Small Investments - Investing Made Easy!
Many people are robbed of a future of financial abundance due to a myth that in order to invest, you need a significant amount of money. The truth is exactly opposite. These days, there are a lot of investment avenues that allow you small investments.
With the help of the small investments, it would become easier for you to create a substantial amount of money over the years. It is easy to set aside $ 200 per month than to accumulate $ 3000 annually. Therefore, instead of putting off and postponing the investments, it is a better idea to start small but make that first move and start investing.
In the following article, we are going to share with you some of the investment avenues which you can opt for to invest as low as $ 100. We will provide you with the proper blueprint which you can follow in order to begin your investing journey.
1. Small investments ideas:
The avenues for making a small investment are plenty. The advantages of making a small investment regularly are:
• No significant impact on your finances
• Easy to invest on monthly basis
• Compounded returns over a period of time
One of the easiest ways to start investing small amounts is through your 401(k) plan. Most of the companies allow you to contribute as low as 1% of your total salary in your retirement account. This ensures that you would be able to initiate your investment journey with a pretty small amount which is insignificant to you.
Moreover, investing in 401(k) plan ensures that you get a tax deduction as well which would help you save money as well. Many companies also match up your contribution in order to invest in your 401(k) plan.
You can slowly increase the amount to 3% and even more as you become more accustomed to investing. This is just a single way in which you can make a small investment towards your future. Depending on your knowledge level, you can invest in different investment avenues as well which we would mention in the sections below.
2. Small investments for beginners:
Another problem which can prove to be a hindrance for many people once they make up their mind to invest is the knowledge which they need. If you do not know how to analyze the investments or calculate the tax on the interest earned, it can be complicated to choose an investment avenue for yourself.
In such a case, investing through an expert or broker would probably be the best options for you. If you lack the knowledge to invest, you can go ahead and opt for these investments for beginners. Not only, they allow you to invest small but also the decision-making on your part is entirely minimized. Your funds would be managed by experts in most of the cases or would be lent to a company or to an institution which would eliminate the need for your knowledge out of the equation.
Some of the small investment ideas for beginners are:
• Index funds:
Index funds are mutual funds which invest in the entire index like S&P rather than only in particular stocks. They would often mirror the returns of the index. Two such index funds which allow you to invest a small amount are:
Schwab S&P 500 Index: This fund allows you to invest as little as $ 100.
Schwab Small Cap Index: This fund follows the small-cap index and accepts investments of as low as $ 100.
Thus, depending on your risk appetite you can easily choose between different index funds.
• Treasury securities:
Treasury securities are financial instruments through which you lend to the United States government. You can buy them directly through the bond portal Treasury direct. Even though the interest which you earn on these securities is not on the higher side but it is a good place to begin with and understand the concept of investing in security bonds. You can invest for as little as 30 days or even for 30 years.
The minimum denomination of investment is just $ 100. You can even opt for the Treasury inflated protected securities which make adjustments to your investments from time to time to provide you with high inflation based cushion. This is done in accordance with the consumer price index.
CDs stand for a Certificate of Deposit. These are financial products which are issued by banks, thrift institutions as well as credit unions. You can lend money to these institutions and earn interest.
Some of the CDs which accept smaller investments currently are:
Goldman Sachs bank: you can invest as little as $ 500 in CDs with the minimum tenure of 6 months and maximum of 6 years. The interest rate varies between 0.6% and 2.45% per annum.
Ally bank: Ally bank allows you to invest as little amounts as you gain in its CDs. The interest rate is between 0.3% and 2.25%. The investment tenure varies from 3 months to 5 years.
The main reason why it is good for beginners to invest in CDs is that they are much more secure as compared to other financial instruments. You can begin with the two options which we have listed above as they allow smaller sums to be invested.
3. Small investments opportunities:
Small investment opportunities can often help you create a large corpus over a period of time. There is no dearth of such opportunities when you look at the financial products which are offered by various institutions. We have put together a list of 5 such different opportunities which allow you to make smaller investments.
DRIPs stand for dividend reinvestment plans. These plans allow the investor to directly buy the stocks from the companies without investing through the broker. As long as you can afford to buy one single stock, you can buy through these plans. The benefits of these plans include:
- · Averaging of cost
- · Re-investing of dividend
- · Almost no fees
Currently, 3 of the best DRIPs include:
- 3M Co.
Johnson & Johnson
You can start your small investments in DRIPs using these 3 plans.
• Individual stocks:
Till a few years earlier, it was not possible for you to invest smaller amounts in stocks like $ 500. These days, with the help of discount brokers you can afford to invest even amounts which are lesser than $ 500. These brokers charge you a fixed fee for each trade which ensures that even smaller amounts can be invested.
Some of the discount brokers which you can use are:
In addition to these discount brokers, you can also use brokers like Loyal3 which even allow you fractional ownership of a single stock. This enables you to invest a very small amount of money.
• Mutual funds:
The general notion is that mutual funds require thousands of dollars in investments. This is not true at all. There are numerous mutual funds which allow you to invest less than $ 500. A single search on a platform like TD Ameritrade would help you uncover 300 such mutual funds which have a minimum investment of $ 100.
Some of the mutual funds which allow an investment of $ 100 and have performed well are:
Schwab large-cap fund
Blackrock balanced capital
Schwab balanced fund
The advantage of investing through mutual funds is that you would let the professionals manage your money. You need not worry about analyzing the financial statements or the annual reports of the company.
ETFs stand for exchange-traded funds. These are traded like stocks on exchanges. They can be purchased like a stock in the denominations of 1 unit. Thus, if exchange-traded fund is trading at $ 129, you can purchase a single unit for $ 129. This is the reason why you can invest smaller amounts as well in exchange-traded funds. Some of the ETFs in which you can invest smaller amounts are:
Vanguard S&P 500 ETF
S&P Regional Banking ETF
iShares US Preferred Stock ETF
There are numerous other ETFs whose unit price is less than $ 500 and therefore, you can easily buy a single unit. Some of the brokers which you can use in order to buy ETFs without incurring any fees are:
E*Trade (117 commission-free ETFs)
TD Ameritrade(101 commission-free ETFs)
Charles Schwab(200+ Commission-free ETFs)
Investing in ETFs through these brokers would ensure that not only you are able to invest smaller amounts but also avoid any kind of extra fees as well.
• P2P lending:
P2P lending involves lending to other individuals in smaller amounts. You can start with as less is $ 25. This ensures that you are able to invest without going through any financial institution. The borrowers would be stating the purpose of the loan.
You would also be able to access the credit score of the borrowers and thereafter, you can decide whether you want to lend them the money or not. The entire amount is distributed among several lenders to diversify the risk.
The annual interest which you can earn per annum is in the range 5% to 7%. Some such websites which allow you to invest low amounts through P2P lending include:
Thus, the inability to save large amounts is no longer a hindrance to invest. You can invest in small denominations of as low as $ 25 with the help of numerous investment avenues which we have shared above.
Small Investments Conclusion
As you can see from the above review, it is possible to invest small amounts of money which will allow you to accumulate capital for your personal and family finance for the future.
All you need to do is choose the route and investment you prefer and start building your own small portfolio which will grow exponentially over the years.
If you are interested in learning more about small investments and would like to take control of your personal finances than you can start by reading the following: