15 Ways To Start Investing Small Amounts Of Money

Joseph Meyer
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The 15 Best Ways To Invest Small Amounts of Money:

Table of Contents

Savings Accounts

One way you can begin to invest small amounts of money, is to save your money toward large purchases that you intend to make in the future. For example, contribute money toward a new washing machine for your home or a new car for your family.

Betterment

Lending Club

Lending Club is a major player in peer to peer lending. The site lets you invest money in short and medium term loans. People who need loans will apply and the people who want to lend money hand pick the people with whom they want to enter into a loan. It’s actually pretty simple.

When you invest on Lending Club you can choose how much risk you are comfortable taking. You can also choose when the loans should be paid back.

There are some pretty interesting tax advantages as well. If a borrower does not pay you back, Lending Club sells your loan to an investor and they are responsible for paying off the loan. That means you get to write off the loss against your taxes.

M1 Finance

There are many options to choose from for investing, but M1 Finance might be the simplest of them all. M1 Finance is a broker app that allows you to invest in exchange-traded funds (ETFs).

It’s completely free to use. M1 Finance makes money from commissions from the security trades.

There’s no minimum balance, no minimum investment amount, and no trading commissions.

You can buy fractional shares, so you don’t have to spend a lot of money to make significant investments.

M1 Finance takes advantage of a recent ruling by the SEC regarding the way brokerages are regulated.

And it’s a lot easier than opening an account with an online brokerage directly.

Fundrise

Luck favours those who don’t give up and don’t quit. And when it comes to luck, timing is equally important. That’s why you need to start investing the minute you start earning.

Investing small amounts of money can give you a huge advantage as long as you start early enough. With the added power of compounding interest, you may not necessarily need to make a ton of money out of the gate to become a millionaire. If you make compounding a habit, you’ll be surprised to see how quickly your investment income can snowball over the years.

Paying Off Debt

Paying off debt is a good way to invest in yourself and increase your net worth. If you’re struggling with debt, you should develop a strategy to pay it off. It can take some time, but if you start by tackling the debt that’s costing you the most money in interest, it can help get you a step closer to being debt free.

Many people who are living paycheck to paycheck have more debt than they have emergency savings. If you have bad credit, you may want to start by focusing on getting it back into shape before you start investing. This will help you establish a good credit history and make it easier to get a loan for a house or car. It can take some time, but you’ll be in a better place to start investing for retirement.

Your Employer-Sponsored Retirement Plan

A 401(k) is a retirement plan generally set up by your employer, where you can set aside money pretax on a regular basis. You can choose your investment choices, and it's an incredibly powerful tool for building long-term wealth.

If you've been working at your company for a while, try asking your HR department for the enrollment paperwork. Even if it's not time to start making contributions yet, the paperwork will still help you to understand the plan. If you're new at your company, ask your HR rep about signing up, and don't be afraid to say that you want to start contributing. If you work in an office setting, you may not be used to asking for this type of information, but it's important to get started early. According to Financial Engines, employees who have been with their company for three years will make 33% more over the course of their career than those who don't start saving until later in their career. The sooner you start, the less you'll have to contribute each month and the more you'll be able to sleep at night.

Your Own Retirement Plan

Most of us have the same goal: to escape the rat race early and start living the enjoyable, relaxed life that many of us work so hard for. The first step towards this, however, requires us to start planning for our retirement and getting ourselves on the right track from an early age.

Some people like to leave this up to their employers, who, in all seriousness, don’t have your best interests in mind [1] and plan to drag you down to their levels when you are at your most vulnerable. There are numerous ways to get around your employers and manage your own career (if you even have one), but I’ll leave that for a different post. For now, let’s focus on the most basic financial advice for anyone who’s interested in retiring early: Start investing your money as early as possible.

The earlier you start, the better. I know, easier said than done. However, if you think of investing as simply the act of buying more of the things you want in exchange for what you already have, you’ll see that it’s not only the best way to retire early, but it’s also a much more effective way to grow your wealth than any other investment plan out there.

