As a former stockbroker, I regularly spoke with people who thought they didn’t have enough money to invest. While several hundred dollars isn’t a lot of money, it’s easy to forget that time is critical to wealth creation.
There are numerous ways you can invest with little money. You just need to know where to start. This guide shows how to invest $500 or less so that you can bolster your financial future.
What Are the Best Ways to Invest $500 or Less?
You don’t need significant sums of cash to invest in the stock market or other opportunities to build wealth. All you need is a willingness to start investing.
Here are seven legitimate ways to begin investing with $500 or less.
1. Open a Brokerage Account
The stock market is one of the best ways to start investing for your financial future. If you’re comfortable managing your holdings, an investment account with an online broker is the top way to get started.
Having an account gives you access to a broad range of investments, from individual stocks to bonds. Best of all, you don’t need much money to work with most brokerages.
However, starting with $500 will make investing in individual stocks more difficult. For example, let’s say you want to invest in Netflix.
At the time of publication, Netflix is trading around $300 per share. If you have $500, you can only buy one share. This makes it challenging to build a diversified portfolio.
In this scenario, you may want to consider an index fund that invests in a broad range of holdings. One example is an exchange-traded fund (ETF) of the S&P 500. This invests in every company in the Standard and Poor’s index.
Using this strategy instantly gives you some diversity by allowing you not to have to buy individual stocks or bonds. You may also see these ETFs in your company-sponsored 401(k).
Many online brokers have low balance requirements and often don’t charge you to trade ETFs or stocks. SoFi Invest is our top-rated option.
This platform has a $5 minimum initial investment requirement and zero trading commissions. You have access to individual accounts, retirement accounts, and other choices.
SoFi even has a wealth of other tools and investment options to enhance your investing journey.
|Sofi Wealth - start investing today|
$5 minimum balance requirement
No management fees required make it easy to transfer over old 401(k) and IRA plans.
2. Invest in Real Estate
Investing in real estate is a terrific alternative to the stock market. You also don’t need a lot of money to start.
Thanks to real estate crowdfunding, you can invest with small amounts of money. Crowdfunding lets you pool money with other investors to purchase commercial or residential real estate.
Most platforms distribute quarterly or annual dividends. You can also earn a return when a property appreciates and is sold for a profit.
While some platforms require significant sums of money to start, others let you begin with as little as $10. Most have low fees and free tools to help you learn where to start.
Additionally, some platforms even have IRAs if you want to make real estate a part of your strategy to start saving for retirement.
Here are several of our top-rated choices to start investing in real estate:
- Fundrise: Invests in commercial and residential real estate with a $10 minimum. The platform has a one percent annual management fee and is a leader in the space.
- Groundfloor: Groundfloor is similar to peer-to-peer lending, as you loan money to people who are renovating houses. You earn interest plus repayment of the loan. You can start with a $10 minimum, and the borrower pays the fees.
- HappyNest: HappyNest is similar to Fundrise but focuses on commercial real estate. You can start investing with just $10, and no fees are charged as they earn money on managing properties.
Read our guide on the top Fundrise alternatives to learn more about the options to invest in real estate with little money.
3. Use a Robo-Advisor
It can be a challenge for many novice investors to get into stocks. They may not want to manage their holdings or know where to start.
This confusion can cause them to put off investing and hinder wealth creation. A robo-advisor can be a terrific solution to that problem.
Robo-advisors are fully automated investment management platforms that act like financial advisors without the hefty fees. Many allow you to invest with little money.
When you open your account, they ask you several questions to learn your risk tolerance, investing goals, and timeline. They take your responses and create a diverse portfolio of ETFs or mutual funds.
Furthermore, they manage your portfolio, rebalancing and monitoring it to ensure it’s on track to reach your goals.
Here are our top-rated robo-advisors:
- Ally Invest: Has a broad range of portfolio options and charges a maximum management fee of .30 percent. You need $100 to start with Ally.
- Betterment: Betterment is the leader in the space and has a variety of portfolio choices. The advisor charges a .25 percent management fee. You only need $10 to start with Betterment.
