Investing may seem like something that you need thousands of dollars to begin with. Some stocks can cost thousands of dollars per share and if you want to invest in more than one stock (and you always should) this means you could easily spend tens of thousands of dollars just to get started.
For many people, this fact alone is enough to put them off investing. But should it?
The short answer is no, there are many ways to get started with investing, even with the smallest of budgets. Lots of investors have built large portfolios from small beginnings and these days with the advent of online brokers and apps, it is even easier to get started.
In this article, I list some options to get you started investing with a budget of $100 or even less.
1 Use a Robo-advisor or micro-investing app
A Robo-advisor is a great way to get started in investing. These are digital platforms that use algorithms to provide automated investment services. They charge low fees and require truly little capital to begin with. They are easy to set up and work by collecting data about their client’s financial situation and investment goals.
Features of a Robo-advisor include:
• Easy account set up
• Goal planning
• Portfolio management
• Investment education services
A micro-investing app is another great method to get that investment ball rolling. These enable users to invest small amounts of money over time. One common method they use is to round up credit card purchases to the nearest dollar and add that amount to your investment capital. They also allow you to deposit extra funds when you have a little cash to spare.
2 Invest in an exchange-traded fund or stock index mutual fund
These are both similar ways to get started investing with limited capital. While there are some differences in them, like the way you buy and sell shares, fundamentally they both offer the same type of investment experience.
In essence, what these methods offer is the ability to invest in the whole market or parts of it using a single modest investment. You can diversify your investment over many different stock indexes including major ones like the S&P 500 index or more specialized indexes.
3 Invest in fractional shares
If you are looking to purchase individual stocks, but are put off by high stock prices, then fractional shares are a great way to go. Fractional shares are just as it sounds, rather than buying a full share in a company, instead you purchase a fraction of a share.
Fractional shares allow you to buy into even the most expensive stocks. Instead of spending thousands of dollars on a single share of premium stock, you can purchase a fraction of a share for as little as $1.
In essence, what this means is that for your initial $100 investment you can build a portfolio of dozens of different stocks.
Currently, there are a limited number of brokerages offering this service, but this method is becoming increasingly popular, and more brokerages are offering fractional shares.