How to Start Investing with $1,000 or Less
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When you have $1,000 or less to invest, you may think your options are limited. If you factor in the recent tumultuousness of the stock market, investing may seem even more difficult. In reality, many wealthy investors began with meager means.
Most people don’t realize there are numerous ways to start investing with little money. It just requires that you start, which you can do today.
How to Start Investing With $1,000 or Less
If you don’t know where to begin, our guide on how to invest 1,000 dollars provides tips on getting started and growing your money.
1. Ensure Your Finances Are in Good Shape
Before you start investing, it’s essential to have your finances in order. There are several aspects of your financial health you should have under control before investing money into the stock market.
- Having minimal consumer debt – You should have as little high-interest debt as possible.
- Building adequate savings – You want to have an emergency fund that you’re regularly putting savings towards. The CIT Bank money market is a suitable option, paying .50 percent interest (7x the national average) and only requiring a minimum balance of $100.
- Avoiding overspending – Fees are an inevitable part of investing. You don’t want to pay more than one percent in fees annually.
- Diversification – Diversification is always important, but it’s even more critical when you’re investing a small amount of money. This helps protect you against losing all your money on one on investment.
If you can check off all the boxes above, you can move on to where to start investing your money.
2. Invest Your Spare Change
You may not realize this, but you don’t have to start investing with large amounts of money. You can start small and invest your spare change.
It’s possible to do this with Acorns. Acorns is a micro-investing app that rounds up your purchases and invests the difference.
For example, if you buy a coffee at Starbucks for $3.10, the Acorns app will round up the purchase to $4.00 and invest the remaining $0.90 from your checking account.
The app can do this with every purchase. While this amount may not seem like a lot, it adds up and is an effortless way to build wealth.
Acorns is one of the best micro-investing apps because it simplifies investing and is inexpensive. The app charges $1 per month for accounts under $5,000 and .25 percent per year after that.
The service is free if you’re in college or under 24 years old.
3. Get Help With Your Investing
While micro-investing apps like Acorns are a terrific way to invest with small amounts of money, that’s the tip of the iceberg. These apps will save you small amounts of money, but you’ll likely want assistance if you are interested in planning for retirement.
Betterment is a more suitable choice for building your retirement funds. Betterment is a robo-advisor that provides personalized advice for your investment needs. It constructs a portfolio based on your goals, retirement timeline, and risk tolerance.
Betterment takes your personal situation and helps you invest in a selection of low-cost exchange-traded funds (ETFs). It also rebalances your portfolio as the market moves and your situation changes. This process is automated, so there is no effort necessary on your part.
Betterment has no minimum balance requirement. They charge a .25 percent fee on your account balance each year.
If you want a hands-off solution that’s affordable, Betterment is a perfect choice for saving for retirement. Read our Betterment review to learn more about what the robo-advisor offers.
4. Take A More Hands-On Approach
If you’re more confident with investing, M1 Finance is worth looking into. M1 is part robo-advisor, part self-directed investing.
M1 lets investors create their own mini funds, called “pies.” The platform offers pre-made, expert pies or lets you create your own pie. Pies consist of low-cost ETFs and a selection of stocks.
When you open an account with M1 Finance and choose to make your own pie, you get access to over 3,800 stocks and 1,900 ETFs. M1 dynamically rebalances your portfolio as the market swings or your needs change.
You only need $100 to start investing with M1 Finance. The platform charges no fees and offers a full suite of retirement accounts.
Read our review of M1 Finance here to learn more about what the service has to offer.
5. Invest in Your 401(k)
Perhaps one of the best ways to start investing with $1,000 or less is through your employer-sponsored 401(k) plan. Many employers offer 401(k) plans as a way to help employees to start saving for retirement.
Using your 401(k) as an investment tool has several benefits, including:
- You get to invest in small amounts since there isn’t a minimum to start.
- Funds come directly out of your paycheck, so it’s automatic and effortless.
- If the 401(k) is not a Roth, funds come out of your paycheck pre-tax and reduce your taxable income.
- Many 401(k) plans offer free educational resources to help you learn how to invest.
