If you’ve steered clear of the stock market because you’re afraid it’ll cost you an arm and a leg, what I’m about to tell you is going to change your life: You can start investing today with just $100. (Actually, you can get started with as little as $5!) If you’re worried that this is some kind of scam or trick to steal your money or bamboozle you, I can assure you it’s not. Here are three solid ways you can start investing (today!) with just $100.
Invest in fractional shares.
Fractional share investing allows aspiring investors to purchase a “fraction” or a teeny-tiny “slice” of an individual stock. Let’s say you wanted to buy a stock with a $300 share price, you’d need at least $300 to add it to your portfolio. What’s worse: if you wanted to buy more than one share, it’d cost you $300 each time. With fractional share investing you can spend as little as $5 to buy a portion (or a fraction, hence the name) of a share.
Pros
-
- Build a diversified portfolio. Fractional shares allow you to build a diversified portfolio from the start. Meaning, you can buy into just about any company you want, regardless of pricey individual share costs.
-
- Invest with as little as $5. With fractional shares, you can begin investing with as little as $5.
-
- Take advantage of dollar-cost averaging. Dollar-cost averaging or DCA is an investing method in which you invest the same amount of money regularly at fixed intervals. (For example, $5 every second Wednesday of the month.)
Cons
-
- New investors may be reckless with their money. Sure, $5 doesn’t seem like a lot, but it can add up. Fractional share investing, like every other type of investing, should be executed with care.
-
- You may not receive a dividend. If you own a portion of a share, your broker may keep the dividend. While this may not add up to much, it could be a dealbreaker for some.
Getting started with fractional shares
If you’re interested in investing in fractional shares, all you need to do is open an investment account with an investing app, fund your account, and start investing.
The following investment apps offer fractional share trading in addition to traditional single share trading.
-
- Robinhood is a zero-commission investing app designed for both beginner and experienced investors. The sign-up process is easy and new users are given one free stock just for signing up. Robinhood also gives users the option to trade cryptocurrency. Bonus: it’s free to get started.
-
- Acorns investing app offers fractional share investing in addition to several other services including retirement accounts and checking accounts. With Acorns, users can opt to make daily, weekly, or monthly recurring deposits. The Lite Plan starts at $1 and includes a basic investment account, a round-up feature (where your spare change is stowed away for a rainy day), and bonus investments from 350 Found Money partners.
-
- Stash is kind of like the OG fractional share investing app. It’s simple to use and makes investing “easy and affordable for everyone.” Users can get started with Stash for $1 per month; its most expensive product is only $9 per month. What’s more: users who deposit $5 will receive an additional $5 to invest.
If blindly diving into fractional share investing sounds risky or you’re interested in long-term wealth, you may want to consider using Motley Fool’s Stock Advisor. It costs $99 to get started and will grant you unlimited access to Motley Fool’s library of expert stock recommendations.
Contribute to your 401(k).
Whether you work for a company that offers a retirement plan or you’re a freelancer who’s never heard the term “401(k)” in your life, it’s never too late to start saving for retirement. If you’re lucky enough to have an employer that offers a retirement plan, your job is pretty much done!
With a 401(k), you can choose just how much you’d like to invest per pay period. If you’re self-employed, you can open a solo 401(k), or a “one-participant 401(k). Other self-employed retirement plan options include an IRA (traditional or Roth), a SEP IRA, a SIMPLE IRA, or a defined benefit plan.
As the name suggests, a solo 401(k) retirement plan is designed to help solo business owners save for retirement. There are no age or income restrictions to open a solo 401(k), however, you must be a business owner who works alone, meaning you can’t have any other employees.
Pros
-
- Take advantage of tax breaks. Contributing to a 401(k) lowers your taxable income, which means you may luck out come tax time.
-
- Decide on the contribution amount. With a 401(k), you decide how much or little you’d like to contribute (as long your contribution falls within the IRS limits).
-
- Take it with you. Even if you switch careers, the money you’ve contributed (and its earnings) belongs to you. If you had a 401(k) with a previous employer, give them a call to see what your options are for moving it elsewhere.
Cons
-
- There may be a few fees. Unfortunately, 401(k) plans come with fees. These could include admin fees, investment fees, and service fees.
-
- 401(ks) may limit your investment options. With a 401(k), you’re not in complete control of your investment options. Usually, these plans limit an employee’s investments to exchange-traded funds (ETFs) and mutual funds.
Getting started with a solo 401(k)
If your employer doesn’t offer a 401(k) or you’re self-employed, you may be able to open a solo 401(k) plan via an online brokerage.
The following companies offer solo 401(k) plans.
-
- TD Ameritrade is a low-cost brokerage that offers many retirement options for the self-employed. There are no startup fees or annual account fees associated with TD Ameritrade’s solo 401 (k) plan.
-
- Vanguard offers both traditional and Roth options for its solo 401(k) plan. Similar to TD Ameritrade, Vanguard doesn’t charge a setup or annual fee. The company does, however, charge a $20 per fund per year fee on each fund a client holds in their 401(k) plan. This fee is waived for customers who have at least $50,000 in assets with Vanguard. Vanguard only allows solo 401(k) customers to invest in Vanguard mutual funds.
Open an online high-yield savings account.
Savings accounts may seem a bit old school, but saving never goes out of style. (What if your car breaks down or your pet needs an emergency vet visit?) Online high-yield savings accounts pay high interest, usually don’t require a minimum deposit, and provide a great way to pay for emergencies.
Pros
-
- Stashing cash in a high-yield savings account is safe and secure. As long as the high-yield savings account is FDIC insured, your money is safe! Note: most accounts are insured up to $250,000.
-
- Online banking ensures 24/7 access. Not only is your money safe, but it’s accessible whenever you need it sans fees (depending on the company and its withdrawal limits). And, thanks to the web-based nature of an online account, you can view your money on the go via a mobile banking app.
-
- Earn interest on the reg. High-yield savings accounts compound interest daily, which means you’re earning interest every single day.
Cons
-
- High-yield accounts may not be the best choice for long-term savers. If you’re planning on building wealth in the long term, you may want to look into another saving option, like a Certificate Deposit (CD) account.
-
- Most online savings accounts do not have a brick-and-mortar. If you prefer physically getting up and going to a traditional bank, an online banking account may not be the right choice for you and your financial goals.
Getting started with a high-yield savings account
Opening a high-yield savings account is quick and easy. It should only take you a few minutes to open and fund an account today.
The following banks offer high-yield savings accounts.
-
- Varo offers customers an APY of 0.81%. What’s more: clients who meet certain requirements within a specified timeframe may be able to increase their APY to 2.80%. Plus, there are no monthly fees or account minimum requirements.
-
- Ally Bank offers an APY of 0.50%, has zero monthly fees, no minimum investment requirement, and provides 24/7 customer support.
-
- Vio Bank offers an APY of 0.53%. Unlike the other online banks listed above, Vio requires new customers to deposit $100 or more to open an account.
The bottom line
You don’t need to be a millionaire or make a lot of money to start investing. If you have $5 in your wallet, you can get started right now.
Tabitha Britt is a writer for the personal finance website, Joy Wallet, which provides readers with useful information, resources, and tools to help maximize their financial fitness.
