Investing seems like something only for wealthy people. Fortunately, that’s a myth. You can start investing with $500 or less.
It may not seem worth it to invest an extra $500. However, thanks to compound interest, the more time you give your money to grow, the less you must invest. The key is to start investing as soon as possible.
Our guide shares a few of the best ways to invest a small amount of money to help it grow.
Ways to Invest With Little Money
Do you want to start investing but only have a small amount of money? Here are six ways to invest $500 or less.
1. Use a Robo-Advisor
Some beginning investors struggle with figuring out how to start investing in the stock market. This confusion may cause them to decide it’s best to stay on the sidelines.
A robo-advisor is a terrific solution to that problem. Robo-advisors are fully automated investment management platforms that act like a financial advisor without the hefty fees. Many allow you to invest with little money.
Betterment is our favorite option. When you open an account, they ask you several questions to learn your goals and risk tolerance. They then create a personalized plan for you.
The broker rebalances your portfolio to ensure your investments are on target to reach your goals. You might expect to pay a lot for this service, but they charge an inexpensive 0.25 percent of what they manage for you.
For example, you only pay $12.50 annually if you deposit $5,000 into a Betterment account.
Betterment has a wide range of account options, from a traditional or Roth IRA to taxable investment accounts and more. The service also offers a full suite of wealth and cash management services.
Read our review of Betterment to learn more.
|Betterment - No Minimum Balance Requirement|
Cost: 0.25 percent of account balance, annually
From beginners to pros, Betterment offers lots of helpful tools and a powerful investing platform.
2. Select an Online Brokerage With Low Minimums
Not all new investors are hands-off with their assets. If that’s you, it’s vital to find a discount broker that lets you invest in stocks with little money and no hefty fees.
SoFi Invest is an arm of the student loan refinancing giant that allows retail investors to start investing with as little as $1.
The broker has no fees. It even offers resources like educational tools and screeners to help you amplify your efforts.
The benefits of using SoFi Invest include:
- Commission-free trades
- Investing in partial shares of stock through its StockBits program
- Cryptocurrency investments
- Retirement and non-retirement accounts
- Custom-built exchange-traded funds (ETFs) exclusive to SoFi
You also receive access to other benefits, like career coaching and financial planning, at no additional cost. The broker has no minimum balance requirement, making it perfect for new and seasoned investors.
*Right now Frugal Rules readers who sign up for an Active Invest brokerage account for the first time are eligible to play “The Claw” interactive game. Play and you could win a random dollar amount of stock ranging from $5 to $1,000!
|Sofi Wealth - start investing today|
$5 minimum balance requirement
No management fees make it easy to transfer over old 401(k) and IRA plans.
3. Invest Your Spare Change
Do you want to begin investing but have no cash to spare? Micro-investing apps let you invest your spare change in the stock market.
Acorns is one of our favorite small investment apps and is simple to use. When you open an Acorns account, you link a credit or debit card to your account. After you make a purchase, the app rounds up your purchase and invests it.
For example, if you spend $5.03 at Starbucks, it rounds up to $6 and invests the remaining $0.97. Funds are invested in one of their six low-cost index funds. This means that you don’t invest in individual stocks.
You can open an account with as little as $5. Acorns has two account levels that cost $3 or $5 per month. If you’re under 24 and attend college, you can invest for free.
Read our guide on stock trading apps to learn about similar platforms.
|Acorns - Invest Your Spare Change|
Get a $5 Bonus
Acorns rounds up your purchases and invests your spare change!
4. Use Your 401(k)
The best way to invest with little money is through a company-sponsored 401(k). This requires no outlay of cash since funds come out of your paycheck each pay period.
Company-sponsored 401(k) accounts let you begin saving for retirement immediately. Most of the time, the cost is super low.
Yes, your paycheck will be smaller. That said, funds come out pre-tax. This means that less taxes are withdrawn.