If you want to grow your money and don’t want to deal with other accounts, your 401(k) is the best choice. You can read our guide on how to set up your first 401(k) to learn what steps to take.
If you’ve been saving money in your 401(k) for several years and feel lost or you feel like you’re paying too much in fees, consider Blooom as a resource.
Blooom offers a free analysis of your plan and helps identify savings options to help grow your retirement funds.
6. Invest in Real Estate
Investing in real estate sounds far-fetched when you have limited funds. Thanks to crowdfunding, real estate is now a realistic investment choice for newer investors with little money.
Real estate is also an excellent way to diversify your investments in the stock market.
Fundrise is a leader in the real estate crowdfunding space and lets you invest with as little as $500. You can invest in various property types through Fundrise, including:
- Commercial property
- New home construction
If you’re new to investing in real estate, Fundrise has ample resources to teach you where to start. Average annualized returns are between 8.70 and 12.40 percent, according to the Fundrise site.
This is net of their .85 percent investment fees, which is competitive within the industry.
Read our review of Fundrise here to learn more about this opportunity.
7. Open a CD At An Online Bank
If you’re newer to investing and you want to avoid the stock market because you are afraid of losing money, there are other options that protect your investment.
A Certificate of Deposit (CD) is one alternative. However, the major drawback is that rates are not very good. Given the current climate, you’ll be lucky to find rates over 1.00 percent. Your money will also be tied up for a set period of time.
A suitable alternative is a money market account. For example, CIT Bank offers a money market account that pays .50 percent. It also allows you to access your funds and has the same FDIC protection as a savings account.
8. Invest in Wine
Investing in wine may sound like something only those with significant means can do. Similar to how crowdfunding has disrupted the real estate market, it has done the same for alternative investments like wine investing.
Vinovest is a wine investing platform that lets people invest with as little as $1,000. When you open an account, they walk you through the steps necessary to determine what your portfolio should include. Vinovest also helps manage your portfolio.
Vinovest reports that the annual returns average about 13 percent. That’s inclusive of their 2.85 percent management fee. The fee does seem high, but it is significantly lower than what DIY wine investors will pay on their own.
Vinovest’s fee covers the storage of your wine and also helps you find suitable investments. As a bonus, you can have a bottle of your wine shipped to your home if you want to drink it.
*Related: Read our guide of the best sites for real estate crowdfunding for non-accredited investors that let you invest with little money.*
9. Buy U.S. Treasury Securities
While boring, investing in U.S. Treasury securities is a legitimate way to invest with $1,000 or less. The best way to do this is through Treasury Direct.
You can buy securities with as little as $100 through Treasury Direct. Those investments include:
- Bills – mature in under a year
- Notes – mature in two to ten years
- Bonds – mature in 3o years
- Treasury Inflation-Protected Securities (TIPS) – mature in five, ten, or 30 years
Bills, notes, and bonds are relatively straightforward but offer lower rates. TIPS works a little differently. They do not pay interest, but they will make recurring contributions to your principal to cover inflation based on the Consumer Price Index (CPI).
Investing in stocks is an essential part of growing wealth. It may feel like you can’t or shouldn’t invest if you don’t have a lot of money. Fortunately, there are plenty of options to pursue even if you have $1,000 or less.
The first step is to get started so you can give your money as much time as possible to grow. Remember to make regular contributions. You’ll be amazed at how quickly your money will grow.
No matter which option you choose, make sure to select one and start investing with as little as $1,000 today!
When did you start investing in the stock market? Why do you think people allow the amount they’re starting with to hold them back? What are some other options to start investing with little money?
John is the founder of Frugal Rules, a dad, husband and veteran of the financial services industry whose writing has been featured in Forbes, CNBC, Yahoo Finance and more.
Passionate about helping people learn from his mistakes, John shares financial tools and tips to help you enjoy the freedom that comes from living frugally. One of his favorite tools is Personal Capital , which he used to plan for retirement and keep track of his finances in less than 15 minutes each month.
Another one of John's passions is helping people save $80 per month by axing their expensive cable subscriptions and replacing them with more affordable ones, like Hulu with Live TV.
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