7 easy ways to start investing with little money

3 minute read

A woman is sitting at a table reviewing her finances.

There is a myth that it takes tens of thousands of dollars to start investing. But what if you could learn how to invest with a little money? Yes, you can start investing and building a nest egg with just a little money. Investing, over time, becomes habit-forming and exciting, especially when you reach your financial goals.

The key is to start somewhere, even if it means investing your spare change. There are several investment vehicles that you can consider to help your money grow.

Consider these options if you want to get started building a healthy investing habit.

Workplace retirement account

If your investing goal is retirement, you can take part in an employer-sponsored retirement plan. Most companies provide their employees with a retirement saving account. An automatic deduction is taken out from your payroll each month. You can simply choose a percentage from your gross income that you want to allocate to this account. 

Many employers will even match either dollar-for-dollar or 50% of what you contribute up to a certain point. Retirement accounts typically offer some form of tax advantage to incentivize you to invest for your future today.

IRA retirement account

If your employer does not provide a workplace retirement account, you can open an individual retirement account (IRA). You can choose between a traditional IRA and a Roth IRA. An IRA account is a tax-deferred account. In fact, withdrawals from Roth IRA are tax-free after the age of 59½. An IRA allows you to save up to $7,000 per year before the age of 50 and $8,000 per year if you are 50 or older. This is an easy way to build up a sizeable amount in just a few years. 

Purchase fractional shares of stock

Anyone can invest in the stock market. If you prefer to pick the individual companies you want to invest in, you can still invest in stocks without a lot of money. Several new investing apps allow you to buy fractional shares of stock and ETFs.

Rather than having to save up $1,000 to buy a single share of a popular technology company, you can buy .001 shares of the company for $1. This makes it easy to diversify your portfolio of individual stocks.

Index funds and ETFs

Index funds and ETFs can be a great way to diversify your investment. Index funds and ETFs track certain indexes, such as the S&P 500 (made up of the 500 largest publicly-traded companies in the U.S.). When you invest in one of these vehicles, it’s like investing in the entire index without buying individual securities for each company in the index.

These products can track various assets, like stocks, bonds, currencies, commodities, or even an entire market.

Savings bonds

If you are risk-averse, consider savings bonds or Treasury securities. You can buy savings bonds with maturities as short as 30 days (minimal earnings) or as long as 30 years.

Only buy bonds you can afford to leave until maturity, or you won’t get the total return you’d hoped. Savings bonds are a great way how to invest with little money. Plus, you’ll diversify your portfolio and keep at least a portion of your funds risk-free. 

Certificate of Deposit (CD)

CDs are one of the oldest forms of investment. You can buy a CD at a fixed rate from your bank. Your bank further lends this money to the market. CDs offer little-to-no risk, but they often come with low rates of return. The upside is that you know precisely how much money you will have when the CD matures.

Bottom line

You don’t need a lot of money to begin investing. All you need is consistency and commitment. While it may seem intimidating to start investing with a small amount of money, the most important thing is to start as soon as you can. By investing even a small amount consistently over time, you can potentially see your investments grow through the power of compound interest.

Remember to do your research and seek the advice of a financial professional before making any investment decisions. And before you begin investing, be sure you’ve taken care of more immediate financial needs like paying off high-interest debt and building up an emergency or rainy day fund. 

This article was written by Hysha Burgess from Everything Finance and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.

This information is provided by Voya for your education only. Neither Voya nor its representatives offer tax or legal advice. Please consult your tax or legal advisor before making a tax-related investment/insurance decision.

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