If you want to start investing in the stock market with little money then this article is for you. In this article, we will discuss some tips on how to get started with investing in the stock market with little money.
Investing money is a smart option for most people. Putting money in the market is by far one of the best ways to increase your wealth over time, yet investing can be intimidating to new investors. If you are willing to take on some risk then you can also find alternative ways to invest your money that don’t always include the stock market.
Let’s explore all the different ways to find small investment opportunities:
How to Invest With Little Money – The Best Small Investment Ideas
Investing is one of the easiest ways to make money while you sleep. Here’s how to start investing with little money.
1. Start Investing in Cryptocurrency
Cryptocurrency has been on a hot streak for the past two years. And, while all of this excitement and noise is going on, a plethora of new investment options have emerged.
Investing in companies that may profit from cryptocurrency adoption is another one of these investment possibilities. This includes businesses such as payment processors like Visa and PayPal, as well as GPU manufacturers like NVIDIA.
If you’re looking to invest in cryptocurrencies, the sky’s the limit. If that sounds appealing, there are numerous excellent platforms available for trading cryptocurrencies right now.
Coinbase is the world’s most trusted place to buy and sell cryptocurrency. Open an account today, and if you buy or sell $100 or more of crypto, you’ll receive $10 worth of free Bitcoin.
2. Invest in Real Estate Debt
Real estate crowdfunding lets you invest without buying property, and Groundfloor makes it even easier by letting you earn passive income from short term real estate debt.
You can open a free account and start with just ten dollars. Investors fund real estate backed loans to developers and earn interest as those loans are repaid. Groundfloor publishes each project’s rate, term, and risk grade so you can choose your notes or use automatic investing to diversify instantly.
Returns often land in the high single digits to low teens. The main risk is borrower default, but the low ten dollar minimum allows you to spread your money across many loans.
It is one of the simplest ways to earn passive real estate income with a small starting amount.
3 . Invest in Mutual Funds
Mutual funds are a great way to invest and grow your money and build a healthy investment portfolio. Investing in mutual funds helps you develop equity and participate in the growth of an economy.
Mutual funds come with different goals such as building wealth over a period, planning for retirement or saving for children’s education.
You can choose from different types of mutual funds such as equity (stocks), fixed-income (bonds), money market funds (short-term debt), or both stocks and bonds (balanced or hybrid funds). You should get mutual funds based on your risk appetite and financial goals.
You could either create your own portfolio through these instruments by investing directly with the aim of making more returns or you can ask help from a robo advisor.
4. Robo Advisors
Robo advisors make investing simple. You can start with a small amount of money and let the platform handle portfolio building, rebalancing, and long term strategy for you.
Betterment is one of the most established and beginner friendly robo advisors. It builds a diversified portfolio for you based on your goals, automatically reinvests dividends, and keeps everything balanced without you lifting a finger.
You can open an account in minutes and start investing with any amount. Betterment also offers goal tracking, tax smart features, and a clean app that makes long term investing effortless.
It is an easy way to get started even if you are new to investing or want a hands off approach.
5. Buy Gold and Silver
Gold and silver have been considered valuable since ancient times and people still buy them today to protect their wealth. These metals tend to hold their value even during tough markets and the price of both has climbed in recent years.
You can buy physical gold and silver or you can invest through ETFs which simply follow the price of the metals. Some people also invest in mining companies that produce gold and silver.
If you want help deciding which option fits your goals, you can ask MoneyGPT. It gives you quick guidance based on your situation along with simple explanations so you can choose the smartest move for your money.
6. Real Estate Crowdfunding
This one may surprise you, but you can really invest in real estate with little money to your name.
One real estate investing app that is getting a ton of notoriety lately is Fundrise. Fundrise is a professionally-managed public non-traded REIT that lets you earn passive income by investing in real estate at an affordable rate and tracking your portfolio’s growth all via an app.
Returns can be received through quarterly dividends and appreciation in the share value of your investment. Start investing from as low as $10 and watch your money grow!
- Earn passive income with real estate investing starting at just $10
- Easy-to-use app for seamless access to crowd-funded real estate deals
- Perfect for those who want their money to work for them
Apps like Robinhood are free investing apps for your phone. I really mean free all around – free to join and they don’t charge any fees to buy or sell the stock with commission-free trades.
You can invest in the stock market right away even if you only have $1.
Plus, you can get a share of stock like Apple, Ford, or Sprint for free when you join through this link.
The value of the free share may be anywhere between $2.50 and $225 and fluctuates based on market movements. You’ve got nothing to lose.
8. High-Yield Savings Accounts
Investing and saving go together. You can’t build wealth without a strong savings foundation.
A high yield savings account is one of the simplest ways to grow your money safely. Most traditional banks still pay close to nothing, while some online accounts pay far more.
