7 Easy Ways You Can Start Investing for Cheap Today
One of the keys to building long-term wealth is investing. You know this. But it can be tough to invest when you don’t have a lot of extra money.
The good news is that you don’t have to wait to start investing. In fact, you can do it even if you have only an extra $100 per month or less. Here are seven cheap ways to start investing today.
1. Take advantage of your employer’s retirement plan
One of the easiest ways to start investing is to take advantage of your employer’s retirement plan. If your company offers a 401(k) plan, you can have the money taken directly from your paycheck without thinking about taking any extra steps to invest. It’s a simple start — and you need to withhold only the amount you can afford.
Next: How to get free money for retirement
2. Get your employer match
On top of a 401(k), some employers offer a matching plan in which they contribute a certain amount to your retirement savings. According to benefits manager Zenefits, the most common employer match offered is one dollar for each dollar you contribute, up to a certain percentage of your income. That’s free money you get to invest toward your retirement. The earlier you start taking advantage of that match, the more savings you’ll have later. For example, if you start saving $100 a month at age 22, that’s equal to saving $500 a month starting at age 42, according to MassMutual.
Next: Turn spare change into an investment.
3. Put pocket change toward building a portfolio
Today, technology has made it possible to use many tools to begin building an investment portfolio on the cheap. Those tools include apps such as Acorns and WiseBanyan that take small amounts of money and invest them for you.
WiseBanyan has no account minimums and doesn’t charge any investment commission or advisory fee, though you’ll have to pay fees associated with the funds you pick.
Acorns also lets you invest a small amount. And it offers a feature that tracks your spending, rounds the amount of each purchase up to the nearest dollar, and invests the difference. However, there is a flat fee of $1 per month for account balances under $1 million.
Either way, if you have some pocket change available, it’s possible to begin building your investment portfolio without much fuss.
Next: Consider a robo-adviser.
4. Utilize robo-advisers to grow your wealth
In the United States, about $266 billion in assets are managed by robo-advisers, according to data provider Statista. The company estimates 12.7 million people will use such automated portfolio investing platforms in the country by 2022.
Online robo-advisers build a portfolio for you with relatively low fees. Some of them, such as Betterment, have add-on services that allow you to pay a little extra to work with a financial professional who can help personalize your experience after your account balance has grown.
There are a number of reputable investment robo-advisers to choose from — and some don’t require a minimum amount to get started.
Next: The pros of dollar-cost averaging
5. Use dollar-cost averaging with low-cost funds
Dollar-cost averaging is a way to invest consistently each month, based on the amount you can afford. Basically, you decide how much you can spare and use the money to buy stocks, bonds, or funds based on their price. If you can commit a certain amount to invest regularly, you can benefit from constantly growing your portfolio.
If you can set aside between $50 and $100 per month, you can start investing in low-cost funds. Funds are collections of investments that are traded in a single transaction. You get instant diversity with funds and don’t have to worry about trying to pick the “right” individual stocks.
If you set up an automatic investment account with companies such as E-Trade, Scottrade, or TD Ameritrade, you can access funds that don’t have transaction fees.
Dollar-cost averaging allows you to buy the maximum number of shares of an investment on a regular basis. If a fund costs $50 per share and you invest $100 per month, you add two shares to your portfolio automatically. The number of shares bought changes as the price of the fund rises and falls.
It’s a way to build wealth consistently over time by investing continually in low-cost funds.
Next: Invest in high-priced companies for a fraction of the price.
6. Try out fractional investing
Want to invest in certain high-priced companies such as Apple, but can’t afford the cost of a share? Fractional investing can be one way to get a piece of a company without having to invest a lot of money upfront.
With this strategy, you buy only a portion of a stock. So if a share costs $60 and you only have $30, you can buy half a share. Later, when you have more money, you can purchase another fraction of a share.
Companies such as Stockpile allow you to easily buy portions of individual stocks with as little as $5. Stockpile doesn’t have account minimums or monthly fees, but it charges 99 cents for each trade you make.
Next: This investment requires as little as $100.
7. Buy U.S. Treasurys
Head over to TreasuryDirect and start investing in U.S. Treasury bonds with as little as $100. If you want to add bonds to your portfolio, this is one way to do it without much risk or much money.
These bonds pay interest every six months until the end of their 30-year term. There are other Treasury securities available with different maturity lengths and terms.
No matter which investments you include in your portfolio, the important thing is to start investing as soon as possible. The earlier you start, the more time your money will have to grow.