This article may contain references to some of our advertising partners. Should you click on these links, we may be compensated. For more about our advertising policies, read ourfull disclosure statementhere.
Thinking about getting into investing? That’s an excellent idea!
Unfortunately, if you don’t know how to start investing, it might just scare the pants off of you.
If you’re feeling intimidated, you’re not alone. There are so many investment options available that it can get a little bit overwhelming. Others hold off because they assume they need a large sum of money to start investing.
Thankfully, that isn’t true. Today, we’re going to talk about how to invest $500 (or less) right away! Here’s how.
1. Your 401(k)
If your employer offers a 401(k), that’s a great place to start your investing journey. In case you don’t know, a 401(k) is a retirement plan your employer sponsors. You can set it up so that every pay period a certain percentage is deducted from your pay and allocated toward your 401(k) portfolio. Here, you can get started with way less than $500!
Additionally, contributions to your 401(k) come from pre-tax income, so you also enjoy a tax break. You eventually pay taxes on that income when you withdraw it, but the idea is that you’ll make withdrawals during retirement when you’ll be in a lower tax bracket.
If your employer offers to match your 401(k) contributions, that’s an opportunity you shouldn’t pass up. That’s free money…and free money is my favorite!
To make the most of this free money, contribute at least the amount your employer matches. So, if they will match 100% of what you put in up to 3% of your salary, make sure you contribute at least 3%. Never leave free money on the table, friends.
If you already have a 401(k), get a free checkup 401(k) here.
2. Fundrise
Have you always wanted to get into real estate investing but don’t have the money to get started? Look no further than Fundrise.
Most people think real estate investing means buying a rental property. As great as that is, being a landlord isn’t something everybody wants to do. The good news is that you can invest in real estate without a down payment or the responsibility of being a landlord.
With Fundrise, you invest in a portfolio of real estate projects acquired and managed by the Fundrise team. You earn income in the form of dividends and appreciation in the value of your shares. Annual fees are just 1%, and they offer a starter portfolio for only $500.
If that doesn’t convince you, Fundrise also offers a 90-day money back guarantee. So, if you try it and aren’t satisfied, you can get your $500 back and move on. What have you got to lose? You can learn more here.
3. Online Savings Account
Are you stuck wondering how to invest $500 or less? Consider adding an online savings account to the mix.
Online savings accounts are a great place to save for things like vacation, emergencies, and more. They provide easy access to your money and help keep it separate so you don’t accidentally spend it. Plus, you’ll probably earn a much better interest rate than at your current bank.
Additionally, they provide a great way to automate your savings. Simply set up an automatic transfer so that every payday, a certain amount moves from your checking account to your online savings account. Set it, forget it, and save with ease!
CIT Bank has a great new account called the Savings Builder. You only need $100 to open the account, and the top tier earns a whopping 1.00% APY interest. (In case you weren’t aware, that’s a great rate for a savings account!)
To earn the rate, simply make a deposit of $100 each month. That’s totally manageable, right, so why wait?Open your account here.
4. Microsavings
Have you heard of microsavings? It’s another easy way to start investing. The best part? You only need a few cents to get started!
Here’s how it works: Use an app like Digit to connect with your bank account. The app will then analyze your spending and save a small amount each day in a savings account for you. It’s as simple as that!
The beauty of microsavings is that you don’t even notice the money you’re contributing. The “spare change” amounts are almost negligible, but they can really add up over time. It helps you save without thinking about it!
This is an ideal solution for someone who wants to start investing but doesn’t have start-up capital to work with. It’s also a good option for someone who struggles with saving, since it almost tricks you into it.
Use this link to try Digit free for 30 days!
5. Robo-advisors
A robo-advisor is an investing service that uses a computer algorithm to determine the best way to invest money based on your goals. Most offer portfolios made up of index ETFs (exchange-traded funds) and come with low management fees and no minimum buy-in.
A lot of new investors don’t consider the impact of management fees when choosing their investments, and that can be a big mistake. Consider this: You invest in a series of funds, and at the end of the year your portfolio has a return of 8% – that’s pretty decent…except if your management fee is 2%, then your net return is actually only 6%. That could cost you tens of thousands over time!
Robo-advisors are a good fit for investors looking to avoid high fees but don’t want to actively manage their own investments. If you think a robo-advisor might be a good fit for you, you can try it without making a big investment.
Robo-advisors like Betterment offer no-minimum accounts, so you can get started today – even if you only have $500 to work with.
6. M1 Finance
Using an online brokerage firm is a great way to dip your toe into the investing waters. M1 Invest from M1 Finance is an online investment-management platform that offers self-directed investing mixed with the functions of a robo-advisor.
M1 Finance allows customers to invest fee-free in more than 6,000 stocks and ETFs. It combines automated investing with unique customization opportunities. Opening an account is easy, and M1’s “pie-based” interface makes it simple to view and manage your investment portfolio.
One way that M1 shines is by allowing customers to buy fractional shares of stocks. If you’re a fan of Amazon, buying a single share could be costly. The ability to buy a fractional share, though, gives you access to investments with companies you love without the high cost. Fractional shares also allow you to diversify your portfolio, no matter how much money you’re able to invest.
For newer investors, M1 has plenty of premade investment options that take the guesswork out of investing. Customers can pick from more than 80 expert portfolios.
Both individual and joint accounts are available through M1 Finance. Customers can also invest in their future through traditional, Roth, and SEP IRAs. Plus, the company offers trust investments with an M1 Trust account.
M1 Finance is an excellent way to jump into investing, especially if you’re working with $500 or less. You can learn more here.
Final Thoughts
Did you think investing was only for people with loads of cash to spare? Now you know that investing is for everyone!
In fact, if you want to retire someday, you can’t afford not to invest! Thankfully, there are plenty of ways you can start investing with $500 or less. Of course, the earlier you get started, the longer you’ll have for your money to (hopefully) grow.
So, what are you waiting for? Choose one of the options above and start investing your money right away!
Have you started investing with $500 or less? Let us know in the comments below!
