This post will detail the answer to the question of how to start investing with $100 or less. Many beginners in investing think that starting with just $100 or even less is out of the question. They often connect the success of a financial plan with having enough capital to back it up. You will explore, in this guide, that the world of investing is not reserved only for people with substantial capital.
Why Start Investing with $100 or Less?
Many people believe that the world of investing is reserved for people with substantial capital. Below, we explain why this may be false. Here’s why starting small is not only possible but also a smart move:
- The Power of Compound Interest: Thanks to compound interest, even small amounts can grow significantly over time. For more details on how to grow your investment, see our guide, Building Wealth: Long-Term Investments and Compound Interest.
- Diving into the world of investing can seem a bit daunting at first. However, starting with just a little bit of money comes with two major perks: it allows you to grasp the fundamentals at a pace that suits you and keeps you safe from significant risks.
- Once you feel more at ease, the key is to stay consistent. Making regular investments—even if they’re small—can help you develop good habits and make investing a part of your routine. With time, this steady strategy can really pay off and lead to impressive growth.
Step 1: Set Clear Financial Goals
Before you start investing, knowing why you’re investing is important. Your goals will determine the best strategies and investment options for you. Ask yourself:
- Are you investing for short-term goals (e.g., saving for a vacation or emergency fund)?
- Are you investing for long-term goals (e.g., retirement, home buying, or financial independence)?
It’s often best for beginners to focus on long-term goals, as these allow you to maximize compound growth over time.
See our guide, How to Set SMART Financial Goals for Success, to learn more details about these terms
Step 2: Build a Small Emergency Fund
Before you start investing, make sure you have a small emergency fund. This is a safety net that covers unexpected expenses, like car repairs or medical bills. Aim to save 500 to 1,000 before you start investing. This ensures that you won’t need to dip into your investments in case of an emergency.
Step 3: Choose the Right Investment Platform
Thanks to technology, many platforms now allow you to start investing with $100 or less. Here are some popular options:
1. Robo-Advisors
Robo-advisors are automated platforms that create and manage a diversified portfolio for you based on your goals and risk tolerance. They’re perfect for beginners because they require minimal effort and knowledge.
- Examples: Betterment, Wealthfront, Ellevest
- Minimum Investment: Often 0to0to100
- Fees: Typically 0.25% to 0.50% annually
2. Micro-Investing Apps
Micro-investing apps allow you to invest small amounts of money, often by increasing your everyday purchases.
- Examples: Acorns, Stash, Robinhood
- Minimum Investment: As low as $5
- Fees: Varies (some charge monthly fees, while others are commission-free)
3. Fractional Shares
Fractional shares let you buy a portion of a stock or ETF, making it possible to invest in expensive companies like Amazon or Tesla with just a few dollars.
- Examples: M1 Finance, Public, SoFi Invest
- Minimum Investment: As low as $1
- Fees: Often commission-free
Step 4: Understand Your Investment Options
With $100 or less, you’ll want to focus on affordable, low-risk, and easy-to-understand investments. Here are some beginner-friendly options:
1. Exchange-traded funds (ETFs)
ETFs are baskets of stocks or bonds that trade like a single stock. They’re a great way to diversify your portfolio without needing much money.
- Examples: SPDR S&P 500 ETF (SPY), Vanguard Total Stock Market ETF (VTI)
- Why They’re Great: Low fees, instant diversification, and easy to buy in fractional shares.
2. Index Funds
Index funds are similar to ETFs but are often available through mutual fund platforms. They track a specific market index, like the S&P 500.
- Examples: Fidelity 500 Index Fund (FXAIX), Vanguard 500 Index Fund (VFIAX)
- Why They’re Great: Low-cost and beginner-friendly.
3. Dividend Stocks
Dividend stocks pay you a portion of the company’s earnings regularly. They’re a great way to generate passive income over time.
- Examples: Coca-Cola (KO), Johnson & Johnson (JNJ)
- Why They’re Great: Provide steady income and potential for growth.
4. High-Yield Savings Accounts
While not technically an investment, a high-yield savings account can be a safe place to park your money while earning interest.
- Examples: Ally Bank, Marcus by Goldman Sachs
- Why They’re Great: No risk and easy access to your money.
For more details about such accounts, see our guide, High-Yield Savings Accounts Explained: Maximize Your Returns.
Step 5: Start Small and Stay Consistent
The key to successful investing is consistency. Even if you can only invest 10or10or20 a month, the important thing is to start and stick with it. Here’s how to stay on track:
- Automate Your Investments: Set up automatic transfers to your investment account so you don’t have to think about it.
- Reinvest Your Earnings: Reinvest dividends and returns to take advantage of compound growth.
- Increase Contributions Over Time: As your income grows, increase the amount you invest.
Step 6: Educate Yourself
Investing is a lifelong learning process. Take the time to educate yourself about different investment strategies, market trends, and financial planning. Here are some resources to get started:
- Books: The Little Book of Common Sense Investing by John C. Bogle, The Simple Path to Wealth by JL Collins
- Podcasts: The Investopedia Express, We Study Billionaires
- Websites: Investopedia, NerdWallet, Morningstar
Step 7: Monitor and Adjust Your Portfolio
Once you’ve started investing, it’s important to review your portfolio regularly. This doesn’t mean checking it every day—instead, aim for a quarterly or annual review. Ask yourself:
- Are my investments aligned with my goals?
- Do I need to rebalance my portfolio to maintain diversification?
- Are there new opportunities I should consider?
Common Mistakes to Avoid
- Trying to Time the Market: It’s nearly impossible to predict market movements. Focus on long-term growth instead.
- Investing Without a Plan: Always have clear goals and a strategy in place.
