5 tips for finding an investment that’s right for you

Many people put off investing because they think you need a lot of money—thousands of dollars!— to start investing. This just isn’t true. You can start investing for as little as $50 per month.

The key to building wealth is developing good habits—like regularly putting money away every month. If you make investing a habit now, you’ll be in a much stronger financial position down the road.

Don’t believe me? Here are five ways you can start investing with very little money:

1. Try the cookie jar approach

Saving money and investing it are closely connected. In order to invest money, you first have to save some up. That will take a lot less time than you think, and you can do it in very small steps.

If you’ve never been a saver, you can start by putting away just $10 per week. That may not seem like a lot, but over the course of a year it comes to over $500.

Try putting $10 into an envelope, shoebox, a small safe, or even that legendary bank of first resort, the cookie jar. Though this may sound silly, it’s often a necessary first step. Get yourself into the habit of living on a little bit less than you earn, and stash the savings away in a safe place.

And what are you going to do with that $10 per week?  Consider investing it into a company called Worthy.  Worthy sells Worthy Bonds with a fixed 5% annual interest rate and each bond costs just $10.  The bonds have a 36-month term but you can sell your bonds at anytime, penalty free.

Learn more about Worthy Bonds

The electronic equivalent of the cookie jar is the online savings account; it’s separate from your checking account. The money can be withdrawn in two business days if you need it, but it’s not linked to your debit card. Then when the stash is large enough, you can take it out and move it into some actual investment vehicles.

CIT Bank currently offers a terrific 2.25% APY on their new Savings Builder Account,  The minimum opening deposit is just $100 and if you can continue to save $100 a month, you’ll earn the high APY.

The idea behind the account is to encourage people to save, which is why the $100 deposit is required each month.  If you miss a month’s deposit, you’ll earn an APY of 1.14%.  The account can go back and forth between APY’s if you’re not able to consistently save $100 each month.

Read more at: https://www.moneyunder30.com/start-investing-with-little-money

2. Let a roboadvisor invest your money for you

Roboadvisors were created to make investing as simple and accessible as possible. No prior investment experience is required and set-up is easy. Let their automated intelligence track your investments in the background, and pay lower fees in the process.

One great roboadvisor that I recommend to first-time investors is M1 Finance, which charges no commissions or management fees. I love M1 Finance because it combines everything that’s good about an roboadvisor and an investment brokerage. You can choose from one of their pre-made diversified portfolios or customize your own by purchasing stocks and ETFs through their platform. The user-interface is super easy to use. You can start investing with a minimum of $100.

If you’re starting out with less than $100, you may want to consider a different roboadvisor like Betterment, which has no minimum starting balance whatsoever. Like M1, it’s also great for beginners as it provides a super simple platform and a hassle-free approach to investing.

3. Enroll in your employer’s retirement plan

If you’re on a tight budget, even the simple step of enrolling in your 401(k) or other employer retirement plan may seem beyond your reach. But there is a way that you can begin investing in an employer-sponsored retirement plan with amounts that are so small you won’t even notice them.

For example, plan to invest just 1 percent of your salary into the employer plan.

You probably won’t even miss a contribution that small, but what makes it even easier is that the tax deduction that you’ll get for doing so will make the contribution even smaller.

Once you commit to a 1 percent contribution, you can increase it gradually each year. For example, in year two, you can increase your contribution to 2 percent of your pay. In year three, you can increase your contribution to 3 percent of your pay, and so on.

If you time the increases with your annual pay raise, you’ll notice the increased contribution even less. So if you get a 2 percent increase in pay, it will effectively be splitting the increase between your retirement plan and your checking account. And if your employer provides a matching contribution, that will make the arrangement even better.

Again, Betterment is a great tool for hands-off investment management of your 401(k). If you want to take a more active approach to managing your 401(k), we’d recommend a service like Ally Invest – perfect for frequent traders looking for one of the lowest fee structures of any major brokerage firm.

Read more at: https://www.moneyunder30.com/start-investing-with-little-money

4. Put your money in low-initial-investment mutual funds

Mutual funds are investment securities that allow you to invest in a portfolio of stocks and bonds with a single transaction, making them perfect for new investors.

The trouble is many mutual fund companies require initial minimum investments of between $500 and $5,000. If you’re a first-time investor with little money to invest, those minimums can be out of reach. But some mutual fund companies will waive the account minimums if you agree to automatic monthly investments of between $50 and $100.

Automatic investing is a common feature with mutual fund and ETF IRA accounts. It’s less common with taxable accounts, though its always worth asking if it’s available. Mutual fund companies that have been known to do this include Dreyfus, Transamerica, and T. Rowe Price.

An automatic investing arrangement is particularly convenient if you can do it through payroll savings. You can typically set up an automatic deposit situation through your payroll, in much the same way that you do with an employer-sponsored retirement plan. Just ask your human resources department how to set it up.

Read more: How To Buy A Mutual Fund

5. Play it safe with Treasury securities

Not many small investors begin their investment journey with US Treasury securities, but you can. You’ll never get rich with these securities, but it is an excellent place to park your money—and earn some interest—until you are ready to go into higher risk/higher return investments.

Treasury securities, also known as savings bonds, are easy to buy through the US Treasury’s bond portal Treasury Direct. There you can buy fixed-income US government securities with maturities of anywhere from 30 days to 30 years in denominations as low as $100.

You can also use Treasury Direct to buy Treasury Inflation Protected Securities, or TIPS. These not only pay interest, but they also make periodic principal adjustments to account for inflation based on changes in the consumer price index.

And as is the case with mutual funds, you can also arrange to have your Treasury Direct account funded through payroll savings.

Summary

There are plenty of ways to start investing with little money, with many online and app based platforms making it easier than ever. All you have to do is start somewhere. Once you do, it will get easier as time goes on, and your future self will love you for it.

Read more at: https://www.moneyunder30.com/start-investing-with-little-money