- M1 Finance: M1 is a cross between robo-advisor and self-directed investing. You invest in pies of holdings, including expert-created options. There is no minimum account balance or management fees.
Read our guide on the best places to open a Roth IRA to identify other suitable options.
4. Grow Your Savings Account
A savings account can be boring, but it’s an essential part of wealth management. This is especially true if you don’t have a fully stocked emergency fund.
Utilizing a high-yield savings account is your best choice since most local banks will not pay enough in interest. Online banks have various account options and pay a competitive interest rate.
If you don’t have savings amassed yet, it’s best to hold off investing until you can grow emergency savings. Then, you can begin to save money to invest.
CIT Bank is our top-rated online bank. It has money market accounts, CDs, and savings accounts. Its Savings Connect option currently pays 4.50 percent if you start with $100 and can commit to electronically depositing $200 monthly.
If you can’t do that, they have other bank account choices with competitive rates.
While there are other investment options that give a better return on your money, having healthy savings is vital to growing your net worth.
Read our review of CIT Bank to learn more.
|CIT Bank - start your emergency fund|
$100 minimum deposit requirement
Open a high yield savings account or money market with $100!
5. Invest in a Local Business
Angel investing can be a terrific way to grow your net worth. Thankfully, you don’t need as much money as you might think to invest in a small business.
Like real estate, crowdfunding has opened the doors for people with small amounts of money to invest in this opportunity.
Like other investments, there is a risk. However, there’s also the opportunity to outpace the stock market if you select the right investment.
Plus, you get the satisfaction of knowing you’re helping an entrepreneur launch or grow their business. If you’re trying to determine how to multiply your money, investing in a business could be a good option.
Mainvest is our favorite platform to invest in brick-and-mortar businesses. You need a minimum of $100 to open an account and choose an investment opportunity.
Investments can range from a bakery or brewery to a movie theater. The business owner makes quarterly payments plus interest as they repay the loan.
The investment timeframe is typically three to five years, and there are no fees charged to investors. Additionally, the platform has tools to help you analyze your choices.
Mainvest vets all opportunities, so you know they’ve done due diligence. Still, it’s best to do your homework to ensure the business fits your risk tolerance.
Read our review of Mainvest to learn more.
6. Invest Your Spare Change
If you have limited disposable income, it can be challenging to start investing. It’s essential to begin saving and investing. Fortunately, even if you lack money, you can get started.
Micro-investing apps allow you to invest even if you’re short on cash. These apps take on two forms, and either can be an excellent way to build a small portfolio.
The first is investing your spare change. For example, if you spend $5.03 at Starbucks, the app rounds up to $6 and puts the remaining $0.97 in different types of investments of your choosing.
The second form allows you to buy fractional shares of stock with as little as $1. Regardless of which you choose, there are no trading fees.
*Related: Do you have limited resources? Read our guide of free passive income apps that let you start investing with little money.*
Here are our top-rated micro-investing apps:
- Acorns: Acorns rounds up purchases and invests your spare change in a stock or bond index fund of your choosing. The app charges $3 monthly, and you need $5 to open an account. Read our Acorns review to learn more.
- Robinhood: Robinhood is a great option if you have limited income and want to control your investments. The app has no fees, but it also has only one account type. Read our Robinhood review to learn more.
- Stash: Stash Invest lets you purchase partial shares of stocks or ETFs for as little as $1. If you use their debit card, you buy partial shares of stock when shopping at your favorite retailer. There are no trading fees, and plans start at $1 monthly. Read our Stash review to learn more.
If you want to invest for the future, stock apps can be a fantastic place to begin if you’re low on cash. Most also have tools and resources to help you learn strategies to start investing.
Read our guide on stock trading apps to learn more about suitable platforms.
7. Consider an Alternative Investment
The stock market or real estate can be among the best investments to grow your wealth. Both have legitimate track records and a minimal barrier to entry.
However, what if neither interests you? Or, what if you want an extra layer of diversity in your portfolio?
