People think that you can't get started with just $50 or $100, but that's simply not true. In fact, I started investing with just $100 when I started working my first job.
Even more food for thought – if you invested $100 in Apple stock in 2000, it would be worth $2,300 today. Or if you invested in Amazon stock at that same time, it would be work over $1,000 today. And that's just if you invested $100 once. Imagine if you invested $100 monthly since 2000? You'd have well over $20,000 today.
Hopefully that's pretty motivating for you, and proves that you don't need a lot of money to start investing.
Where to Start
If you want to get started investing, the very first thing you have to do is open an investing account and a brokerage firm. Don't let that scare you – brokers are just like banks, except they focus on holding investments. We even maintain a list of the best brokerage accounts, including where to find the lowest fees and best incentives:
Given that you're only starting with $50 or $100, you will want to open an account with zero or low account minimums, and low fees. From that list above, you can see that TradeKing and Options House both have $0 account minimums, and very low commissions.
Remember, many brokers charge $5-20 to place an investment (called a commission), so if you don't choose an account with low costs, you could see 5-20% of your first investment disappear to costs.
Another great place to look at is Loyal3, which offers free investing. However, Loyal3 only allows investors to invest in specific companies, so it might now work if you're looking to invest for the long term. Another popular choice is Robinhood, but you can only invest via an iPhone or Android app, and that can be a big drawback for many.
What Type Of Account Should You Open
The next decision you have to make is what type of investment account to open. There are a lot of different account types, so it really depends on why you're investing. If you're investing for the long term, you should focus on retirement accounts. If you're investing for the shorter term, you should keep your money in taxable accounts.
Here's a chart to help make sense of this:
What To Invest In
The next challenge is what to invest in. $100 can grow a lot over time, but only if you invest wisely. If you gamble on a stock, you could lose all your money. And that would be a terrible way to start investing. However, it's very rare to lose all your money investing.
To get started, you should focus on investing in a low cost index-focused ETF. Wow, that sounds like a mouth-full. But it's pretty simple really. ETFs are just baskets of stocks that follow a certain index – and they make a lot of sense for investors just starting out. Over time, ETFs are the lowest cost ways to invest in the broad stock market, and since most investors cannot beat the market, it makes sense to just mimic it.
If you don't know where to start, we've put together a great resource in the College Student's Guide To Investing, where we break down several different ETF choices to build a starter portfolio.
Alternatives to Investing In Stocks
If you're afraid to start investing in the stock market with your $100, you could look at becoming a peer-to-peer lender on a site like Prosper or Lending Club. Peer-to-peer lending is just like it sounds: you lend your money to others and they pay you back with interest.
The reason why peer-to-peer lending is great for borrowers with a small amount of money is that you can break up your investment into many small loans. If you're going to start investing with $100, you can lend as little as $25 per loan. That means your initial $100 could be invested into four different loans. Then, each month these loans pay back principal and interest to you, which you can then invest into other loans.
Over time, your initial $100 could be loaned out to multiple loans beyond the original four, and you will continue to see your growth compounded over time.
Just Start Investing
Remember, the reason why you're investing is to grow your money over the long term. That means you're leveraging the power of time and compound interest. Time works on your side. The earlier you start investing, the better. So, even if you only have $100 to invest, just get started.