I am republishing this article with edits to make it more relevant and helpful for my readers. People often struggle to save big money. In that case starting with a little amount not only starts the investing habit but also works like a charm for the future health of their personal finance. Enjoy the post!
One of the most common excuses from people in their 20’s and 30’s who aren’t investing is the attitude of “I’d love to invest, but I don’t have enough money to get started.” Well, this mindset simply isn’t true. There are plenty of options for investors with small amounts of cash. You’ve simply got to do a little homework to find the best ones that fit your situation.
It’s also important to start your investing journey young. The power of compounding interest is huge.
Albert Einstein was known to have called it “the eighth wonder of the world.” Think about it. By investing in your 20’s and 30’s you’ll have 30+ years until you’ll need the money to retire. Every dollar invested has the opportunity to earn interest. Then, you’ll earn interest on top of the interest that you’ve already earned. The cycle will repeat itself for 30 plus years, and you’ll find yourself in a very fortunate financial situation.
(Related – 10 best practices for dividend investing)
It’s like rolling a snowball down a hill. As it rolls, it accumulates more and more snow and when it stops at the bottom of the hill it’s a massively large snowball. The higher up the hill you start the ball rolling the more time it has to grow. The same is true with your investments.
The earlier you start, the longer time you have to take advantage of compounding interest. It’s huge – and you should be taking advantage of it today.
4 great investments anyone can make with $100 or less
Create an online property
When I created this blog, I spent just $4 for the first month of hosting fee, with money back guarantee and free domain name for one year. I loved blogging and I continued. I extended for another month, then another, followed by one more month. I never looked back again and now I am in my 5th year blogging.
I earn more money online than through my full-time day job. Most of the income come from the posts written years ago. So even if I am not blogging for a month at a stretch, I still don’t see an impact on my income.
You can create your blog easily, in fact within 20 minutes you can be up and running with your first blog post, on your own domain. A little invest of money and a lot of time can lead to a steady income for years to come. Since this is tried and tested by me, I’d recommend investing in an online property as first preference. Refer to my income report, for more
You can also build static websites and monetize your content to earn regular advertisement income. You can start an online buy sell business. Sites like Alibaba can be used to import cheap products, which after branding can be sold online to local customers.
If you already have a business, you can promote online to attract new customers. When I need to hire a technician or plumber for the odd house work, I search on sites like Thumbtack or Craigslist. Your business needs to be online to succeed.
Index fund offers a relative risk-free high return, compared to other modes of investment. One of the basic problems for new investors is diversification. How are you supposed to diversify if you barely have enough money to invest in the first place?
This is where index mutual funds can help.
An index mutual fund is essentially a portfolio of stocks managed by professional investors that mirror a specific index (for example the S&P 500). Buying a mutual fund means you’ll be buying a portfolio of hundreds of stocks all in one purchase.
How’s that for easy diversification?
While a lot of mutual funds have minimum investment requirement as greater than $100, there are funds with much lower minimums; more around the $100 range. You’ve simply got to know where to look to find them. There are index funds that can be traded in stock exchanges. They are called Exchange Traded Fund (ETF).
ETF’s offer flexibility of buying selling from any brokerage account you have. also they have minimal fee compared to mutual funds.
Peer-to-peer lending (also called P2P) is a fantastic strategy for investing small sums of money.
The idea behind it is quite simple. It’s the act of lending money to unrelated people, or “peers”, without having to go through a bank or financial institution.
Various platforms exist (such as Prosper.com and LendingClub.com) that help the transactions between the borrowers and lenders. Lenders can browse through a variety of loan listings and invest only in the ones that meet their criteria (loan default risk, interest rate, term length, etc).
Once the process is complete and a borrower’s project has been fully funded, borrowers make fixed monthly payments which are divided among the investors who funded the project. The payments and disbursements are all facilitated by the lending platform which makes it easy for lenders to receive their money.
It’s a fantastic concept because of its advantages for both parties. Borrowers can receive funds for projects that banks typically wouldn’t lend for, and at interest rates lower than what credit cards offer. Lenders have the opportunity to invest with small amounts ($25 is typically the minimum investment you can make in any given project), can easily diversify their investments, and can earn great returns.
I’d like to brag about my decision to invest in P2P loan instrument. My Investment with Prosper grew by 6.72% in last one year. Compare that with savings account interest rate of less than 1% or a three-year CD rate of 1.6%. P2P lending is little riskier than those options but it’s not as much as in stocks. Below is the snapshot of my Prosper investment gain. If you are interested, apply for a Prosper loan here.