Prosper

Prosper is an online lending platform where individual investors can browse through loan opportunities from different institutional lenders, such as banks and mortgage companies. Investors can browse a variety of loan terms and recent borrower ratings and decide which loans they’d like to fund through Prosper.

When a loan is funded by a group of like-minded investors, this is called a peer-to-peer loan. Prosper reports that all of its loans are fully funded to the investors prior to the borrower receiving the loan, thus the borrower does not have access to the money until all investors have received their full investment plus interest.

Prosper offers fixed-rate and adjustable-rate loans for a variety of purposes, including consumer, business, home improvement, student loan refinancing, and auto refinancing.

Investment minimums and loan amounts vary. For more information, visit the official Prosper website, and read my full Prosper review.

US Treasury Securities

Let’s get one thing straight right off the bat: the U.S. Treasury doesn’t offer individual investors anything that’s even close to a good investment. In fact, unless you’re trying to hold a Treasury security for less than a year or so, these aren’t even investments.

When you buy a Treasury security, you’re simply lending money to Uncle Sam. That’s right – you lend the government money, and they pay you interest for the privilege. The only reason you’re even getting that interest payment is because the government needs the money to print more money to pay its debts.

Investing in Your Own Skills

Investing in yourself is the smartest form of investing. Hours spent studying and practicing can yield stocks that pay dividends for years to come. Any time you view learning as an investment rather than a cost, you’ll improve your chances of succeeding.

For instance, do you know that taking a college class can pay dividends up to 10 years later? Think about that for a moment. Investing in a class today could lead to a longer, more successful career 10 years from now.

Don’t be tempted to take a class to fill up your time. While that might increase your odds of getting a degree, it won’t increase your knowledge. Instead, take a class you are interested in – one where you’ll learn something you’re interested in or can immediately apply to your current position.

Of course, investing in your own skills and knowledge isn’t just limited to the classroom. It can also come in the form of:

Reading — There is just no replacement for knowledge. If you read enough, you can learn just about anything. But why not choose books by successful people?

Dividend Reinvestment Plans

One of the easiest ways to get your foot in the door of the stock market is with a dividend reinvestment plan, also known as a DRIP. With a DRIP, you buy shares of a company, and then can choose to reinvest dividends back into more shares of the company, essentially getting a bit of a free ride on the shares’ appreciation and quantity.

A DRIP is great because it’s essentially free money. You don’t pay for the initial stock when you enroll, and you get to automatically reinvest dividends for free, thus growing your initial value quicker.

The DRIPs are also mostly managed by the dividend companies themselves, which means a lot of the time you can log on to your account, and invest in some more shares with just a few clicks of your mouse.

Low Minimum Investment Mutual Funds and ETFs

Mutual funds and exchange-traded funds (ETFs) are among the best ways to get started in the stock market. They’re low-minimum investment vehicles that provide instant diversification. Their ability to compound return helps investors achieve better results.

Online Brokerage Firms

If you are a beginner investor who is looking for a low-cost, online broker to get into the stock market, consider using a brokerage firm. These online brokerages have low costs and some of them include a number of tools to help you get started.

Your Own Business

About the Author

Razvan is a successful serial entrepreneur with several ventures under his belt, with interests ranging from real estate, to finance, to travel. Most importantly, he’s a dedicated entrepreneur, currently involved in multiple projects, so he’s been there and done that.

You can be sure that when you read his stories, you’re reading from experience.

The way I see it, life is one big game – the biggest game of poker you will ever play and something that should be fun. Why play games that are not enjoyable or not free to play?

I love reading stories of people who are living their dreams. I am a huge fan of Tony Robbins, Napoleon Hill, Brian Tracy and other self development writers and I try to learn how they achieved such success.

My whole life I have had the passion to help others. I am a list maker and a person who likes to keep his life organized. I constantly seek advice from many sources to live life to the fullest, be it from books or other sources I learn from and finally teach others.

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