losing from investing.
8. Invest in Your Own Business
Invest in your own business might sometimes be the best way to invest instead of investing in other’s business. With the advance in internet and changes in the current world. You can easily start your own business with just over $100 dollars.
In fact, there is actually a book written by Chris Guillebeau that told the stories of business owners which start up their business with just over $100.
This is one of the best book I have ever read on business startup, and probably you should too. Not only the the author makes each start-up stories fun to read, there are many things to learn from the different business owner, who start up their business with just over $100, and build them into a 5 figure business.
Starting a business might just be the best investment you can make.
Unlike, the past where you need tens of thousands of dollars to start a business, nowadays you can start a business with just $100 in bank.
9. Invest in Yourself
You are your own best investment. An investment on your own education and to enrich your knowledge is the best investment you can every made.
Learn a new language, a new course on computer application, or even read a life changing book from my library. All these new skills and knowledge you learn can possibly bring your career up into the next level.
It is totally possible that you can acquire a certain life changing skill within a few months, or even weeks.
These new skills you learn can help you in either getting a promotion, or gives you opportunity to get into a higher paying job.
You will need the following to successfully invest in yourself:
- Time to delicate yourself into learning that new skill
- Discipline to learn the skill well
- Open mind to challenge yourself out of your comfort zone
- Optional: A few hundreds of dollars to take the course, or buy that book
Investing in yourself is not only simple to do, but it will also changes your life for the better.
Investing does not requires you to have millions of dollars sitting aside in the bank. You can start investing even when you have little money to spare. Even a $100 is enough for you to start investing.
Most importantly, you have to move out of your comfort zone and start on something. Slowly, but eventually, you will succeed.
Here are the 9 easy ways to start investing with little money:
- Pay of Debt
- Saving Accounts
- Employer-Sponsored Retirement Plan
- Retirement Plan
- U.S. Treasury Bonds
- Dividend Reinvestment Plan
- Low Fees ETFs
- Invest in Own Business
- Invest in Yourself
Investing is never easy, but with the things you know from reading our articles, it will help you in your investing journey.
Successful investors like Warren Buffett read approx 500 pages a day.
Knowledge on investment can be learn from books or articles like this one. Reading can only make you wiser and smarter, so that you too maybe able to make the right decision in your investment.
Will Durant Said:
“Education is a progressive discovery of our own ignorance.”
Here we have selected a whole library of some of the best books you should read to learn more about financial education.
You can Visit My Library to explore some of the best books in life.
Trust me, it will definitely be worth it!
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Disclaimer: I am not your financial adviser or lawyer, information found in our website are just my opinions. You should always ask your financial adviser or lawyer for any financial or law related advice.