January 5, 2021

Small Investments That Make Money

Read more about Investing
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Contrary to popular belief, you don't need to be rich to start investing.

The truth is, even a few dollars can go far. Investing helps you reach long-term goals, like retirement or buying a house, much faster than saving alone. But with so many investing platforms available, where do you start?

To make your first move, check out this list of beginner-friendly ideas on how to grow your savings on a small budget.

1. Robo-advisors

If you're new to the market, it's scary to even look into investments. But you can get guidance without the price of a financial advisor. Enter the robo-advisor.

Robo-advisors use a computer algorithm to manage your portfolio for you. They'll choose investments based on your age, when you plan to use the money, and your risk tolerance. It's completely hands-off and good for beginners who want to follow the average market returns.

Betterment: For total beginners (picks investments for you based on your goals and risk tolerance)

  • No minimum required investment
  • 0.25% annual advisory fee (for every $100 in your account, the fee is 25 cents per year)
  • Supports fractional shares, so you can buy just a small fraction of a stock if you don't have enough for a full share
  • Different portfolios for goals such as emergency savings, retirement, a major purchase, or general investing
  • Offers retirement accounts
  • Tax loss harvesting available (this helps to minimize your tax liability by offsetting capital gains with losses)
  • Automatic account rebalancing

2. Fractional Shares

Buying a stock or share is like having a small sliver of ownership in a company. Before now, you could only buy whole shares of a company, making some valuable stocks and high-value ETFs completely out of reach.

Nowadays, with fractional shares, you can buy a slice of a company's share with just $1. A fractional share means you're buying just a piece of one share instead of the whole thing.

This makes things more affordable for new investors who don't have a ton of money lying around. Plus, fractional shares allow you to diversify with the money that you are able to invest.

You can easily purchase stocks through online brokers and investment accounts.

Robinhood: This popular app lets you buy fractional shares as small as 1/1,000,000 of a share. Trading fractional shares is real time and 100% commission-free. The investing app is completely self-directed and best for investors with at least some experience.

  • No fees
  • No minimum to start
  • Trade stocks, ETFS, options, and cryptocurrency
  • User-friendly app
  • Limited educational resources or research tools
  • No IRAS
  • No mutual funds or bonds

3. Dividend Reinvestment Plans (DRIPS)

With DRIPS, you just need one share to get started. Some big companies distribute profits - called "dividends" - to its shareholders. You can automatically reinvest dividends by buying more (whole or fractional) shares of stock from that same company.

This allows your money to grow faster with compounding interest.

For example, if you have one share this year and two shares next year, the dividends you receive in year 2 will be more than what you earned in year 1. Your earning potential accelerates if a stock pays a $3 dividend and increases their dividend to $3.10 the next year.

There's no work on your end - just hold onto the stock. Many online brokers offer free dividend reinvestment plans to investors.

Ally Invest: This platform offers free automatic dividend reinvestments (DRIPs) with the ability to purchase fractional shares. You can apply automatic DRIPs to all - or select - stocks in your diversified portfolio.

  • $0 online stock and ETF trades
  • No account minimum to open
  • Wide variety of investment options

4. Mutual Funds and ETFs

Mutual funds and ETFs are a great way to diversify your portfolio and lower your risk. They're both professionally managed by fund managers, and allow you to invest in a range of companies and industries.

You can invest in Mutual Funds and ETFs with robo-advisors and self-directed brokerage accounts.

M1 Finance: This investment platform is best for semi-experienced investors (you'll choose your own stocks and ETFs and/or invest in premade portfolios).

  • No annual fee or trade commission fees
  • Pick your own stocks and ETFs for fully customized portfolios (called "Pies")
  • Automatically buys stocks for you according to your Pies and manages your portfolios
  • Supports fractional shares

5. P2P Lending

Most of us have loaned cash to a friend or family member before. But you can also lend money as a form of investing and earn interest from the borrower. That's how peer-to-peer (P2P) lending works.

Investors provide unsecured personal loans to people who may not be able to secure funds from other lenders.

There is a risk of loss to your principal if a borrower does not repay the loan with interest. To minimize the risk of someone defaulting on their repayment, P2P lending platforms will split your investment into small investments of $25 or $50 to a group of different people.

With this new investing platform, you can diversify your portfolio outside of traditional investments.


  • Minimum $25 investment in each loan
  • 1% annual fee on the outstanding principal balance of any loan you fund
  • View risk "grades" and credit history of potential borrowers
  • Invest a lump sum in one loan or distribute it across several loans
  • Average historical returns of 5.3%

Lending Club

  • Minimum investment of $1,000 ($5,500 for IRA)
  • 1% service fee
  • $25 minimum investment per note
  • View risk "grades" and credit history of potential borrowers
  • Investors must make $70,000+ per year ($85,000 for California) AND who have at least $70,000 ($85,000 for California) in net worth (excludes primary home, home furnishings, and automobiles)

6. Real Estate Crowdfunding

Real estate investing is known for being consistently profitable and a reliable form of passive income. Over the last 30 years, real estate performed better on average than stocks.

And now, you can invest in real estate without flipping houses or playing landlord.

Real estate crowdfunding platforms let you pool funds with fellow investors to purchase real estate. Then, the company will manage the property for you. Investors earn returns by:

  • Buying undervalued real estate and renovating the property to increase rent or property value
  • Collecting rental income on stabilized properties
  • Holding mortgages and collecting interest
  • Acquiring properties that have potential to appreciate in value

As a shareholder, you're a partial owner of the property. Profits from collecting rent or selling the property will go back to you.


