We would like to make this article a top notch, let us say how a person invests when he have more than few dollars?
But this time, we will not be talking with the common traditional investment options that usually require thousand bucks. You can always do some short term type of investment for your money.
In the past, before I started my investment journey, I have my misunderstanding about it as what you have now, the idea of being an investors need thousands of funds for him to get started on this journey and to tell you, my thoughts are telling me how do I invest my $10k or my $100k?
Well, now that I know something in the world of investment, I would like to fill in the gap in the past which to get the right information for those who are startup in investment journey, so these ideas that I am going to share will help you lessen the thoughts and fears that I have experienced in the past.
To tell you, I was really surprised the first time I discovered that I could even start my investment journey in stock market, this is thru mutual funds with as low as $50 a month. I grabbed the chance and that’s the thing that I did in my first journey.
Even though later I just found out that mutual funds type of investment was the best, the fact that my starting investment for myself was huge step to consider. That initial step that I did in the past helps me realize the amassing wealth that will be coming later on.
For figure purposes, I am going to defined only small money like more than $50, but for sure not more than $500. So based on the parameter, I have here my fifteen effective investment ways for you to invest your small amount of money and turn it in to something unexpected.
1. Clear out your Personal Debt
There are 2 major reasons in leading off with suggestion of clearing your debt.
- First, you should put this in mind that investing your small amount of money should not be done if you have things to pay regularly like debt, especially those debts that are unsecured or money needed to be save in case of emergency situations.
- Second, paying or clearing your personal debt is the best way we can tell you, for you to feel the guaranteed return of money. This situation is true if interest charge on credit card is double digits, meaning no place available for an average investor to get a double digit rate return and that is a hundred percent guaranteed.
Let us assume that your credit card has a balance amounting to $2,000 with interest of 15.98% per annum. By paying that balance on your credit card, you will lock in nearly 16% of return on your funds that virtually and forever!
If you just find time researching and surfing on the internet, you can make a card with zero interest. In this way the payment will directly go on the card itself not on interest (Situations like this happens on limited time so if given an opportunity you can pay them now.
2. Retirement Plan Sponsored by Your Employer
This is so far the easiest idea or way for you to invest small money, or this can be done if you don’t have money at all. This is because, everything has been set up on the deduction items on your payroll, so the percentage allocated on the paycheck that you are going to received regularly will be going to your retirement plan.
Basically, you have the power to allocate amount on your monthly paycheck that you can afford, it can start as low as one percent up to twenty percent or even more, this depends on the rule being established by an employer.
This means that you don’t even need a large nest for you to invest. You can just simply add amounts on your account each paycheck you received and start investing on other window for investments with the available capital you have if your employer permit.
One thing that we like with this system is the tax benefits, not only that the contributions you have are tax deductible, but also with the income you earned from investment is not subject on income tax deductions until such time that you finally retire and starts withdrawing the money. In addition to that, if the current employer you have will offer matching contribution, the scenario will be that you’re getting found money.
Considering the amount money that you are going to invest, you need to prioritize investment from your employer, shall we say a sponsored retirement plan for your future should be the first step that you should take.
3. Self Financed Retirement Plan
In the case that you have no employer that will sponsor your retirement plan, the best thing to do is to set up your very own self financed retirement plan. The only thing you need is to have enough income for you to pay the needed contributions.
The best plans that most people acquire is the Roth IRA or the traditional IRA. Like you employer sponsored plan, the returns on the investment that you have earned will have its tax implemented when you start withdrawing it in the future.
And also, the contributions to IRA are fully deductable with tax. On the other hand those contributions on Roth IRA are not, however the withdrawals will then be free from possible taxes as long as you are at more than half during the time of your withdrawals, and you participated in plan for least five years already.
Though this one does not involved employer contribution, a Roth IRA or traditional can be held in brokerage account, in which that offers nearly unlimited choices of investment options.
With this, you have the chance to even contribute to $5,000 annually to both traditional or even Roth IRA , this means that you have the capability to build up substantial portfolio in few years, also with best IRA providers available at low cost.
As you know, there are many “robo advisors” that you will encounter as you go along with online platforms on investment. They usually offer expert management with your portfolio at low cost fees. Betterment is among the best for those who are under the small scale investor’s category.
This is basically done by simply completing series of questions given online in which this will determine the level of your risk tolerance in investment.
After getting the initial inputs and based on its evaluation, a certain portfolio is now then created with allocation that includes different ETF or Exchange Traded Funds. Because this allocation is your responsibility as you fund your account. You no longer think about the investment option and re balancing investments.
Investment for betterment has not required minimum or initial money to be deposited in order to create an account. Basically, you can even open an account by simply committing to a monthly contributions as little as $80(this portion varies; there are some who accept even $50).
And the management fee will be charge around 0.30% based on the balance of your account that is less than $9,000. Take note, the cost of management fee will be based on sliding scale and this can drop in figure as your account grows.
5. The Lending Club
Lending group, organization or group online is one of the most known peer to peer or P2P platform for lending in which the borrowers get their loans, while the investors or the lenders will provide cash for those who have applied for the loans.
As return the investors or lenders are then rewarded with the investment made, basically the rates or extra high and the risk for the investors are also high especially if you deal with unknown clubs.
