Out of the main pillars of financial wellness—earn, save, spend, invest, and protect—investing can oftentimes feel like the scary, unknown thing lurking in the closet. Being frugal, creating a spending plan, and buying insurance seem to operate within the warm, fuzzy confines of familiarity and safety.
But investing? It can feel like you’re staring into a vortex of ambiguity. For starters, there’s a host of complex concepts and perplexing jargon to get your head around. Of course, there’s the volatility and risk involved. Plus, it may seem like you need to be a regular ole’ moneybags to have the funds to invest in the first place.
All that aside, you know full well how important it is to invest—regardless of whatever craziness is going with the market. By investing, your money can grow, and you can ultimately build wealth in the long term.
Don’t let the fact that you’re not flush with cash deter you from dipping your toes in. With all the investing platforms and apps in existence, it’s certainly doable to invest with just a bit of cash.
Here are a few ways you can get started with investing with a hundred bucks or less:
Consider a micro-investing platform
With micro-investing apps such as Acorns and Stash, you’ll only need as little as $5 to open an account. Acorns will round up transactions from your linked bank and credit card accounts and invests the change. After answering a series of questions, such as your risk tolerance and investment time horizon, Acorns will recommend to you one of five portfolios, which range from conservative to aggressive.
Their diversified portfolios are made up of ETFs. An ETF is a “basket” of securities—think bonds, stocks, real estate. ETFs are traded like stocks on exchanges and track a widely followed index, such as the S&P 500 or Dow Jones.
Like Acorns, Stash also gives you the option to invest one of its portfolios. But you can also create your own portfolio with a mix of ETFS and fractional shares of individual stocks.
The fees for both Acorns and Stash are the same: $1 a month for accounts under $5,000. Once you hit $5,000 in your account, the fee is 0.25% of your investments or assets under management.
Invest through a robo-advisor
Robo-advisors use algorithms and technology to create and manage your investment portfolios. While they’re touted for their diversified portfolios and lower fees, on the flipside robo-advisors offer a more automated, less personalized touch.
The beauty of robo-advisors? Typically there are no minimum investments and trade fees. While you can get started with just a bit of cash, the portfolio management fees are as follows: Betterment charges 0.25 percent annually for its digital plan, and Wealthsimple charges 0.5 percent for accounts with $100,000 or less.
Make contributions through a workplace retirement plan
Employer-sponsored retirement plans, such as 401(k) shouldn’t be overlooked. It’s an easy way to invest pre-tax dollars toward your nest egg. See if you can start with a small percentage of your income, and go from there.
And if your employer offers a matching contribution, even better. If you can swing it, contribute enough to get the full match. Otherwise, that’s just money you’re leaving on the table.
Plus, these retirement plans also limit the number of investment options that you can choose from, explains Dwight Dettloff, a CPA and CFP® of Winding Tail Financial. In turn, you won’t be suffering from decision paralysis, and spend far too much of your precious time researching thousands of alternatives.
Try a free investing platform
Yup, you heard that correctly. Popular stock investing platforms such as Robinhood and M1 Finance don’t charge any commissions on trading.
And while M1 Finance is technically a robo-advisor, you can also make trades on the platform. Besides pre-made portfolios, you can also create a customized portfolio. You’ll need $100 minimum to start trading on M1 Finance, plus there are no annual portfolio management fees.
If you’re curious about investing on either platform, Robinhood is better for active traders as you can trade throughout the day, explains Samuel Wieser, CEO and investment advisor representative of Northman Financial.
On the other hand, as M1 Finance only enables you to make trades once a day, it’s better for long-term, buy-and-hold investors. Wieser adds that while you’re looking at no trading fees, a downside is that the trading and research tools are limited on both platforms.
Save so you have a larger chunk to work with
While there are plenty of investment options to get started for just a few bucks, sometimes you might want to wait until you can shore up more funds to invest through a discount stock brokerage. After all, there are a lot of benefits to investing through one of these brokerages, explains Wieser.
For instance, some of the larger ones give you the option to talk to someone on the phone or step into a brick and mortar location for help and guidance. Plus, they’ve been around for decades, and many have extensive trading and research tools available to investors no matter the size of their portfolio.
“While each offer commission free-vehicles (typically ETFs), investors who want to make many trades or simply plan on investing a small amount every month will likely end up paying commission fees on at least some of their trades,” explains Wieser.
Even at the most discounted brokerages, you are going to pay $4.95 per transaction, points out Adam Beaty, a certified financial planner of Bullogic Wealth. That adds up to $9.90 just to buy and sell the position, which means you need a 10 percent gain just to break even.
“Obviously, it’s going to be very hard to make money this way,” says Beatty. “It would probably be best to move this money to a brokerage, but not invest it until you build it up. If you can put together a couple of hundred, you’re already doing better.”
As you can see, even if you don’t have a ton of money, you won’t be hard-pressed to find options to get started investing. But with any financial decision, research the costs and fees, take a look at the risks and your comfort level with risk. It’s also important to know your budget, goals, and timeframe with investing.
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