There are still $500 investments available that let you increase your net worth.
Here are some other opportunities to invest with limited resources:
- Masterworks: Masterworks is a crowdfunded-based art investing platform. Art is typically expensive, but you can invest in partial shares of a piece for as low as $20 through the app. Aside from a 1.50 percent annual management fee, there are minimal costs.
- Vaulted: Vaulted is a platform that lets you purchase physical gold. The company holds the gold for you, and you can start with as little as $10. It has minimal fees and is a legitimate way to add diversity to your investments.
- Prosper: Prosper is a platform to consider if you want to take advantage of peer-to-peer (P2P) lending. Instead of going to a bank to get funds, individuals go to Prosper to get cash. You loan the funds, and the borrower repays you with interest.
Like any traditional investment, it’s essential to do your due diligence before pursuing alternative investments. You also want to ensure your choice fits your appetite for risk.
Read our guide on ways to build wealth outside of the stock market to learn more.
What to Avoid When Investing $500
When you’re new to investing, it can be easy to fall prey to get-rich-quick schemes or popular trends. It’s also easy to listen to talking heads on TV and believe you should do what they say.
These can all be exciting, but they likely don’t fit within your investing goals. Your goal probably is a long-term one, and due diligence is vital to align your investments with your desired outcome.
Use your goals to create your plan of attack. Having $500 to invest does open up more opportunities if you have $100 to invest, so keep that in mind.
Additionally, it’s best to avoid credit card debt when investing $500 or less. This high-interest debt will erode your available cash to invest.
You don’t necessarily need to wait to invest until you eliminate your debt, but having a plan to eliminate it will help you immensely.
Read our guide on ways to pay off debt quickly to identify how to attack it effectively if that’s a concern for you.
Marrying the two philosophies of your investment plan and avoiding debt can go a long way to help you achieve your goals.
What Does $500 Do When You Invest It?
It is easy to believe that limited resources will be ineffective in helping you grow wealth. That overlooks compound interest, which is a crucial tenet of wealth creation.
Compound interest is your money making more money. It’s the most powerful force in increasing your net worth.
Furthermore, even if you can only invest $500, that is more than enough to start.
Let’s look at an example of investing $500 by putting it in a holding with an eight percent annual return, which is the stock market’s average return.
After ten years, you will have $1,079 if you put nothing else towards the investment. If you can put an additional $500 annually towards the investment, you will have $8,323.
The more your money grows directly impacts what you can earn, thanks to compound interest. If you pursue low-risk ways to invest $500, that can also affect growth.
Ultimately, you want to start investing as soon as you can. Time is the best gift you can give your money, even if you’re beginning with limited resources.
Read our guide on the top Betterment alternatives to use if you don’t know where to start when investing your money.
You don’t need a lot of money if you want to invest. There are more opportunities than ever to invest with $500 or less.
You can pursue something traditional, like stocks, or assist a small business. Becoming wealthy overnight isn’t possible, but starting early will greatly impact your long-term growth.
What is holding you back from investing?
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Brian @DebtDiscipline says
You have to start somewhere even if its small. If you continue to make excuses you will never get started and begin to learn more about investing. All about taking that first step. The sooner the better too, to take advantage of compound interest.
John Schmoll says
Completely agreed Brian. Taking that first step is vital. You’re only hurting your future self if you don’t.
Here in Canada we have something called a TFSA (I’ve forgotten what the letters stand for) but it is essentially an account where the earnings (not the capital) are not taxable. I have roughly $4 thousand invested through that account in a mutual fund held by my bank. I don’t seem to be making much money but it’s better than the no money I was making when it was just a cash account. I’m leery about doing anything on my own because whenever I have tried in the past I only lost money. Do you know of any services like you’re talking about – Etrade et al who operate in Canada? Should I consider moving my money ? I add to this fund sporadically because of other priorities right now (paying down debt) but hopefully I will be able to start adding regularly to it soon.
