How can you invest with $100 or less each month?

  • Stay consistent with your investments, even if that means putting aside as little as $25 per week
  • Go for long-term investments, after building up an emergency fund of 3-6 months of expenses
  • Reinvest your smaller amounts and continue to diversify your investments

Right now, savings accounts are offering such low returns that it is almost useless to invest money in them. Also, inflation will likely eat into your savings.

If you are looking for higher returns long-term, then the financial markets are where to look if you want to invest small amounts of money regularly. Bear in mind that even though there are many ways to build financial security for your future, be wary of quick return investments because they usually come with a huge risk.

Before starting to build on your financial investments, make sure that you first build a cash emergency fund to cover your living expenses for 3-6 months of living expenses. Similarly, make sure that you have no credit card debt.

Concept of compounding returns

Compounding means that even though your investments begin with small amounts, over time they can pick up speed. This happens by allowing the returns generated to be reused and diversified to generate more returns. This increases when regular contributions are also added to the investment.

These are some of the best ways to invest up to $100 a month:

Equities are the clear winners

Stocks and mutual funds are the best investment for young people starting with small amounts of money, and who are still far from retirement. They have proven to be the best long-term investment around.

In research conducted by Dr. Jeremy Siegel and John Bogle (founder of Vanguard), they compared the real return of gold, bonds, and stock over 196 years. In their article “Investing $100 a month for 30 Years,” Investopedia mentions that the research showed that with an inflation-adjusted portfolio of $10,000 invested in gold in 1810, it would be worth $26,000 today. However, if the same amount had been invested in stocks at that time, the investment would have been worth $5.6 billion today.

A conservative estimate of 6% annually can turn a monthly contribution of $100 a month to $16,500 in a decade. It will also continue growing as the investments are continued and dividends are reinvested. In thirty years between 1985 and 2015, the S&P has averaged a growth of 8.7%, the Dow Jones 9.33%, and NASDAQ 10.34% annually.

Josh Simpson, a Florida investment advisor with Lake Advisory Group, is quoted in an article in the U.S. News: “Some of the wealthiest clients that I have started off investing small amounts of money when they could.”

How to invest in the stock exchange?

The first step to investing in the stock market is to decide if you have the time and patience to research the market, buy stocks and analyze your holdings on an ongoing basis. Host of CNBC’s Mad Money Jim Cramer recommends spending an hour per week researching each holding in your portfolio. If you are not adhering to the buy and hold strategy but are trading,  you may need to do research new stocks more frequently as your portfolio turns over. 

If you simply don’t have the time to manage your own portfolio, look for a money manager. You can find a service online like Robo advisors, which offers services that allow small investors to create portfolios, rebalance their investments, and apply strategies for tax minimization. When you sign up, Robo advisors will suggest an investment portfolio, and you can make changes to these recommendations as desired. 

The stash investment app, is another tool that is helpful for beginning investors. The fees are low; it costs $1 a month to open and maintain a brokerage account with no minimum. The app will help you select stocks that suit your investment goals and even provides a debit card with a rewards program. There is a commission on returns, and this is true of many money management services. 

Finally, you can also opt to invest $100 into your 401(k) account which also offers tax savings. The money is automatically paid directly into the account from your paycheck, ensuring you are not tempted to spend it. These funds invest in stock funds and other assets, ensuring you will benefit from their growth. You can also increase your monthly contributions to your 401(k) as your salary grows.

No matter how you choose to invest $100, there are better ways to see growth than with a savings account. Reinvest and continue to diversify to see the best returns.

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