Updated May 5, 2021

Small Investments That Make Money

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You don't need to be rich to start investing. Here are 15 easy ways to invest small amounts of money.

#1 regret you'll hear from investors: Starting later rather than earlier and missing out on years of growth.

The truth is, the biggest factor is when you start investing, not how much you have to start. Even a few dollars can go far if you know what to do with it.

Now, for the million dollar question... how do you make your first move?

Check out this list of beginner-friendly ideas 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 having to sit down with a financial advisor and pay them for their time. 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.

Old-school online brokers like Vanguard and E*TRADE don't offer the next tip. Find out how you can invest in big name companies with a much lower price tag.

2. Fractional Shares

Single share of high-performing stocks (such as Amazon or Tesla) could cost hundreds or even thousands of dollars. That's way too expensive for most investors.

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

This makes things more affordable for new investors who don't have a ton of cash lying around. But not all online brokers support fractional shares.

Robinhood lets you buy fractional shares as small as 1/1,000,000 of a share. They have no fees and 100% commission-free trades. That said, the investing app is completely self-directed and best for investors with at least some experience.

FYI, you can also invest stock dividends into fractional shares. See below for how to turn that $0.40 from Coca-Cola into more shares.

3. Dividend Reinvestment Plans (DRIPS)

With DRIPS, you only 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 over time, the dividends you receive in year 2 will be more than what you earned in year 1. Your earning potential accelerates if a stock increases their dividend from $1 to $1.10 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 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. In addition to commission-free trades, you have a wide variety of investment options.

For real though, stock trading isn't for the faint of heart. It's emotional. If you want to grow your money without as big of a rollercoaster ride, check out mutual funds and ETFs.

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 is best for semi-experienced investors. You pick your own stocks and ETFs for fully customized portfolios (called "Pies"). The app automatically buys stocks for you according to your Pies and manages your portfolios. Plus, M1 Finance supports fractional shares.

In the next investing platform, you can diversify your portfolio outside of traditional investments.

5. P2P Lending

Instead of loaning your neighbor Joel $100, lend money as an investment 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.

Two popular options are Prosper and Lending Club. Prosper has a minimum $25 investment in each loan with average historical returns of 5.3%. Whereas, Lending Club requires a minimum investment of $1,000 ($5,500 for IRA) but you can view risk grades and the credit history of potential borrowers

Being a creditor isn't for everyone. If you'd rather make money with tangible assets, take a peek at real estate crowdfunding.

6. Real Estate Crowdfunding

Did you know that over the last 30 years, real estate investing performed better on average than stocks? Yes, buying and flipping houses is good money.

If you want to flip houses straight from your laptop, real estate crowdfunding might be the way to go.

These platforms pool funds with fellow investors to purchase real estate. You earn returns by renovating undervalued real estate to increase rent or property value. (No dealing with real estate brokers or tenants required.)

Fundrise lets you do all this with $500. The average Fundrise investor earns 8.5% in annual returns and they pay out dividends every quarter.

But before you start hardcore investing, experts recommend having 3-6 months of expenses in an emergency fund. And here's the best place to stash it.

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.

One popular option is CIT Bank since they encourage saving by rewarding active savers with a high APY. The minimum opening deposit is $100 and if you save $100+ every month, you get the top APY tier. Like many online banks, they do not have monthly service fees.

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.

9. Pay Off Debt

Time to get rid of any credit card at all before investing.

By paying off debt, you lock in a rate of return on your money. So, 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.

In contrast, the average rate of return for stock investments is only about 9%.

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. (Whew, so much more manageable.)

Dreaming of toes in a sandy beach or a lake house by the mountains? The next two options break down long-term investing for retirement.

10. Employer-Sponsored Retirement Plan

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.

Here's why: When you contribute part of your paycheck into the 401(k), the money is taken before any income taxes are deducted. That way, your savings grows tax-free and when you eventually withdraw funds from your account during retirement, you're taxed at a lower rate.

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.

11. Your Own Retirement Plan

Don't just rely on your employer's retirement plan! You can also set up your own retirement nest egg.

With a Roth IRA, your withdrawals are tax-free after you turn 59 ½. You contribute money that has already been taxed in your paycheck so all investment gains will never be taxed again by Uncle Sam.

Fidelity is one of the most well-known and popular Roth IRA providers available. There's no minimum to open account, annual fee or commission fees. They support Traditional, Roth, SEP, SIMPLE, and rollover IRAs.

Keep in mind if your account is less than 5 years old, withdrawals may be subject to taxes and penalties. And if you withdraw earnings from a Roth IRA before age 59 1/2, you may owe income tax and a 10% penalty.

12. U.S. Treasury Securities

Don't want to deal with the ups and downs of the market? Then invest in U.S. Treasury Securities. The United States Treasury Department issues debt obligations to fund the national debt, and you can get a cut of the pie.

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.

You can also sprinkle bonds into your investment portfolio with robo-advisors, depending on your risk tolerance.

At the end of the day, personal fulfillment is the key to happiness. Don't forget to take care of numero uno - you.

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.

15. Micro-Invest Spare Change

Speaking of starting small…

Micro-investing apps "round up" everyday purchases and help you invest, even if it's a few dollars.

Let's put it this way: If filling up on gas costs $24.34, the app will add that $0.66 loose change into a portfolio for you. Over time, the amount you save from each transaction can really add up.
The money can be invested for a vacation fund, emergencies or even retirement.

They're perfect for those who aren't knee-deep in Wall Street lingo or don't have time to figure out the stock market.

For 100% hands-off investing, Acorns will automatically choose investments and manage your portfolio. If you want to learn how to invest with some hand-holding, Stash can provide guidance. This micro-investing app helps you choose investments based on your goals but lets you manage your own portfolio.

What the Experts Say

Investing for the first time can be daunting. But you don't have to go it alone. As part of our series on investing and saving, CreditDonkey asked a panel of industry experts to answer readers' most pressing questions. Here's what they said:

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. Imagine if you bought a share of Amazon in 1997 for the hefty cost of $1.97.

Just remember, no one's "too broke to invest." You can start with small amounts of money as you get into the swing of investing. Use this guide to diversify your investing strategies and don't put all your eggs in one basket.

Amber Kong is a content and creative at CreditDonkey, a personal finance comparison and reviews website. Write to Amber Kong at amber.kong@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.

CreditDonkey is a paid Affiliate/partner of Stash. Investment advisory services offered by Stash Investments LLC, an SEC-registered investment adviser. This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting, or tax advice. Investing involves risk.

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