Beginner's Guide: 12 Affordable Ways to Start Investing Today

You’ve probably heard of hedge funds and other unique investments that only the rich can invest in. Chances are, hearing about these investments makes it seem like you must have a lot of money to start investing money. In fact, 62% of people think you need $1,000 or more to open an investment account, according to a recent FinanceBuzz survey about investing habits.

Thankfully, that isn’t the case. You can start investing and building a nest egg with just a little money. Here are 12 smart small investments to consider if you’re ready to make some savvy money moves.

12 ways to start investing if you don’t have much money

If you don’t have a big investing budget, you still have several investment options to choose from, including investing in the stock market. Consider these options if you want to get started building a healthy investing habit.

Open a retirement account

Opening a retirement account can help you start saving for retirement. Retirement accounts typically offer some form of tax advantage to incentivize you to invest for your future today.

For instance, a Roth IRA doesn’t give you a tax deduction today. Instead, you get to withdraw the money tax-free in retirement as long as you meet the requirements. On the other hand, a traditional IRA may give you a tax deduction today. You have to pay taxes when you withdraw the money in retirement.

Both accounts may have penalties if you withdraw money before age 59 1/2. Be confident you can leave this money invested for the long haul. Ultimately, the type of account you choose depends on your situation and goals.

Make sure to open a retirement account with a company that allows you to start investing with the amount of money you have available. Several no minimum account balance options exist. You shouldn’t have too many problems finding a suitable retirement plan.

Invest in an index fund

Whether you decide to invest in a taxable investment account or a retirement account, you have to choose what to invest in. An index mutual fund is one option to consider adding to your investment portfolio.

Essentially, an index mutual fund is a single investment you can purchase. It holds several investments within it. These investments aim to track the returns of an index, such as the S&P 500. The benefit of investing in an index fund is that it allows you to invest without buying a share of each stock within the index.

Index mutual funds may have minimum initial investments to get started, but several do not require a minimum deposit. Fidelity offers a handful of zero minimum investment mutual funds options such as FNILX, FZIPX, FZROX, and FZILX.

Another upside is the investment is diversified, which means you spread out the risk. Rather than holding a single company’s stock, you hold multiple stocks through an index mutual fund. This disperses your risk if one firm performs poorly or goes bankrupt. You still have other companies your mutual fund has invested in that may outperform.

You do have to watch out for fees, though. If two mutual funds earn the same returns, the one with lower fees allows you to keep more money. Even a .5% difference in fees can make a massive difference over the long term.

Diversify with an ETF

Another possibility for small investors is an exchange-traded fund. ETFs work similarly to mutual funds. One significant difference is you can trade an ETF throughout the day. You can only buy and sell mutual funds once per day.

As with mutual funds, ETFs can provide diversification to help you avoid concentrating risk in a single stock. ETFs may also come with lower fees in some cases. They require you to have only enough money to purchase a single share of the ETF. Companies that allow fractional share investing may not have this limit.

If you’re looking for a place to invest in ETFs, consider opening an account with Stash. This service allows you to invest in stocks and ETFs with no minimum investment. Stash does charge a monthly fee to use its service, but it starts as low as $1 per month.

Purchase fractional shares of stock

If you prefer to pick the individual companies you want to invest in, you can still invest in stocks without a lot of money. Several new investing apps, including Robinhood and Stash, allow you to buy fractional shares of stock and ETFs.

Rather than having to save up $1,000 to buy a single share of a popular technology company, you can buy .001 shares of the company for $1. This makes it easy to diversify your portfolio of individual stocks.

You can use fractional shares to buy partial shares of several companies with a relatively small investment. It would be difficult to do this with whole shares unless you had a significant amount of money saved.

Not all brokerage firms allow fractional share investing. If this is how you want to invest, make sure you verify fractional share investing is an option before you open an account.