Many Americans put off investing because they believe they do not have enough money. In the past, it did require a substantial amount of money upfront to start investing. Most brokers would require a minimum of $1,000 down. Fortunately, with the digital revolution well underway, it is much cheaper to invest. The bottom line is, you do not need lots of money to invest. Here are three ways to invest with very little money.
Micro investing involves saving small sums of money to invest in stocks, bonds, exchange-traded funds and index funds. Platforms such as Betterment, Acorns and Robin Hood allow you to invest with little to no money, and many of the platforms do not require account minimums. For example, you can invest small amounts of money in a portfolio developed by a micro-investing platform. The catch is that many of these investing platforms use sophisticated software to run their portfolios instead of human stockbrokers. That is why these companies can charge very little in brokerage fees and typically do not require any account minimums.
Commission-Free Exchange Traded Funds:
Exchange-traded funds, known as ETFs, continue to grow in popularity among novice investors with little money to invest. ETFs are marketable equities that track a specific index, such as the NASDAQ or the S&P 500 indexes. You can buy and sell ETFs just like you would individual stocks. Many brokers who buy and sell ETFs for investors do not charge any commissions. That is why ETFs are fast becoming one of the most popular investment vehicles for people with little or no money. For example, one of the most popular online brokers, TD Ameritrade, offers a comprehensive list of over 300 commission-free ETFs. For the price of a single share of an ETF, you gain exposure to a broad range of assets listed in a market index.
Although it may seem like common sense to start investing small amounts into your company’s 401(k) retirement account, many Americans decline to enroll because the company automatically deducts the investment dollars from their paychecks. The problem is, many people are unaware that the deductions are so small, they probably would not miss the money. You can deduct as little as 1 percent of your paycheck into your employer’s 401(k) is you so choose. Combined with some of the tax benefits of 401(k)’s, that 1 percent gets smaller over time while still earning the same returns. If your company gives you an annual pay raise, you can start increasing your contribution each year.