There are plenty of ways to start investing with little money. Even if you are a college student or a fresh graduate, you can invest the few dollars that you might have saved up in your bank account. You are lucky that you are in a position to invest your money in such a tender age. The earlier you start investing, the richer you will be in your twilight years.
People with low paying jobs can look for investment options like 401k or IRA. There are many companies who offer a retirement plan to their employees. Furthermore, investments apps like M1 Finance and Prospect have enabled people with no knowledge of finance to get started with investing. All you have to do is link your bank account and start investing with as little as $10.
Here are 5 easy ways to start investing with little money.
Betterment is an online financial advisor that helps you invest based on your current financial situation. They analyze your income sources and find out your investing capacity. It’s such a great thing to have finance professionals take care of your investment than to do it yourself. Not every one of us is well versed with the world of investment.
They have three plans: New investor, Hands-off investor, and Hands-on investor. As the name suggests New investor is for someone who needs a capable person to guide them through the entire process of investing their money. If you are reading this post, this plan might be the best for you. After the creation of your portfolio, your transactions are handled by an algorithm that will invest and reinvest your money without causing a cash drag.
2) Investment in mutual funds
Mutual funds are the best way to start investing with little money. You as an investor have to create an account with an Asset Management Company(AMC). The AMC is an organization monitored by trustees who make sure your that your money is invested in a profitable market. Also, you don’t have to worry about losing your money as the AMC’s invest your money in several industries. So, if one industry crashes, the other will make up for the loss. Finally, AMC’s are experts in the field of finance and investment so there can be no better partner than them.
3) Enroll in a retirement plan
Retirement plans like the 401k and IRA are another great way to start investing with little money. Whether you work for a corporate firm or a non-profit government organization, you are eligible to invest your money in both 401k and IRA. But, for 401k, it is important that your employer offers you the plan. Because some employers like to stay out of it.
For the IRA, there are some minor criteria like your income, occupation, age, etc. But the enrollment procedure is quite easy and hassle-free. Both 401k and IRA don’t charge any tax while you are contributing to it. You will only be taxed at the time of the retirement– when you will be eligible for withdrawal of your money.
Prosper is a peer-to-peer lending marketplace. In the last 15 fifteen years, they have loaned out $15 billion to more than 910,000 people. With Prosper, you can invest your money in personal loans with an average return of 5.3%. You don’t have to rely on stocks and bonds anymore. Personal loans are an evergreen market and returns are guaranteed.
You can invest a minimum of $25 per loan. This way you diversify your investments and avoid any major losses. Moreover, some of the major financial firms like Sequoia Capital and Credit Suisse have market shares of Prosper. So, your money is in trustworthy and safe hands.
5) M1 Finance
M1 Holdings LLC is a Chicago based automated investing company. They have been operating in areas like banking, finance, and wealth management for the last 15 years. To get started, you first have to build a custom portfolio and then buy fractional shares of the major companies like Amazon and Apple.
M1 Finance lets you start investing with little money. You don’t have to buy shares worth thousands of dollars and risk losing your money. With M1 Finance, you can buy a share for a very low amount. Plus, they don’t charge any commission on your financial transactions.
It is wise to divide a certain percentage of your income into investing. The fear of failure and losing money stops people from becoming rich. The investment methods mentioned in this post are completely risk-free. So, start your journey of becoming wealthy by investing whatever little money you can afford to invest.