  • Minimum to start is $500
  • Pays quarterly dividends
  • Passive investing
  • Illiquid investment

7. High-Yield Savings Account

Not ready to throw money into the market but still want to earn some interest? High-yield savings accounts are your best bet.

Online banks offer much higher interest rates (as much as 20x or more) compared to traditional banks.

Plus, your savings are completely risk-free as long as you choose an FDIC-insured bank. Even if the bank defaults, the government will pay back the amount in your account (up to $250,000).

You can access your money at any time for an emergency fund, a down payment for a house, or other uses. That said, you won't see substantial gains here and you'll likely lose purchasing power over inflation (2-3% every year).

CIT Bank: Encourages saving by rewarding active savers with a high APY

  • $100 minimum opening deposit
  • Earn the top APY tier if you save $100+ every month
  • No monthly service fee

8. Certificates of Deposit (CDs)

CD rates are another super-safe option.

You can get higher interest rates than with a normal savings account, but you can't touch your money for a fixed amount of time (also called a "term").

Your term can be as short as a few months or as long as several years. Usually, the longer the term, the higher the interest rate earned. But if you withdraw money before your term expires, you'll lose a few months' interest as penalty.

Similar to savings accounts, CDs earn low returns but also are very low risk.

TIAA Bank: Offers one of the best rates for every term length

  • Terms starting at 3 months to 5 years
  • Minimum deposit of $5,000

9. Pay Off Debt

Before you invest, make sure you pay off debt (especially unsecured debt such as credit cards, medical bills, and most personal loans).

If you pay off your debt, you lock in a rate of return on your money. For example, if your credit card balance is $10,000 with an interest rate of 18% per year, you're guaranteed an 18% rate of return on that $10k.

You could consider taking out a lower-interest personal loan to pay off debts with much higher interest rates.

To start, try a website called Fiona to compare personal loan offers for dozens of lenders. They'll match you with a low-interest loan to pay off your credit card balances. You'll get out of debt much faster with the lower interest rate and you just have one bill to pay every month.

10. Employer-Sponsored Retirement Plan

You may have heard folks refer to 401(k)s as "free money," and that you should contribute enough to get the "employer match."

Here's what that means:

  1. When you designate a percentage of your paycheck toward your employer's plan, you put away tax-free money toward retirement savings.

    The contributions you make are tax deferred (i.e., the money is taken directly from your paycheck before any income taxes are deducted and your money grows tax-free in your 401(k) plan).

    When you eventually withdraw funds from your 401(k) during retirement, you're taxed at a lower rate.

  2. If your company matches, it's an even better perk.

    Every 401(k) plan is different, but "employer matching" means that if you contribute money into your plan, your employer will put some too - up to a limit, which is usually a portion of your total salary.

    A 401(k) is one of the easiest ways to invest small amounts of money. If you haven't already, talk to your employer or HR department to opt into the plan.

11. Your Own Retirement Plan

You can also set up your own retirement plan with a Roth IRA. You contribute money that has already been taxed in your paycheck and you won't be taxed again when you withdraw funds in retirement. Plus, all investment gains are tax-free.

  • Withdrawals are tax-free after age 59½
  • Maximum contribution per year is $6,000 ($7,000 if you're 50+)
  • The income limit to participate is $137,000 for single filers and $203,000 for married couples filing jointly

There are plenty of solid Roth IRA providers for you to start building a retirement nest egg.

Fidelity: One of the most well-known and popular Roth IRA providers available

  • No minimum to open account
  • $0 annual fee
  • $0 commission for online US stock, ETF, and option trades
  • No opening cost or closing cost
  • Supports Traditional, Roth, SEP, SIMPLE, and rollover IRAs

12. U.S. Treasury Securities

U.S. Treasury Securities are great for investors who don't want to deal with the ups and downs of the market. The United States Treasury Department issues debt obligations to fund the national debt.

Treasury notes and bonds are securities that pay a fixed rate of interest every six months until the security matures. Terms range from 30 days to 30 years.

You can buy securities directly from the U.S. Treasury Department with the TreasuryDirect portal. From there, you can buy Treasury securities in $100 increments.

Don't want to buy directly from the U.S. government? You can sprinkle bonds into your investment portfolio with robo-advisors like Betterment, depending on your risk tolerance.

13. Invest in Yourself

It's easy to get caught up in day-to-day chores (laundry, meal prep, work - the list goes on). Take this time to visualize where you want to be in the next few months or years.

What skills could help bring your A-game to your career? Do you want to pivot to a new industry? Maybe tackle a passion project?

Level up by taking online courses, reading books, or go back to school full time. It'll open new opportunities to you and enable you to kick butt at whatever you do.

14. Start Your Own Business

Being your own boss is tough, but it's rewarding to build something of your own. If you like the sound of that, try investing some money into your dream venture.

You could sell handcrafted greeting cards on Etsy. Or create a pinball empire à la Warren Buffett. You might even open a restaurant with your cherished family recipes.

There are more tools than ever for starting a business from home, even on a shoestring budget.

Bottom Line

If you don't start investing now, when will you? Everyone needs to take their first step at some point.

And there's no better time to start than right now. Missing out on years of growth is a big mistake. Imagine if you bought a share of Tesla or Amazon just a few years ago.

You don't need to be a hardcore Wall Street expert or be rich to open a brokerage account. You can start with small amounts of money as you get into the swing of investing.

Write to Amber K at amber@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

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