SoFi is currently one of the best options with a 4.30% APY on savings when you set up direct deposit or qualifying activity. That rate is unbeatable compared to old school banks and gives your emergency fund real growth while still keeping your money fully liquid.
Your goal is to keep three to six months of expenses saved for emergencies. Putting that cash in a high yield savings account instead of a checking account lets it grow automatically without any extra work.
SoFi lets you open an account in minutes, earn a top-tier APY, and still access your money instantly whenever you need it. It is a straightforward place to start building or rebuilding your emergency fund.
• Earn up to $300 cash bonus when you set up direct deposit
• Get paid up to two days early with no monthly or overdraft fees
• Earn up to 4.50% APY and manage all your money in one app
9. Microinvesting Apps
Acorns lets you open an investment account from as low as $1 per month and invest spare change from everyday purchases.
But they offer so much more — they let you take control with all-in-one investment, retirement, checking and more.
Just link your credit or debit card to the Acorns app, and once your spare change balance has reached $5, you can start investing with Acorns’ algorithm which buys into exchange-traded funds or ETFs.
You can also get a $20 bonus for joining.
- Rounds up your spare change and invests it automatically—no extra work required
- Investing $100 a month could grow to over $180,000 in 30 years with a 9% return
- Sign up, fund your account with $5, and set up recurring investments to get a $20 bonus
10. Certificates Of Deposit (CDs)
A certificate of deposit (CD) is a type of savings account that offers a higher interest rate than a regular savings account. A CD is also known as a time deposit account.
When you open a CD, you agree to leave your money in the account for a set period of time, usually six months or longer. During that time, you cannot withdraw your money unless you pay an early withdrawal penalty.
The longer the term of your CD, the higher the interest rate you’ll earn. However, if you need to access your money before the end of the term, you may have to pay a penalty. Most banks will let you withdraw part of your money without penalty, but you’ll usually earn less interest on that portion.
11. Peer to Peer Lending
Peer-to-peer lending (P2P) is a method of raising funds for borrowers by lending money to investors with rates set by the market.
It is one example of how technology can change traditional economic models, affecting aspects such as regulation and financing options available to individuals.
The most popular p2p lending sites are run by Lending Club, Prosper Marketplace and Zopa in the US market. You can earn a return of around 5% a year by lending to borrowers.
How to Start Investing for Beginners (7 Simple Steps)
If you want to start investing this step-by-step investing guide for beginners can help you understand the basics of building a portfolio and investments.
Starting anything new can be daunting. Certainly, learning to invest your money is no different.
I wanted to write up an easy-to-follow guide for anyone looking to get their wet by investing in the stock market.
Whether you have saved some money and want to begin investing or you just want to learn how to invest, putting a proven plan in place will set you on the right path to tackle this new challenge.
This guide will help you learn the basics behind investing and get you started on your way.
If you don’t take the time to design and plan your life you will have to settle for what life gives you… – Joe Duncan
1. Select an Investment Strategy
Before you start investing you need to learn about markets and understand how they work. Investing is a way for building wealth, but anyone can learn how to invest.
There are investing apps and brokerages that make it easy to invest even with small amounts of money that have no account minimum and low stock trading fees.
You should understand that investing is different than gambling, investing is not a get rich quick scheme.
This investing guide for beginners will help you understand the basics behind investing in the stock market.
The odds of making money are greatly stacked against most individual investors so getting familiar with different profitable strategies is important.
Perhaps you choose to focus on timeless methods like:
Value Investing: Value investing (buying underpriced stocks) is an investment strategy where stocks are selected that trade for less than their intrinsic values. Value investors actively seek stocks they believe the market has undervalued. Investors who use this strategy believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond with a company’s long-term fundamentals, giving an opportunity to profit when the price is deflated.
Dollar Cost Averaging (DCA): Dollar-cost averaging is an investment technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. The investor purchases more shares when prices are low and fewer shares when prices are high. The premise is that DCA lowers the average share cost over time, increasing the opportunity to profit. The DCA technique does not guarantee that an investor won’t lose money on investments. Rather, it is meant to allow investment over time instead of investment as a lump sum.
These are proven methods used to grow your wealth.
The Little Book Investing Series is a good place to get a basic understanding of different strategies. For example, The Little Book of Value Investing and The Little Book of Common Sense Investing are two options that touch on both value investing, dollar cost indexing, and passive indexing.
During his youth, Billionaire investor Warren Buffett took his investment education so seriously that he read every book on investing at the Omaha public library, some of them twice.
As you continue to learn about a particular method, you will develop your expertise in that area. Once you have learned enough you will begin to find an investment style that makes the most sense to you.
No matter what style works for you, each particular investment strategy will establish a prescribed plan for you to put into practice for years to come.
