It's a common misconception that to succeed at investing, you need a lot of money. While having more funds at your disposal will, indeed, help you build a more robust portfolio, at the end of the day, it's possible to get started as an investor with very little cash on hand. In fact, you can kick off your investing career with as little as $100 if that's all you can swing right now. Here are some options to look at if you're low on funds.
1. Buy low-cost ETFs
ETFs, or exchange-traded funds, let you add a bucket of stocks to your portfolio with a single investment. Like stocks, ETFs trade publicly, so you can track their performance with ease. If you're new to investing and low on money, you might consider the iShares Core S&P Total U.S. Stock Market ETF (ITOT -1.09%). This ETF gives you exposure to the total stock market, which leads to a nice amount of diversity in your portfolio.
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2. Purchase fractional shares
Some companies with solid growth potential have share prices that far exceed the $100 mark, but that doesn't mean they're off-limits. Thanks to the increased availability of fractional shares, a high stock price no longer has to be a barrier to owning a piece of a company you're interested in.
Fractional shares let you buy a portion of a share of stock instead of a full share. Like ETFs, they're good for building a diversified portfolio on a budget. Unfortunately, not all brokerages offer fractional shares, and not every stock is available as a fractional share. You may need to do some research before going this investment route, but it's a viable one to consider nonetheless.
3. Sign up for your company's 401(k)
The best feature of 401(k)s plans is that they generally don't impose a minimum contribution. As such, you can elect to have a very small portion of your paychecks deducted for retirement savings purposes. From there, you can invest your 401(k) in low-cost index funds. Like ETFs, index funds allow you to scoop up a bucket of stocks with a single investment. Unlike actively managed mutual funds, index funds are passively managed, and as such, they typically come with very low fees (called expense ratios) that don't eat away at your 401(k) returns.
Best of all, you'll get a tax break for contributing to a traditional 401(k), which may help free up additional cash for investing at a later point in time. Your employer may also have a policy of matching worker contributions, so if you invest $100 of your own money for now, your company might add some money to your retirement plan as well.
Contrary to what you may have been led to believe, you don't need a lot of money to begin investing. If you've shied away from the stock market because of financial constraints, go ahead and get started, even if you only have $100 to work with right now. That small sum could end up going a very long way.