In fact with this platform, you can invest as low as $20 for single loan. This means that a $900 investment can be spread on different notes. The only limitation for lending club is that there are states that requires minimum net worth before you are allowed to invest on the said platform
As we said, while the amount that can be invested is small, the need to show your asset is a must for you to participate in the club.
The term prospers work best similar to what lending clubs is. As little as $20 for you to start, you can even spread few of your extra dollars across loans. In the same jurisdiction, a minimum net worth of your total asset is still a requirement before you can join.
According to the data we have, the average yearly return of this platform is around 16%, in which is considered an amazing return based on fixed rate category type of investment. In case of both lending club and prosper, there is potential risk of losing your principal in cases that the loan you are holding goes default.
Take note that t there is no such FDIC related insurance in it that will solidly protect the investment you have as compared to what in banks that offers investments.
7. Treasury Securities
If you are one of those many people are there who are looking for more conservative type of investment, in which your principal is then protected by from unexpected possibilities of market swings, Treasury Securities is the best way for you to invest.
Let us consider US Treasury. These are securities of debt obligation issued by United States Department of Treasury for them to fund national debt. The said securities have its own maturities from 30 days up to 30 years (the longer terms in maturities involve some risk on its principal if you have plans to sell it before the maturity date).
You can directly invest in US securities through US Treasury department portal. The portal can be used for you to buy United States securities in some denominations that start from $100. No just that, you can also sell the securities as well, and one thing I like with this is that there is no such penalty in doing an early withdrawal.
The treasury can also be use for you to buy a protected treasury inflation security. These don’t just pay the interest, but also has periodic adjustments on its principal based from the inflation chance in consumer index.
8. Investment in Banks
Just to make things clear, there’s not much money if you invest in banks, at least you will have options for you to select. However, banks has its main advantage, this is when you have the capability to invest even your little money and then earn little interest from it and with a zero risk of principal loss.
In most cases, bank investments are used as a window for getting larger amount of funds that will be invested for riskier yet rewarding investment category in the future.
This one is another kind of platform in investment, one which you build or just invest it in the existing mutual funds based on certain criteria in investments. In other words, motifs are mini-mutual funds in which the platform gets its original name.
For instance, you can have your investment for a solar energy project built in Hawaii, or a garbage recycling plant in Panama.
Remember that there are many motifs available for you to select, and learn about those. If you are unsure with it, you can do your simple study and if nothing you can find, you can create your very own motif.
For the record, motif has a minimum investment of $250. This is for a single motif platform. Therefore every motif has 30 different kinds of securities invested, and take note, a transaction fee amounting to $9.90 is charge either create a brand new motif or invest to an existing one.
10. Investing Your Very Own Skills
You need to determine potential skills you have that could bring you to the next level, this level can be personal or career. Rethinking the terms and learning new things like computer programs, new language, or by simple taking a course like public speaking.
It is very much possible for you to learn new things and acquired ideas for you to enhance certain skills you have that will enable you to qualify for possible promotion on the job that you are currently working, or transfer to another department that has high paying position compared to the previous one that you are working.
Remember that even a few dollars increase in your current paycheck may require effort or upgrading skills for you to acquire and master.
11. Reinvestment in Plans Dividend
This one is commonly known as the DRIPS. Obviously these are similar to plans that will allow you to invest your small money in stocks released by companies for them to pay dividends.
For the record, there are companies that offer DRIPS, so if you have plans to directly invest in stocks, and a certain company catches your attention, you can then do your investment on them. Without any other charges imposed on it like extra fees on investments.
In addition to DRIPS, this platform allows you to grow up your initial investment in the long run by making regular contributions. Normally this is done on payroll deductions by the company you are employed.
We also believed that this is an excellent way for a dollar cost average budget in having large investments from big companies. So after earning dividends in the future, the money will then be reinvested back to buy company stock and so on.
12. ETF’s and Low Investment Minimum
Every mutual fund has its own initial minimums in investments. For the record, many of them require several dollars in thousands for you to open a certain account, but there ETF’s that will allow you to open an account with a little amount of money.
If you are unsure with it, you can have a self check with these large fund families, and some brokerage firms in investments, for you to see if the funds are available with minimum deposit like less than $10,000. You can also look at index funds, if it suits your needs, since these represent a best way for you to play the market.
13. Loyal3 for Stocks
A limited investment system, but amazingly an excellent lace for small investor start, imagine you can invest in the stock to as little as $9. It even allows you to purchase fractional stock shares.
The only disadvantage with this is that this is not a diversified type of investment platform. Meaning as investor you can only invest on stocks that are available on site.
There are no mutual funds or bond offerings. But due to its minimal amount of initial investments and free of transaction fees, this makes Loyal3 system good for small investors for them to purchase fractional stocks on big companies.
Table of Contents
- 1 1. Clear out your Personal Debt
- 2 2. Retirement Plan Sponsored by Your Employer
- 3 3. Self Financed Retirement Plan
- 4 4. Betterment
- 5 5. The Lending Club
- 6 6. Prosper
- 7 7. Treasury Securities
- 8 8. Investment in Banks
- 9 9. Motif
- 10 10. Investing Your Very Own Skills
- 11 11. Reinvestment in Plans Dividend
- 12 12. ETF’s and Low Investment Minimum
- 13 13. Loyal3 for Stocks