2. Decide on Your Asset Allocation Mix
Your asset class allocation is simply the desired mix of holdings in your portfolio.
Think of your account as a pie with each slice of that pie representing a different asset in your account.
The percentage of stocks, bonds, and other holdings in your portfolio should be decided upon based on the recommendations from your readings.
For example, a classic 60% stocks and 40% bonds allocation is a useful template for most people. With this example allocation, you will get growth opportunities from your stock holdings, as well as interest income plus potentially smaller overall account declines due to the more conservative bond allocation.
3. Choose a Product
Now that you have decided on a mix of assets for your portfolio you can begin selecting investment products.
For investors willing to accept company-specific risk, investing in individual stocks and bonds will provide adequate exposure.
Alternatively, Exchange Traded Funds (ETF’s) can provide better diversification for an individual investor. This means that your portfolio will be subjected mostly to market risk. That is, the risk of having an individual stock holding in your portfolio decline by a large amount and create a significant loss for your whole account is minimized.
All things being considered, most individual investors are usually best-served by investing in stock and bond ETF’s for simplicity and ease of transaction. ETF’s represent the ownership of a basket of securities like the holdings in the Dow Jones Industrial Average and can be bought and sold throughout the day just like a stock.
Today, most ETF fund companies, like iShares or Vanguard, offer ETF products that provide ample exposure to the stock or bond market with options for customization too.
4. Decide How Much to Invest
Next, determine how much money you want to use to fund your account. This value needs to be a number you are comfortable with having invested and your risk tolerance.
During a full market cycle, you will need to be able to mentally handle the periods when your account is down.
The stock market will routinely experience declines of 10% to 20%. Determine what dollar value will cause you to experience “sticker shock” when you look at your account statement and that value can be set as your 20% downside threshold. Then, calculate the total account value by dividing that dollar value by 20%.
For example, if a $2,000 account decline is the most you can financially or mentally tolerate divide that value by 20% and you could fund your account with up to $10,000.
Putting money to work in the markets is very different than keeping it in a savings account. You will experience daily fluctuations in your account balance that could be sizable.
Also, investing does not produce stable returns like a savings account that pays monthly interest.
However, for bearing this additional risk by putting your money in the market you will assume a higher rate of return over a long period of time.
5. Pick a Trading Platform
This trading platform will be where you buy and sell assets for your account, transfer cash, read market research, and handle other administrative issues.
Selecting a full-service discount online broker like E-Trade, Scottrade, or Charles Schwab will be fine for most investors. Take some time to familiarize yourself with account fees and balance requirements for different brokers before making your choice as these can vary slightly and costs add up over time. You can also opt for smarter automated investing service with Betterment which aims to provide optimized investment returns for individual, IRA, 401k, and rollover accounts.
Overall, if you ever have an issue with your account or have any questions about using the online technology these firms have well-trained employees that are available to assist with your questions.
6. Define Your Time Horizon
Establishing a time horizon for your investments will keep you on course to meet your goals.
If your goal is to accumulate money for a large purchase or create an additional income source in a few years then that needs to be your focus. Checking your account balance several times a day will not help you reach your goal any faster.
In fact, research has actually shown that the more decisions investors make the lower their returns and ultimately their account balances. Frequent monitoring will lead to excessive trading which will increase transaction costs, fees, and diminish the ability for your account to compound over a long period of time.
As a result, you will be further from reaching your investment goal and need more time to invest which may put a strain on your finances elsewhere or at the very least postpone your large purchase.
7. Monitor Your Investments
While checking your account too frequently is not advised, you will need to monitor your investments periodically – especially when the market is down. Don’t ignore your statements when you know your account balance has declined along with the market just because it is painful to see that you have less money.
Those are the times when you need to manage risk by comparing your performance to a benchmark like the Standard & Poor’s 500 Index to see if the decline in your account is relatively the same or if there is really a cause for concern.
Monitoring your investments will involve checking your account balance on a pre-specified timeframe as determined during the research process. For example, some strategies advise reviewing your account statement and asset allocation at the end of every month or quarter to determine if changes are necessary.
Start Investing Today
Once more, I understand that investing can be intimidating. When I started I had more questions than answers. I hope this investing guide for beginners was useful for you.
I often find myself googling market-related concepts that are a bit fuzzy to me, almost always ending up at Investopedia. The beauty of the site is that there is no unnecessary or flowery language…they get right to the point with concise and pertinent information that directly answers and explains the topic at hand.
Whether it’s how the RSI works to what convexity is, they do a fantastic job at making complex concepts easy to understand in a short amount of time. They also have self-paced, online courses that provide on-the-job skills.
However, for an initiated individual investor like you, using the sequential steps above is a proven plan that I have put into practice with family and friends which will increase your odds of investment success as well. As always, if you have questions or comments, feel free to leave a comment. Thanks for reading.
