Many people worry that they don’t have enough money to start investing. You may have gotten the idea that you can only start investing if you have thousands of dollars available for investments. However, the truth is that you can start investing in your future with only a few dollars. Here’s how to invest $100 in the most effective way.
1. Start an Investment Portfolio
An investment portfolio may include all sorts of investments. This can include fractional shares, which are small percentages of shares that you can buy with only a few dollars, bonds, ETFs, and other methods of investing. With $100, you can start with a fairly diversified portfolio, which can be extremely beneficial to ensure that you earn money long-term. It’s a long-term strategy that will pay off in years and years, not necessarily one that will give you a quick turn-around.
2. Invest in a Retirement Fund
Many retirement accounts can give you a percentage of interest and also help you save on taxes. If you invest in a 401(k), for example, you can reduce your taxable income for every year you invest, so you’ll only have to pay taxes when you take the money out of the account. A Roth 401(k) allows you to invest with after-tax dollars, but allows you not to pay taxes when you withdraw the money. Especially if you’re young or your employer matches contributions, investing in a retirement fund may be a great choice.
3. Put Your Money Into a Savings Account
One of the safest ways to save money and invest in a way is simply to open a high-yield savings account. A high-yield savings account can give you a fairly significant percentage in interest, and you don’t have to do anything with the money. While most people don’t recommend making a savings account your only investment, it can be a good way to set aside an emergency fund that’s easily-accessible in case of emergency, but will still earn some money while it’s set aside.
4. Pay Off Some Debt
Paying off debt doesn’t seem like an “investment” to many people, but it can be a huge way to save money on accounts with a high percentage of interest. If you have high-interest debt, like credit card debt, it’s likely a better move to pay off that debt rather than establish an investment account. Would you rather have $100 in a bank account earning 1% of interest, or $100 less of debt that’s costing you 16% every month?
Investing often seems like a very complex process, and that’s exactly why many people don’t bother trying to invest when they only have around $100. However, even if you only have some pocket change to invest, that’s better than not investing anything. First, try to pay off high-interest debts so you’re not paying interest on them. Then, you can put your money into an investment portfolio, retirement fund, or even a savings account to start earning for you.