By: Lezanne Winshaw | October 23rd, 2020

One of the biggest misconceptions when it comes to investing is that you need a big lump sum of money. That isn’t the case. You can start investing with any bit of spare cash that you have. So, even if you only have $100, you can begin investing. Excited? Good! We’ll show you how.

How to Start Investing

The first step in making money isn’t to hire a financial advisor or buy some real estate. The first step is to pay off your debt.Debt eats away at your money-saving potential every month. If you have a spare $100, use it towards paying off the debt with the highest interest rate. Once you have paid off your credit card debt, and you have an emergency fund, it is time to start building your wealth.

Savings Account with High-Interest Rate

Sure, this is not sexy personal finance advice. But it is a safe and easy way to invest smaller sums of money. High-interest online savings accounts like CiT Bank can offer you better interest than most brick and mortar banks. Place your $100 in the bank account for a while. Once your money has grown a bit, the investment possibilities are so much greater.

What Can I Invest in to Make Money Fast?

1. Peer-to-Peer Lending

Peer-to-peer lending allows average Joe to lend money to an entrepreneur with a novel idea for a small business, instead of them having to borrow money from a brick and mortar bank. Investment turn-around time can be pretty quick. And you can diversify your portfolio. Two options for you to consider: Prosper and Lending Club.

2. Invest In yourself 

“You’ve got to spend money to make money.” Use your $100 to invest in an online course on a platform like Udemy. By completing an online course or reading a book, you can make yourself more valuable to your current employer. Hello, promotion! Or, it can allow you to make more money as a freelancer with your improved skill set. If this extra skill or knowledge helps you to earn an extra $500 per month, the rate of return could be much higher than investing in stocks.

3. Sign Up For a 401(k)

Signing up for a 401(k) is one of the easiest ways to save and invest money. You decide on a portion of your paycheck to go towards your retirement account. Every month that sum is diverted from your paycheck before you have the chance to spend it on something superfluous. Some companies will make matching contributions. So, for every $100 that you put into your 401(k), your employer will do the same. That is the quickest way to turn $100 into $200!

If you don’t have access to a 401(k), you can open a Roth IRA. Invest a fraction of your monthly paycheck for your retirement yourself. It is never too early to start investing for your golden years.

How to Invest in the Stock Market with $100

Stock market investing typically comes with the drawback of high broker fees. If you are just starting on your investment journey, you can try one of the following low-cost investment strategies first.

Invest in ETFs

Exchange-traded funds (ETFs) are a type of security that comprises a range of securities. They are similar to mutual funds. However, they are listed on exchanges. Also, ETF shares can be traded throughout the day like normal stocks. You can trade ETFs through traditional broker-dealers as well as through online brokers.

With an app like Stash, you can even purchase fractions of ETFs. So, you need far less even than $100 to start investing.

An app like Acorns uses just your spare change to make investments. You aren’t going to be bankrolling that Ferrari any time soon. But, at least you have started saving and learning about investing strategy!

Make Money Investing in Index Funds 

An index fund is a type of exchange-traded fund (ETF) or mutual fund. Warren Buffett recommends the low-cost S&P 500 index fund by Vanguards. The portfolio (list of stocks purchased) of an index fund matches that of a financial index. 

Individual Stocks

With just one right stock or fraction thereof, you could make a decent amount of money. Sure, your $ 100 is not going to get you even one Apple stock. However, with a discount broker like Ally, you can start investing with no minimum deposit. And, Ally offers research tools to help you find the right stock for your investment strategy.

Robo-Advisors

An investment advisor will charge you for their time in the form of annual brokerage fees or a percentage of your investment. Robo-advisors such as Betterment provide automated investing services online. They ask you a few questions about your investment preferences and risk tolerance. Based on the outcome of these questions, they automatically invest your money.

Learning on the Job

If you want to try your hand at active stock trading, an app like TD Ameritrade could be the one for you. This app is easy to use and provides educational content and research tools to help you make a good investment. You can also check out personal finance blogs like Afford Anything, Rich & Regular, smarts.co, or Nerd’s Eye View. They may have some good pointers.

Investments to Avoid

There are several investment opportunities that you should avoid if you want to grow your money. If it sounds too good to be true, it probably is! Penny stocks and pyramid schemes should also be given a wide berth.

Is Investing the Best Way to Make a Lot of Money?

Investing is a sound way to build your wealth. However, it might not be the quickest, especially if you are starting with $100. But, if you have patience and focus on high-yield, long-term investments, and factor in things like compound interest, you could be growing a very decent investment portfolio in a shorter period of time than you expected.

What is the hardest part of saving money? Getting started. We have listed a bunch of ways to start saving money with only $100. Most of these are very low-risk. So, what are you waiting for? Start on your money investing journey right away!

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