Four Ways to Start Investing Without A Ton of Money

I frequently get asked how to start investing with little money. There are several great options for beginners who don’t have a ton of discretionary money to use. It doesn’t matter how much you start with, only that you take the first step and remain consistent.┬áBefore beginning any investing, I recommend you have an emergency fund in place. Typically 3-6 months of expenses is sufficient. This step is important because if an emergency occurs, you’ll likely liquidate your investments first, which completely negates the point. if you keep dipping into it, it can’t grow and work for you later.

Brokerage Accounts

Believe it or not, you don’t need thousands of dollars to start investing through traditional brokerage accounts. There are several companies offering accounts with $0 minimum balances and low fees. These accounts allow you to trade traditional investments such as stocks, ETFs, etc. Some of my favorite accounts with no minimum balances are:

TD Ameritrade – $0 Minimum Balance, $6.95 per trade
Ally Invest – $0 Minimum Balance, $4.95 per trade
Merrill Edge – $0 Minimum Balance, $6.95 per trade

To start these accounts, visit their respective websites an open a new account. You’ll need to connect a bank account to fund your trading activities. Deposits from your existing checking or savings account usually take 2-3 days to clear and become available for trading.

Fractional Shares

Mobile apps such as Stash and Acorns allow you to invest as little as $5 into what is known as fractional shares. Put simply, you purchase a small percentage of a stock or ETF. The funds are selected and grouped according to risk profile, company type and area of interest. Both platforms allow users to select an auto-invest option; setting an amount to be withdrawn from your bank account each month. Acorns also offers an option to invest the spare change from your debit card purchases.

I tried both for 30 days and was impressed with the ease of setting up the accounts and number of options for guiding my investments. The fees on both platforms are also very reasonable. I recommend new investors explore these as options for starting off.

Educational Savings

I previously discussed options for investing on behalf of your children. Many companies, such as Charles Schwab allow you to start 529 plans with as little as $25. A good way to keep these accounts growing is to encourage family and friends to direct gifts to these in lieu of purchasing toys during birthdays and holidays.

Take Advantage of your Company Retirement Plan

If your workplace offers a retirement plan, this is a perfect opportunity to get started. These plans typically let you set aside as little as 1-2% of your pay. At a very minimum you should maximize the amount that your company will match. Why leave free money on the table? If you later leave that job, you can always roll it into a new account without tax consequences.

If your company does not offer an IRA plan, you can still start your own. As long as you earn income, and are younger than age 70 1/2, you can contribute to an IRA. I recommend establishing a Roth IRA, which allows you to contribute after-tax dollars (compared to traditional accounts which invest pre-tax dollars). This is important because it means that when you retire, the money you withdraw will not be subject to income taxes (if you withdraw early, it could still be subject to penalties).



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