- Letting Emotions Drive Decisions: Stay disciplined and avoid making impulsive decisions based on market fluctuations.
Case Study: Sarah’s Journey to Investing with $100
Sarah, a 25-year-old college graduate, wanted to start investing but only had $100 to spare. Here’s how she got started:
- Set a Goal: Sarah decided to invest for long-term growth, aiming to build a retirement fund.
- Chose a Platform: She opened an account with a robo-advisor (Betterment) and invested her $100 in a diversified portfolio.
- Automated Contributions: Sarah set up automatic monthly contributions of $25.
- Reinvested Earnings: She reinvested all dividends and returns to maximize compound growth.
- Educated Herself: Sarah read books and listened to podcasts to learn more about investing.
After 5 years, Sarah’s initial 100 investments, combined with her monthly contributions, grew to over 100 investments, which combined grew to over 2,000. Her disciplined approach and consistency paid off, proving that even small investments can make a big difference over time.
Additional Investment Options for Small Budgets
1. Peer-to-Peer Lending
Peer-to-peer (P2P) lending platforms allow you to lend small amounts of money to individuals or small businesses in exchange for interest payments.
- Examples: LendingClub, Prosper
- Minimum Investment: As low as $25
- Why It’s Great: Higher potential returns compared to traditional savings accounts.
2. Real Estate Crowdfunding
Real estate crowdfunding platforms let you invest in property projects with small amounts of money.
- Examples: Fundrise, RealtyMogul
- Minimum Investment: As low as $10
- Why It’s Great: Access to real estate investments without needing large amounts of capital.
3. Certificates of Deposit (CDs)
CDs are low-risk investments that offer fixed interest rates over a set period.
- Examples: Online banks like Ally Bank, Discover Bank
- Minimum Investment: As low as $100
- Why They’re Great: Guaranteed returns and low risk.
Final Thoughts
Starting your investment journey with $100 or less is possible and a smart way to build wealth over time. By setting clear goals, choosing the right platform, and staying consistent, you can grow your money and achieve your financial dreams. Remember, the most important step is to start. Even small amounts can make a big difference over time, thanks to the power of compound interest.
So, what are you waiting for? Take that first step today and begin your journey toward financial freedom!
FAQs About Starting to Invest with $100 or Less
1. Is it really possible to start investing with just $100?
Yes, absolutely! Many platforms, like robo-advisors and micro-investing apps, allow you to start investing with as little as 5 to 100. Fractional shares also make investing in expensive stocks with small amounts possible.
2. What’s the best way for beginners to invest $100?
For beginners, the best options are low-cost, diversified investments like ETFs or index funds. These allow you to spread your risk and grow your money steadily over time. Robo-advisors are also a great choice for hands-off investing.
3. Can I lose money if I invest $100?
Yes, all investments carry some level of risk. However, you can minimize potential losses by choosing low-risk options like ETFs or high-yield savings accounts. The key is diversifying and avoiding putting all your money into a single investment.
4. How long will it take to see returns on a $100 investment?
It depends on the type of investment and market conditions. For example, if you invest in the stock market with an average annual return of 7%, your 100couldgrowtoabout100couldgrowtoabout200 in 10 years. Consistency and patience are key.
5. What’s the difference between a robo-advisor and a micro-investing app?
- Robo-Advisors: Automated platforms that create and manage a diversified portfolio for you. They’re ideal for hands-off investors.
- Micro-Investing Apps: You can invest small amounts, often by rounding up everyday purchases. They’re great for beginners who want to start small.
6. Should I pay off debt before investing $100?
It depends on the type of debt. High-interest debt (like credit card debt) should generally be paid off first, as the interest costs can outweigh potential investment returns. For low-interest debt (like student loans), you can balance paying it off with investing.
7. Can I invest $100 in cryptocurrency?
Yes, but cryptocurrency is highly volatile and risky. If you’re new to investing, it’s better to start with more stable options like ETFs or index funds. If you do invest in crypto, limit it to a small portion of your portfolio.
8. How often should I invest if I only have $100 to start?
Consistency is more important than the amount. Even if you can only invest 10 or 20 a month, setting up automatic contributions can help you build wealth over time.
9. What’s the minimum amount I need to start investing?
Many platforms allow you to start with as little as $5.
For example, micro-investing apps like Acorns and Stash have no minimum investment requirements.
Meanwhile, robo-advisors like Betterment allow you to start investing with $0.
10. How do I choose the right investment platform for $100?
Consider factors like fees, minimum investment requirements, and ease of use. Robo-advisors and micro-investing apps are great for beginners, while fractional share platforms like M1 Finance allow you to invest in individual stocks with small amounts.
11. Can I withdraw my $100 investment anytime?
It depends on the type of investment. Stocks, ETFs, and mutual funds can usually be sold at any time, but you may incur fees or taxes. High-yield savings accounts and CDs offer more liquidity but may have withdrawal restrictions.
12. What’s the safest way to invest $100?
The safest options are high-yield savings accounts or CDs, which offer guaranteed returns with no risk of losing your principal. For slightly higher returns with low risk, consider bond ETFs or dividend-paying stocks.
13. How do I track the performance of my $100 investment?
Most investment platforms provide dashboards or apps where you can monitor your portfolio’s performance. You can also use tools like Personal Capital or Mint to track all your investments in one place.
14. Can I turn 100 into 1,000 through investing?
Yes, but it requires time and consistent contributions.
For example, if you start with $100, add $50 each month, and earn an average annual return of 7%, you could reach $1,000 in about five years.
15. What’s the best investment for someone with no experience?
For beginners, robo-advisors and index funds are the best options. They’re low-cost, diversified, and require minimal effort or knowledge to get started.
