Investing can change your life sentence for the better. But many people mistakenly think that unless they ‘ve got thousands of dollars lying around, there ‘s no good place to put their money. The dependable news is that ‘s just not the font. You can start investing with $ 100 or even less.
The most authoritative thing — and the way you can get those larger sums — is to just get started, no count how large or little your investment dollars are at the beginning. In this article, you ‘ll learn about six big ways to invest a few hundred dollars. By putting your money in one or more of these categories based on your short- and long-run goals, you can start investing your direction toward long-run fiscal independence .
Our 6 best ways to invest $100 starting today
You have $ 100, and you ‘re looking to put it to work. here are our six best suggestions for what to do with it :
- Start an emergency fund.
- Use a micro-investing app or robo-advisor.
- Invest in a stock index mutual fund or exchange-traded fund.
- Use fractional shares to buy stocks.
- Put it in your 401(k).
- Open an IRA.
immediately let ‘s take a attend at each of these in more detail .
1. Start an emergency fund
It ‘s apprehensible if your first gear think was to start by taking your $ 100 and buying stocks, cryptocurrencies, or some early investment that could double, triple, or even increase your money 10-fold. After all, the stock certificate market has proven itself to be the simplest and most accessible room for people to build their wealth over time. many cryptocurrencies have gained enormously in value over the past few years.
But those assets are besides explosive. They can fall in value identical sharply with little or no warn and often without a clear reason why. That ‘s not a boastfully cover if you ‘re able to buy and hold, and indeed long as you own a diversify mix of investments where your winners can make up for a few losers. time in the market will help you create wealth .
But what if you ca n’t good hold those investments through a crash and have to sell because you need the money ? A little bad luck and timing could mean your $ 100 investment is now worth $ 80, or $ 50, or even less. That ‘s why starting with money in savings is far more important than choosing investments that can be actually explosive .
think if you were to lose your job or suffer an unexpected illness or accident that affected your income for weeks or even months. Having several months ‘ deserving of income available in cash can mean keeping life ‘s unexpected events from damaging your fiscal plans. Interest rates on savings accounts are n’t very gamey, but this is about protecting your downside — not capturing senior high school returns .
2. Use a micro-investing app or robo-advisor
once you have fiscal emergencies covered, you ‘re in a much better placement to start investing. If you like a amply automated access that requires adenine little attempt as possible, then a robo-advisor may be just what you ‘re looking for. Robo-advisors use apps or websites to learn about your fiscal needs and then come up with an investing scheme to meet them. They ‘ll frequently use basic information such as old age, family size, income, and hazard tolerance to tailor a portfolio to your needs. Robo-advisors then handle all the details of selecting investments, making purchases and sales, and keeping you informed .
You could besides use a micro-investing app, which allows investors to put belittled amounts of money to work over time. For exercise, a micro-investing app might allow you to round up your credit wag purchases to the nearest dollar and invest the dispute while besides allowing you to deposit funds when you have extra money ( like $ 100 ) to invest .
3. Invest in a stock index mutual fund or exchange-traded fund
Stocks are probably the most mighty wealth-building tool that the average person can buy. however, it can be in truth hard to pick the winners, and, if you ‘re only investing $ 100 ( or evening less ) at a fourth dimension, it might not be worth the time and effort to choose person stocks. This is where stock index funds come in .
When you invest in a banal index fund, you buy a assemble of every caller that ‘s held in that exponent. In early words, if you invest $ 100 in the SPDR S&P 500 ETF Trust ( NYSEMKT : SPY ), you ‘ll own a bantam share of all 500-plus companies that are in the S&P 500 Index. You get moment diversification and an investment with a long history of making money for anyone who can hold for a decade or longer .
It ‘s besides childlike to do. You just put your money into a stock index reciprocal fund or a low-cost exchange-traded fund. You can choose from a across-the-board kind of stock indexes, ranging from popular ones such as the S & P 500 Index to more specialize indexes .