A high return investment without a risk of losing your money is a must have in every investment portfolio. You can start with a little money, I started with only $500 and let it be there for 3 months before raising to $1000. It took almost 6 months to invest $5000. We just got our first home, that’s why I can’t investment more money right away.
The only caveat is that the liquidity can be a bit disconcerting. If you can’t sell your loans on time, when you require your money back, you get really stuck. You’ll have to wait indefinitely till the loan gets fully paid back.
Savings Account or CD
Yes, I realize this is the most boring strategy of them all with the smallest return, but savings accounts can be a great (and easy!) start to your investing journey. If you’ve got a limited amount of funds to invest then consider opening a high-yield savings account.
With $100 you can’t really hope for a big return either. Putting $100 in a CD or savings account is better than keeping it in checking account.
I’d recommend doing some research to find a bank separate from where you currently bank.
This has 2 benefits:
1) You’ll be moving money into an account that you don’t check the balance of every day. You won’t be paying any bills from this account, so it’ll be easy to forget about. The saying is true, “out of sight, out of mind.” Sounds simple, but by adding it to an account that you don’t look at every week you’ll be much less inclined to use the money to buy something you know you shouldn’t.
2) You’ll earn a higher interest rate. By intentionally seeking out a high yield savings account you’re much more likely to find a higher rate than what your current bank offers.
It’s also a good idea to regularly adding money to the account at whatever frequency and amount your personal budget can afford. Monthly is a good plan, and most banks allow you to set up an automatic investment plan so you can set it, and forget it.
Once your account hits a certain threshold, say $1000, you can then begin looking at other investment options, perhaps the stock market.
There you go, 4 great ways to invest with $100 or less. Don’t wait till you have more money in your pocket to invest, start today!
Readers, any suggestions for others? How did you invest your first saving?
Mark Ross says
Why not increase your saved money, and invest that on stocks. Some of the options you said there are not too good and can’t give you the return that you would need to retire comfortably. I still think being a stock investor can be rewarding if you have enough knowledge about it and of course, if you can get good returns by investing on it.
You’re absolutely right Mark that the 4 strategies listed here don’t have high enough returns to retire from. The point I was aiming to make though was how to get started, even if you don’t have a lot of money to invest.
I agree that stocks are one of the best ways to go, and I’d recommend after having enough money (definitely much more than $100) to heavily get into the stock game. Until that point though, it’s not realistic for someone with only a small amount of cash to invest in stocks. In fact it can be prohibitive because of commission fees.
But yet, those who say “I don’t have enough money to buy stocks” still can invest elsewhere, until they can pour funds into the stock market.
The investment is too small that’s why the return is small too. But this is a start 🙂
Mel @ brokeGIRLrich says
I love this! It’s so easy to get bogged down by trying to save up “enough” to start investing. I mean really, what the heck is enough anyway? I made my first ever stock purchase with a $35 AmEx gift certificate that was a present for my 19th birthday. Honestly, it was a total bust, but I have no doubt that if I’d actually researched properly and known a little about what I was doing, I would’ve been hooked.
I’ve been looking into Peer to Peer Lending lately too. The numbers look very promising on all the other blogger reports I’ve seen.
Nik @ Midlife Finance says
Although savings account is the most boring strategy and may not offer the highest interest rate for your money, for me this is the best way to get started with minimal cash and a plus benefit is that your money is extremely safe in a savings account.
I’m with Mark Ross. WIth a thousand bucks, you can’t exactly do a lot. So just keep saving that up (ie put it into a savings account) until you have a decent amount that you can actually invest in stocks (ie $5k or $10k).
Great starter tips. Any return is surely worth it.
The idea of a $100 investment seems like a joke but to many it is the stepping stone or only realtiy that they have to help them get started planning their future. I have been researching the internet lately trying to find ways to invest and reinvest amounts as low as $20. If you are even making any effort to save then its a good thing. I am interested in learning more about peer to peer lending. Thanks for the articles as always. Upwards of Twenty
I really like the direct stock purchase plans and reinvesting all the dividends.
Tushar @ Everything Finance says
Great post. It’s true that you really don’t need a ton of money to start investing. I am a huge fan of compound interest; if you are young and invest even small amounts early in life, it makes a huge difference, as you have outlined here. P2P lending is next on my list.
[email protected] Education says
Really, a very nice Article Shelby Nousain!!! For investment, saving is the first step then you will think about the next steps of investment. “invest” money in the bank is lower risky. And we all know investment in bank is a one kind of saving. And when we talk about expectation of profit rate, it totally depends on our investment policy and amount and the time period which we choose. And in your article you mention about all kind of investment policies for $100 investors.