Jeff Bezos is an American technology entrepreneur, investor, and philanthropist. Not only is he the founder, chairman, CEO, and president of Amazon but also one of the wealthiest men around the globe today. Due to that fact many of his profits come through good investments.
“Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital”, says Bezos.
Lots of people put off investing because they think you will 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 later on. You won’t miss the relatively small quantities you put away now, and you’ll thank yourself later.
Don’t believe me? Here are five ways you can start investing with very little cash:
1. Try the cookie jar strategy
Saving money and investing it are tightly connected. So as 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 might not seem like a lot, but within the course of a year in regards to over $500.
Ally Bank currently provides a strong 2.20% APY on their online savings accounts. There’s no minimum deposit required and no monthly maintenance fees associated with an Ally Savings Account so the yield is earned on all balances.
The brand also offers online checking accounts, CD’s and other deposit accounts if you are in the market for a place to park your money.
Try placing $10 in an envelope, shoebox, a small safe, or even that legendary bank of first resort, the cookie jar. Though this might seem silly, it’s often a necessary first step. Get yourself into the habit of living on slightly less than you earn, and stash away the savings in a safe place.
The electronic equivalent of this cookie jar is your online savings account; it’s different from your checking account. The money can be withdrawn in two business days if you want it, but it’s not connected to your debit card. Then when the stash is large enough, you can take it out and move it into a true investment vehicles.
Start with small amounts of money, and then increase as you become more comfortable with the procedure. It may be a matter of deciding not to go to McDonald’s or passing on the films, and putting that money into the cookie jar instead.
Prefer that cash to be invested straight away? Acorns is an app that rounds up your credit and debit card purchases and invests the difference. It is not fancy, but it’s a start. And for people who’ve never been savers, getting that beginning is all the more important.
2. Let a roboadvisor spend your money for you
Roboadvisors were created to make investing as simple and accessible as possible. No previous investment experience is required and set-up is simple. Let their automatic intelligence monitor your investments in the background, and pay lower fees in the process.
1 great roboadvisor I recommend to first-time investors is M1 Finance, which charges no commissions or management fees. I love M1 Finance because it unites everything that is great about an roboadvisor and an investment agent. You may select from one of the pre-made diversified portfolios or customize your own by purchasing stocks and ETFs through their stage. 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, then you might want to consider a different roboadvisor such as Betterment, which has no minimum starting balance at all. Like M1, it’s also perfect for beginners as it provides a super simple platform and a hassle-free way of investing.
3. Enroll in your employer’s retirement plan
If you’re on a tight budget, even the simple step of registering in your 401(k) or other employer retirement plan might seem beyond your reach. But there is a way which you can start investing in an employer-sponsored retirement plan with amounts which are so small you won’t even notice them.
For instance, plan to invest only 1 percent of your salary into the employer plan.
You probably won’t even miss a donation that little, but what makes it even easier is that the tax deduction you’ll get for doing this will make the contribution even smaller.
As soon as you commit to a 1 percent contribution, you can increase it gradually annually. By way of example, in year two, you can increase your contribution to two percent of your pay. In year three, you can increase your donation to 3% of your pay, etc.
If you time the increases with your annual pay raise, you will notice the increased contribution even less. So in the event you receive a 2 percent boost in pay, it will effectively be splitting the increase between your retirement plan and your checking accounts. And if your employer provides a matching contribution, that will make the arrangement even better.
Again, Betterment is a excellent tool for hands-off investment management of your 401(k). If you wish to take a more active approach to managing your 401(k), we’d suggest a service such as Ally Invest — perfect for frequent traders looking for one of the lowest fee structures of any major brokerage firm.
4. Place your cash in low-initial-investment mutual funds
Mutual funds are investment securities that allow you to invest in a portfolio of bonds and stocks with a single transaction, making them ideal for new investors.
The problem is many mutual fund companies need initial minimum investments of between $500 and $5,000. If you’re a first-time investor with little cash 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.
Automated investing is a frequent attribute with mutual fund and ETF IRA accounts. It is less common with taxable accounts, though its always worth asking if it is available. Mutual fund companies that have been proven to do so include Dreyfus, Transamerica, and T. Rowe Price.
An automatic investing arrangement is very convenient if you can do it via 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 put this up.
5. Play it safe with Treasury securities
Few tiny investors begin their investment journey with US Treasury securities, but you can. You’ll never get rich with these securities, but it’s an excellent place to park your money–and earn some interest–until you’re ready to go into higher risk/higher return investments.
Treasury securities, also called 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 true for mutual funds, you can also arrange to have your Treasury Direct account funded through payroll savings.
There are plenty of strategies to start investing with little money, with many online and program based platforms making it simpler than ever. All you have to do is start somewhere. Once you do, it will get easier as time continues, and your future self will adore you for it.