*Related: Starting with little money? Check out our guide of free passive income apps that let you start investing with little money.*
If your company matches a portion of your contributions, that’s even better since you are getting free money for retirement. Each plan operates differently, but they’re an excellent way to invest if you have minimal funds.
For those who currently have a 401(k) and are not sure if they are invested wisely, Blooom is a helpful free service. Blooom analyzes your investments to find savings and ensure that more of your money will work for you.
5. Crowdfunded Real Estate
Don’t like the stock market but still want to start investing with $500 or less? Real estate is another avenue to grow your wealth. Thanks to crowdfunding, you can invest in real estate with little money.
Fundrise is a leader in the space and lets you start with as little as $10. The service finds and vets investment opportunities so you don’t have to locate properties on your own.
You can invest in multiple property types, including:
- Commercial property
- New home construction
This lets you invest in real estate without being a landlord.
Average annual returns were a competitive 9.47 percent, net the .85 administrative fee for 2019 (the most recent year returns are listed).
*Related: Do you want to invest in real estate but have limited funds? Read our detailed guide of the best real estate crowdfunding platforms that let you invest with little money.*
If you want to diversify your investing or like real estate, crowdfunding provides considerable potential.
Don’t like the idea of real estate, but want to invest in a small business? Mainvest is a fantastic option that allows you to invest as little as $100 in a brick-and-mortar business.
Read our analysis of Mainvest to see if it’s a viable option to invest in a small business near you.
|Fundrise - start investing in real estate|
$10 to start
This popular crowdfunding real estate platform makes it possible to invest in real estate with as little as $10!
6. Kill Your Debt
Paying off debt seems like an odd way to invest $500. However, if you have high-interest debt, using spare funds to attack it can be a wise investment.
For example, if you have a credit card with an 18 percent interest rate and you pay it off or significantly knock it down, you “earn” considerably more than any of the above choices.
The reason for this is that you save on interest. In turn, this allows the next $500 you have to go towards other investments.
If you have high-interest debt, consolidating or refinancing it to a lower rate is a great way to save on interest. Take the time to compare lenders to find the best route.
Credible is a useful platform that lets you simultaneously compare up to ten lenders to find the best available rate.
Comparing rates won’t negatively impact your credit score. Instead, it may save you considerable money.
Steps to Take When Investing $500 or Less
When it comes to investing with $500, it’s essential to take a few steps to ensure you make wise decisions for your situation.
Here are several tips to follow.
Know Your Goals
Each situation is unique. It’s important to look at your finances as you begin investing.
As you take a holistic look, ask yourself the following questions:
- Where do I want to be financially in the next three to five years?
- What unique opportunities and challenges do I need to be mindful of?
- How can I accomplish what I want and avoid debt?
- When do I want to retire?
- How can I start investing now, even if it’s a small amount?
You may need to ask yourself additional questions, but the options above provide a good way to create a plan to work towards your goals.
Having spare cash saved for emergencies is vital to your financial health. It helps you avoid debt and handle unexpected expenses.
If you have enough saved for an emergency, saving spare cash also lets you take advantage of small investment ideas that arise. Rates aren’t high, but it’s a good idea to hold money aside for opportunities and emergencies alike.
A money market at CIT Bank is a perfect solution. It pays 0.85 percent, offers the same FDIC coverage as a savings account, and has a minimum balance of just $100.
As you grow it, you can use the funds to pursue other low-cost investment ideas.
|CIT Bank - start your emergency fund|
$100 minimum deposit requirement
Open a high yield savings account or money market with $100!
Leave it Alone
The key to investing your $500 wisely is to ignore it. You don’t want to touch it.
Yes, you want to analyze performance, but you want to leave it alone. It’s important to give your money time to grow.
Time is the best gift you can give your investments. The amount you invest matters, but time plays a more significant role.
Touching the cash or withdrawing it only jeopardizes your efforts.
Investing with $500 or less may seem pointless. Don’t let that myth deter you.
Small investments can and do return big things. You just need to give your money the time to grow.
What is holding you back from investing? What’s another way to invest with limited resources?