There are some differences between ETFs and reciprocal funds, including how you buy and sell shares, what minimum investments apply, and what fees you can expect to pay. But the general idea behind both ETFs and reciprocal funds is that you can invest in the solid grocery store or in selected parts of it through a single investment .
once you ‘ve built up a hearty foundation in these index-tracking funds, you can branch out and explore early investing options. But an index fund might well be all you ‘ll always truly need in orderliness to succeed with your investing. concerned in an exponent investment company that costs more than $ 100 ? The future topic applies to ETFs, besides !
4. Use fractional shares to buy stocks
index funds make livestock invest easy, but picking your own stocks is a capital way to earn even better returns. however, until recently, the combination of brokerage commissions and stock prices kept anyone working with smaller sums of money on the away looking in.
That ‘s not the case anymore since most brokers no long charge commissions, and respective major brokerages offer fractional share investing .
thus what precisely is fractional plowshare investing ? In short-circuit, alternatively of putting in an holy order for a number of shares to buy, you tell your broke how many dollars you want to invest in a stock, and your broke will invest that amount of money in that stock for you. For example, if you invested $ 100 in a stock that traded for $ 500, your brokerage account would show that you owned 0.2 shares of that company .
Looking to invest in index funds ? good news ! Most brokers who offer fractional invest for stocks will besides let you buy fractional shares of ETFs as well .
5. Put it in your 401(k)
If you have a 401 ( potassium ) or another employer-sponsored retirement design, funding it could be an excellent use of your investment dollars. That ‘s particularly true if you have n’t maxed out your employer ‘s match contributions. What ‘s that ? It means that most employers will match some of the money you put in your 401 ( thousand ) .
here ‘s an model : Let ‘s say your employer matches 50 % of your contributions, up to 3 % of your pay. If you earn $ 50,000 per year, your employer will put $ 750 in your 401 ( kelvin ) for the first gear $ 1,500 — 3 % of your pay — that you invest. That ‘s a 50 % acquire on that $ 125 per calendar month you invested .
There ‘s even more to like about investing in your 401 ( thousand ) : lower taxes. Every dollar you contribute to your 401 ( thousand ) is considered a pre-tax contribution, meaning you wo n’t pay income tax on that dollar the year you contributed it to your report. Better so far, your investments will grow tax-exempt until you start taking distributions in retirement .
Do n’t have an employer, or have a side-hustle or contract spear ? Guess what ? You can open a alone 401 ( potassium ). You wo n’t get the release money from an employer, but you can however take advantage of those pre-tax contributions and tax-exempt growth .
6. Open an IRA
Have an extra $ 100 you want to invest for retirement above and beyond your company 401 ( kilobyte ) ? An individual retirement account ( IRA ) is a big way to go and can turn even small sums of money into a big nest egg over time .
Let ‘s say that you stash $ 100 a month in an IRA for 30 years. Based on the S & P 500 ‘s historical performance, the $ 36,000 you invested would be worth closely $ 180,000. That ‘s the power of compounding gains over clock time .
Why an IRA ? In a son, taxes. With a traditional IRA, you gain like benefits as with a 401 ( kelvin ), reducing income taxes by cutting your taxable income each year you contribute while besides growing your nest egg tax-exempt until you start taking distributions in retirement .
With a Roth IRA, you get the same tax-exempt increase as with a traditional IRA. But alternatively of getting to lower your taxable income each year you make contributions, distributions in retirement are 100 % tax-exempt .
One way not to invest $100
One trap to be mindful of is investing in penny stocks. penny stocks are typically low-cost stocks of smaller or thinly traded companies. While it may seem coherent that bantam companies or stocks that trade for just pennies per share ( or even less ) have the highest return potential, the reality is that the worldly concern of penny stocks is fully of deceitful companies and pump-and-dump schemes ( think The Wolf of Wall Street ) .
In abruptly, if you ‘re asking how to best invest $ 100 in penny stocks, the answer is, “ Do n’t. ”
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Don’t wait to invest
If you ‘ve been holding off with your invest, do n’t wait any longer. Take your $ 100 and pick one — or more — of these six ways to put it to work. You ‘ll be surprised at what a difference it will make in the long run .