John Schmoll says
Those are good questions Miriam. I don’t know a whole lot about TFSAs – Tax Free Savings Accounts, other than it’s not taxed when withdrawn and such. I’m fairly certain that Etrade operates in Canada, as does Vanguard, Schwab, Fidelity and others. I don’t know exactly what their requirements and such are but would generally send you in that direction as I know they’re solid here in the States.
If you did move it, I’d make sure you’re comfortable with what you’re doing first – generally speaking I’d direct you to the Canadian equivalent to our index funds so you’re staying with the market. But, not knowing your entire situation it’s hard to say exactly what you should do.
Any of the options you mentioned sound good for people just starting out. Whatever they choose, they should just start!
John Schmoll says
Kayla @ Femme Frugality says
As soon as I’m able, I plan to ramp up my savings and investing as I know it’s super important to reaching my financial goals. First I just need to get rid of my debt! 🙂
John Schmoll says
Very cool Kayla! Once you kill your debt you’ll be able to hit the ground running.
John, having just found your site yesterday and you helping me with some questions on Twitter yesterday as well, this article was exactly what I was looking for! (Get out of my head!!!) I’ve just finished reading Rich Dad, Poor Dad and at 33, have decided I need to get my butt in gear! I’ve got about $20k in my 401k but my company quit matching due to starting an employee ownership plan. Our 401k is handled through Paychex with only a handful of funds available.
I spoke with an investment friend a few months ago regarding reallocating because frankly, I have no clue what I’m doing! Right now, I’m sitting at 1.5% RoR, so I’m thinking I need to change up a bit.
Since the company stopped matching, I’m thinking of starting up a separate Roth IRA or even starting small like this article suggests with either Motif, Sharebuilder, or Betterment.
Say I can scrape up $100 to get started, and $50-$100 a month, what would be my best course of action? Got to tell you again, I love the site!
John Schmoll says
Ha ha, what can I say – I double as a mind reader. 😉 Seriously though I’m glad to be of help Dominic. Sorry to hear that your company is no longer matching funds, but sounds like you’re definitely on the right path with your book selection.
I think a Roth, generally speaking since I don’t know your entire situation, is a great way to go! All three of those are solid options to look at. Sharebuilder is really good, though has a fair number of restrictions so would direct you away from them unless you have specific stocks you know you want to buy each month.
That said, I think the Motif vs. Betterment question comes down to how much control you want. Betterment is going to do more hand holding. You, of course, can control it and do what you want at any time, but they act like a virtual financial advisor. Based on a few questions you answer, they’ll put you in a selection of some of the 12 or so ETFs they work with. They have no minimum balance requirement, so you can start with as little as you want, but if you can’t put in $100/month you’ll be charged $3 month – so $36 per year, BUT you won’t have trading fees on top of that.
Motif is a good one to look at because you can start with as little as $250. However, you control more of it so if you’d rather not have that then you might not want to go with them. With Motif you basically create your own mutual fund or ETF and pick up to 30 stocks. They also have about 150 pre-made ones you can choose from if you like. To trade each Motif you pay $9.95, but is still a relatively good value.
I personally have a Motif account and the platform is relatively simple to use. I don’t have a Betterment account, but have worked in it quite a bit as well and seems similarly simple to use. I don’t think you can really go wrong with either – just comes down to that control piece I mentioned above. The key, as you pointed out, is simply starting and make sure not to focus on a few dollars in cost but getting started.
Anyway, I know that’s a lot to take in. 🙂 If you have any further questions – feel free to reach out to me through my contact page: https://www.frugalrules.com/contact/
Thanks for the compliment, glad you like the site!
DC @ Young Adult Money says
Great post, John. I think the thing that made me not start investing when I didn’t have a “lot” of money to invest was the thought that the transaction fees would be killer. I prefer to buy at least $2k of stocks to offset the cost of the trade, but I think you would agree that it’s better to get started than to worry about a $5 or $7 fee. I’ve changed my view on this and now realize how harmful the “I don’t have enough” mentality is. I’m actually a big fan of investing while paying down student loans, as I think long-term it’s better to get in the habit and get some dollars flowing into your investment account than to wait until every last student loan is paid off. Lots of people will disagree with that approach : )
John Schmoll says
Thanks DC! I tend to be the same way with my investing – I like to buy in blocks so as to mitigate any trading fees. But, like you said, as long as you’re not paying crazy fees sweating a few dollars should be the last of your concern as you’re just starting out – it’s that getting started that truly matters.
