When it comes to investments, you can always start small. Investing money, even if it is just with little money, can reap big rewards. You can invest even with a small amount today! A lot of people put off their investments because they tend to think that they will need a lot of money to start their investments. However, you can start investing for as low as $50 per month. The key to building wealth is to develop good habits. Discipline yourself by putting money away each month. If you can make investing a habit starting now, you’ll end up in a much stronger financial position in the future.
1. Try the cookie jar approach
Saving money and investing money are closely connected. Because for you to have money to invest, you should first save the amount you will use. It will take a lot less of your time than you think. You can always do it in very little steps. If you have never been a saver, you can always start by putting away $10 a week. You might think that it’s quite small, but over a year, you’ll have more than $500.
The American Express National Bank is currently offering a strong 2.10% Annual Percentage Yield through their online savings account. There is no minimum deposit required and no monthly maintenance fees that are associated with a Personal Savings Account from American Express. So, the yield is earned on all balances. The company is also offering a high-yield CD’s if you are looking for a place to put your cash and need higher rates.
2. Get a Robo-advisor to invest your money for you
Robo-advisors were created to make investing as simple and accessible as possible. There is no prior investment experience that is required and the set-up is easy. You can just let their automated intelligence track your investments in the background, and the processing fee is not expensive.
One of the most recommended Robo-advisors is Wealth front. The fees are quite reasonable, which is around 0.25%. But the kicker is that you can get your first $5,000 managed free (this is specific to MU30 readers). So, if you are looking into investing with a small amount of money, Wealthfront is a great option if you don’t have any experience. However, note that you will need $500 to get started with Wealthfront.
Now, if you don’t have the $500 starting balance, there are still a lot of great options to choose from. You’ll find available choices in the Robo-advising space. M1 Finance charges no commissions or management fees. Also, their minimum starting balance is just $100. You can also choose from one of their pre-made diversified portfolios or you can customize your own by purchasing stocks and ETFs through their platform. Their user interface is also user-friendly.
However, if you want to start with less than $100, you may want to consider Betterment. They don’t have a minimum starting balance. Just like M1, it is also great for beginners as they provide a super easy platform and a hassle-free approach in investing.
Furthermore, if it is important for you to invest in a socially responsible way, you can try Swell Investing. They also have a low minimum (around $50) and they never invest in industries that contain weapons, tobacco, oil, and private prisons. Instead, they have tailor-made portfolios for green tech, renewable, disease eradication, clean water, and many more.
3. Enroll in your employer’s retirement plan
If you are currently in a tight budget, even the simple step of enrolling in your 401(k) or another employer retirement plan may seem impossible. But there is a way for you to begin investing in an employer-sponsored retirement plan with starting amounts that are quite small, you might not even notice it.
For example, you can invest just 1% of your salary into the employer plan. You won’t even notice a contribution that small. Also, you’ll get a tax deduction which makes your contribution even feel smaller.
Once you have committed to a 1% contribution, you can gradually increase it each year. For example, you can increase your contribution to 2% the following year. On your third year, you can increase your contribution to 3% of your pay. If you match these increases with your annual pay raise, you might not notice the effect of the increase in your contribution.
If you get a 2% increase in pay, it will effectively be splitting the increase between your retirement plan and your checking account. Also, if your employer provides a contribution that matches yours, this will make the arrangement even better.
4. Put your money in low-initial-investment mutual funds
Mutual funds are also considered as an investment security. This will allow you to invest in a portfolio of stocks and bonds with just a single transaction, which is perfect for new investors. However, the trouble is that many of the mutual fund companies require an initial minimum investment of between $500 and $5,000. If you are a first-time investor with little cash to invest, those minimums are hard to achieve. But some of the mutual fund’s companies will waive the account minimums if you will agree to an automatic investment between $50 and $100.
Automatic investing is a usual feature with mutual fund and ETF IRA accounts. It is less common, however, with the taxable accounts. It is always worth asking for the availability of this investment. The mutual fund companies that are known to do this are Dreyfus, T. Rowe Price, and Transamerica.
5. Play it safe with Treasury securities
It is not common for small investors to begin their investment journey with the US Treasury securities, but do note that you still can. You will not be able to get rich with these securities, but it is an excellent place to park your money and earn some interest until you are ready to get investments with a higher risk but higher returns.
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