How to Start Investing With Basically No Money
Investing offers more benefits when you have a big portfolio, but that doesn’t mean investors with only a few dollars to get started can’t participate in the stock market. Thanks to some new services and flexible investment accounts, you can start investing even if you only have a small amount of money put into the market.
The Best Apps for Micro-Investing
While some traditional and startup investment accounts require as much as $100,000 to get started, others have no opening balance requirement at all. These services let you slowly build your investment balance over time through micro-investments. And these micro-investments can add up fast.
If you set up a recurring transfer and invest $20 per month over a year, you’ll end up with $240 at the end of the year. And, if you’re able to spare just a dollar a day, that’s $1,000 in three years. It may not be enough to build a nest egg, but if you’re young and want to jump into the stock market, it’s a start. Think of it as a trade-off—instead of eating out in a restaurant once a month, invest that money in the market.
If you want to get started investing with your spare change, Acorns is a good platform. There is no minimum balance required to open a new account. When you connect your debit or credit card, Acorns will monitor your purchases and round up to invest your spare change. For example, if you go to the sandwich shop and spend $4.75 on a hero sandwich, Acorns will round it up to an even $5 and invest the extra 25 cents in your account. You can also setup recurring daily, weekly, or monthly investments or make one-time contributions.
Acorns charge a $1 monthly fee for accounts with a balance under $5,000 and a 0.25 percent management fee for accounts over $5,000. Your account dollars are automatically invested by Acorns in diverse, low-cost exchange traded funds, or ETFs. Even if you know nothing about investments, Acorns will take care of the hard decisions for you. You just sit back and watch your account grow with each purchase you make.
If you prefer a more traditional stock investing experience but don’t big dollars to invest, Robinhood is also a great choice. While big brokerages charge around $10 per stock trade and discount brokers charge about $5, Robinhood charges nothing.
This mobile, online only brokerage works like an online-only bank—but for your stocks instead of your cash. By avoiding physical branches and expensive infrastructure, they can offer digital stock trades for free. A paid version, Robinhood Gold, is available for $10 per month with additional features that get s you access to extended trading hours and additional buying power. If you are a legal United States resident with a social security number and a smartphone, you have everything you need to buy and sell stocks—with no fees and no minimum balances to worry about.
Robo-advisors are a type of investment platform where you fill out a brief questionnaire and the investment firm takes care of the rest using advanced investment algorithms. At Betterment, you just tell them your goals and they will invest your dollars into a combination of low-cost funds customized for you.
The basic account has no minimum balance and no trade fees. Betterment charges a 0.25 percent annual fee on your account balance, exactly the same as Acorns charges on accounts over $5,000. You can contribute via scheduled recurring deposits or one-time manual investments through the Betterment website.
Don’t Forget Your 401(k)
If you work for a company that offers a 401(k) plan, your investment dollars are automatically deducted from your paycheck. You don’t have to invest anything from savings to take advantage of this employee benefit. In fact, you're not allowed to invest in a 401(k) from savings. That's because with a 401(k) a payroll deduction automatically deposits the specified amount of dollars directly into your 401(k).
In most 401(k) accounts, you choose the percentage of the investments you want to allocate to each investment fund. Every payday, a percentage of your payroll is automatically invested, usually up to 15 percent of your gross paycheck—if you don't see it, you don't miss it.