As financial advisors, we are constantly meeting people who are looking for advice on how to start investing with little to no money. And what surprises us is that most people seem to think that you have to be wealthy to start investing. That couldn’t be further from the truth.
In fact, as long as you have a little bit of money left over, or even just the dedication to change a few things in your life, anyone can start saving and investing.
In the following guide, we’ll provide you with our top 7 investment tips for people with little money. Just keep in mind that all forms of investments are associated with risk, and there is no fail-safe solution on how to make money as an investor.
1. Use an Online Broker
Our first tip is also one of the riskier, although, for the right people, it can also be one of the most rewarding.
Many times, $50 is all it takes to open an account with an online forex or CFD broker such as eToro. And with some knowledge about how financial markets work and a little bit of luck, those $50 could soon start growing.
Just keep in mind that trading is more hands-on than traditional investments and it will require more of your time to become profitable.
2. Do It On Your Own
The easiest and most basic way of investing is to do it on your own, sometimes called the cookie jar approach.
It can be as easy as getting a piggy bank or a simple savings account with your bank and then dedicate to putting as much as you feel that you can afford into that. Even a $1 per day or $10 per week goes a long way and before you know it, you’ll have hundreds of dollars saved up.
Obviously, you can’t expect to see this money grow on its own since your money won’t be subject to interest or market movements, but it’s a great way to start. And when you have a few hundred dollars saved up, you can move on to one of the following options.
3. Automatic Advisors
As a beginner who has never invested before, it’s advisable to get help at first. However, instead of paying high commissions and fees for private advisors, you can opt for an automatic advisor such as Ally Invest or M1 Finance.
These services are very simple to use.
All you have to do is register and deposit the money you want to invest, then professional investors will place your money into portfolios of hand-picked assets that are later controlled by automatic software.
Better yet, their fees are much lower than traditional financial advisors and they often have much lower initial investment limits.
4. Start a Retirement Plan
Everyone should save up for their retirement and it’s a great first investment. As an American, you can enroll in your employer’s retirement plan such as a 401(k).
Even as little as 1 percent of your income can have a major impact on your life in the future and there is really no reason to wait.
5. Traditional investments
Our last two tips involve more traditional investments that are very suitable for beginners with limited funds. Both of the following securities are great ways to learn how it is to invest like a professional, although it’s easier and considerably safer than, for example, regular stocks or commodity futures.
Just keep in mind that they often require larger initial investments than the options mentioned above.
6. Low-risk Low-Reward Mutual Funds
Mutual funds are portfolios consisting of several stocks and bonds that you can invest in with a single transaction. That means that you can make a profit from the international stock market, without learning how to analyze and invest in stocks on your own.
Mutual funds also tend to be professionally managed meaning you will get the most of your investments without having to lift a finger.
7. Try Your Luck with Treasury Securities
US Treasury securities is another great first-time investment for beginners and they share some similarities with mutual-funds regarding how easy they are to get started with.
However, unlike mutual funds that can boost your investment and make you profitable, treasury securities tend to grow slowly and not offer great returns. Instead, this type of investment should be considered more of a saving and a good way to get started in the world of investments.