I’m with you on investing while paying down debt. I didn’t when I was in credit card debt and wish I would have. Many don’t and they have no clue what to do when they’ve freed up that cash each month. That’s also not to mention the fact that it’s best for the long run to get those investing dollars to do what they need to be doing.
Jayson @ Monster Piggy Bank says
I agree with you John that setting a kind of goal is really the factor here whether you lose or win, in spite of how much your money is. Proper mindset should be obtained and a good approach must be adopted prior to investing.
John Schmoll says
Yep, a goal is definitely nice to have.
Fervent Finance says
I’d recommend opening a Vanguard account. When buying their own ETFs on their brokerage platform I do not believe they charge a transaction fee. For example if you like VTSAX but can’t meet the minimum you can buy VTI which is the ETF equivalent.
John Schmoll says
Yes, I do believe you’re correct in that you should be able to buy their ETFs without a commission. The only concern, and why I typically wouldn’t recommend them to someone just starting out with a little amount is their tiered pricing structure, especially once you move away from their ETFs. I’d rather see someone build up $3-5k then move over as they’ll benefit more from what Vanguard has to offer.
If you like ETFs, I recommend Betterment, WiseBanyan and Acorns. There are no minimums to open an account, but fees do vary. For example, Betterment charges .35 if you set up monthly contributions of $100. WiseBanyan doesn’t charge a fee…
John Schmoll says
I like Betterment as well, especially if you want a hands off approach. I’ve heard relatively good things about Acorns, though they have a limited offering and is just really spare change – but is better than nothing I guess. I’ve done a little bit of research into WiseBanyan – they do have some good selling points, but would direct towards Betterment in most cases.
Natalie @ Financegirl says
Every now and again I go for the ETFs through Trade King. Easy, cheap, and definitely doable with under $500.
John Schmoll says
TradeKing is another relatively good option Natalie. As long as you can stay away from their maintenance fees you can’t beat their price.
WG @ Wealth Gospel says
These places are all doable. Like Natalie said above, ETF’s can be the way to go. Many of the robo advisors will help you get started for less than $500 with those as well.
John Schmoll says
Exactly! You can’t go wrong with a low-cost ETF.
Shannon @ Financially Blonde says
Great suggestions John!! We just opened an investment account for my son’s money through Motif and it was not only easy to do, but I loved the minimum balance requirement. I also recommend Drive Wealth for people with low starting balances, they have low minimums and also let you create a starter account where you can practice investing before you actually do it.
John Schmoll says
Thanks Shannon! I really like Motif for that as well – they make it very easy to manage and love the specialty twist to it. I’ve never heard of Drive Wealth – I’ll have to check them out.
Mrs Lewis says
You’re such a good mom! I remember handing every dollar from birthdays and holidays to my parents for “savings” as a kid. Today I have no clue what happened to it all. I look forward to having kids so I can teach them about building their own wealth and not leaving it all to me.
Brittney @ Life On A Discount says
Wow, I wasn’t aware about some of these options. I have a 401k and an IRA, but haven’t dabbled much in regular investing. Once we finish paying off our debt, I think we will venture into stock market investing.
I’m not sure if I’m correct in saying this but the Robinhood app is great for iOS. I’ve been playing around with it and the benefits are no commision trades (stocks, ETFs) and an easy to use interface. No research/balancing but there a no minimum balances to maintain so you can start with as little as the lowest cost ETF. I’d love a review of it to make sure my comments aren’t off base!
Mrs Lewis says
Investing makes me nervous and I think it’s because i haven’t hit every savings goal yet or pay off my debt. Being the only income earner in my family makes it hard to juggle priorities.