How to Invest When You Don’t Have a Lot of Money

We all know investing is important. It’s how you build wealth so that you can live comfortably in the future. However, a lot people are discouraged from investing due to the erroneous notion that you can only do it if you have thousands of dollars to part with.

Fortunately, that isn’t the case. While more is always better, you can get started today with your spare cash. There are lots of great options available with which you can begin building your portfolio. Consider these options to invest with little cash.

Certificates of Deposit

CDs are a type of account in which you deposit to earn money on interest. Although a lot of people throw around the term “buying” a CD, it isn’t actually a tangible thing you purchase with a fixed amount. Your bank determines the minimal amount you can invest. Usually, though, you can get a CD for around $500.

Dividend Reinvestment Plans (DRIPs)

DRIPs are plans through which you invest a small sum of cash into stock that pays dividends. Your dividends are reinvested back into the company so that your portfolio keeps growing. Lots of companies allow you to do this with very small amounts of stock. Some examples are Verizon and Coca Cola.

P2P Lending

Websites like Lending Club are platforms that allow regular folks like you and me to become lenders. P2P connects you to borrowers who aren’t able to qualify for a loan from the traditional outlets. Usually it’s with the purpose of paying off debt.

With P2P, a borrower doesn’t receive a loan from a single lender. Instead, the loan is made up of small contributions from scores of lenders. This mitigates risk for you as a lender.

Normally, you can begin investing in P2P with as little as 25 dollars, although to avoid putting all your eggs in one basket it’s best to wait until you have a larger sum. Having around $1,000 is fine. That might take a couple months to get together, but it’s better than raising the thousands that other investments require.

Buy Individual Stock in Strong Companies

In the past, you couldn’t really invest on your own with ease. Nowadays, you can use sites like eTrade or an online discount broker to buy shares of companies on your own at a relatively low cost. A lot of trades by these means cost around $10.

To minimize your risk, purchase stock in companies that you know are performing well and show signs of continuing to do so in the future. Companies like Apple and Google. Apple, for instance, costs about $100 per share. So with $500 you can have 5 shares.

Although these online platforms allow you to invest with small amounts of money, it’s still best to wait a bit until you have a bit of a larger amount. Since you’re charged per trade, making a series of small buys will cost you more in fees than one big purchase.

Investing doesn’t have to be out of reach. Opportunities like these make it possible to stay within your budget while building your wealth for the future.