Many people don’t have enough money to make large investments. Luckily, some apps and programs help make your smaller investments add up.
Even if you can’t invest much, multiple options exist to allow people with limited incomes and budgets to invest for the future with just a few hundred dollars.
Many people think that you need lots of money to start investing. But anyone can invest, even if it’s in penny stocks. To begin with, it’s a good idea to research the stock market.
Research can help you decide where and why you want to invest your money. Investing in mutual funds, for example, has benefits like portfolio management and a diversified portfolio that lowers risk.
If you’re on a limited budget but want to start investing, you can make this dream a reality.
1. Invest in mutual funds
If you’re a new investor, the first thing that you will want to do is get familiar with investment terms. This doesn’t mean that you need to predict market patterns. However, it does mean that you’ll want to understand the difference between ETFs (exchange-traded funds) and mutual funds, for example.
- A mutual fund lets you buy or sell based on a dollar amount compared to a share or stock market price. This means you can invest the amount you want, right down to the penny.
- An ETF share is tied to the market price. This means that you can’t buy a partial share.
Most experts agree that mutual funds and ETFs are low-risk investments. A mutual fund allows you to make a minimum investment if you’re looking for the best returns for your money.
If you want to invest monthly, check out a Systematic Investment Plan (SIP) that makes it possible to invest smaller dollar amounts. Of course, you can also make weekly, monthly, or quarterly investments.
With SIP, investing small, regular amounts is better than one large lump sum. That’s due to the principle of compounding, which boosts your regular investments by creating a snowball effect over time.
2. Put your money into gold
One of the best ways to invest is to invest in a metal that holds or increases its value. Gold is a safe investment since it is always in demand, particularly during a recession.
Due to the pandemic and other global economic issues, the price of gold has fluctuated. So, while owning physical gold coins can bring a sense of security, you can also avoid concerns about safety and storage by investing in digital gold ETFs.
3. Save regularly
It takes a lot of hard work and commitment to set aside a certain amount of money each month. The good news is that technology offers apps and computer applications that can help you organize and automatically save each month.
4. Automate your savings
It’s no surprise that big oak trees grow from tiny acorns. This saying is true when it comes to investing. Even small amounts of money can add up over time due to a well-diversified portfolio or compounded interest.
One of the easiest ways to automate your savings is to use an app like Acorns, Chime, or Qapital. For example, acorns allow you to round up to the nearest dollar when you buy products or pay bills with debit or credit cards.
This automatically saves money and is painless since you don’t have to see or worry about it.
- The money is bundled into a couple of low-cost, diversified ETF portfolios if you use Acorns.
- Then, when you invest with Chime, you can deduct a portion of each paycheck to go straight into savings.
- Qupital is also an FDIC-insured bank that lets you transfer money automatically to a savings account to take advantage of compound interest.
5. Check out savings apps to save your change
If you’re interested in investing pocket change or a few extra dollars here and there, you can try investment applications such as Stash or Robinhood.
- If you’re a new investor, Robinhood is a good option for investing in penny stocks.
- Stash lets you do the same thing but goes one step better. This app allows you to invest in a portion of the stock. This means you can have a slice of the pie in big corporations such as Amazon, Disney, Tesla, or Apple.
6. Consider a dividend reinvestment plan
If you like to take a little risk, multiple investment options are available, even if you’re hitting the stock market for the first time.
A dividend reinvestment plan (DRIP) can give you a better return than a savings account, a certificate of deposit (CD), or a Treasury bill.
Here’s how a DRIP works:
- Buy stock shares in single or multiple company stocks.
- Set your dividends to buy more shares or fractional shares automatically.
- The plan automatically reinvests any dividends earned.
- This eliminates paying a broker a sales commission.
- Higher returns often outweigh the risk of reinvesting returns and buying more stock.
7. Turn your tax refund into investments
Many of us think about ways to spend our tax refund or use it to pay off bills. Investing your tax refund is a great way to start investing if you have trouble saving money to set aside each year.
If you can spare the money, consider investing part or all of your tax refund this year.
Putting these kinds of windfalls into a diversified portfolio can give you a head start on your investment savings.
Keep in mind that with any investment, it’s important to check out any fees associated with an account and take steps to minimize anything you might owe.
For example, receiving e-statements instead of paper statements is one way that you can often reduce fees related to investment accounts.
8. Contribute to your 401k
One of the most solid ways to start investing if you have a limited income or are sticking to a budget is to take advantage of your employer’s investment plan. These are typically 401ks, but can look like Roth IRAs, standard Roth accounts, or a 403(b) for a non-profit institution.
Many employers offer an investment match. That means, that if you contribute 10% of your paycheck to a company retirement plan, your employer will match that contribution with an equal amount. It’s like picking up free money.
Keep in mind that investing in a diversified portfolio that reduces stock volatility and risk is generally safer and more profitable than sinking all your money into one company’s stock.
9. Invest in Crowdfunding or Peer-to-Peer Lending
For those who are open to more risk or want to invest a chunk of money, such as $1,000, consider looking into peer-to-peer lending.
For example, if you’re interested in becoming a virtual landlord or getting into real estate without getting your hands dirty, check out crowdfunding platforms like Fundrise.
These crowdfunding sites connect investors with entrepreneurs to launch new ventures. Once the loans are paid off, investors who lend money to business owners get an interest share based on their invested capital.
Some platforms, such as Prosper, let you get started for just $25, while others may have higher minimums.
Although crowdfunding investment can lead to high risk since many new enterprises don’t succeed, you also gain the opportunity to make it big.
10. Trade for better investments
As your accounts and expertise grow over time, you can always swap out poorer-performing shares for better investments.
Keeping an eye on your long-term goals and ensuring that you have a diversified, risk-averse portfolio can help you achieve your investment goals.
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