Investing seems like something only for wealthy people. Fortunately, that’s a myth. You can start investing with $500 or less.
It may not seem worth it to invest an extra $500. However, thanks to compound interest, the more time you give your money to grow, the less you must invest. The key is to start investing as soon as possible.
Our guide shares a few of the best ways to invest a small amount of money to help it grow.
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Ways to Invest With Little Money
Do you want to start investing but only have a small amount of money? Here are six ways to invest $500 or less.
1. Use a Robo-Advisor
Some beginning investors struggle with figuring out how to start investing in the stock market. This confusion may cause them to decide it’s best to stay on the sidelines.
A robo-advisor is a terrific solution to that problem. Robo-advisors are fully automated investment management platforms that act like a financial advisor without the hefty fees. Many allow you to invest with little money.
Betterment is our favorite option. When you open an account, they ask you several questions to learn your goals and risk tolerance. They then create a personalized plan for you.
The broker rebalances your portfolio to ensure your investments are on target to reach your goals. You might expect to pay a lot for this service, but they charge an inexpensive 0.25 percent of what they manage for you.
For example, you only pay $12.50 annually if you deposit $5,000 into a Betterment account.
Betterment has a wide range of account options, from a traditional or Roth IRA to taxable investment accounts and more. The service also offers a full suite of wealth and cash management services.
Read our review of Betterment to learn more.
2. Select an Online Brokerage With Low Minimums
Not all new investors are hands-off with their assets. If that’s you, it’s vital to find a discount broker that lets you invest in stocks with little money and no hefty fees.
SoFi Invest is an arm of the student loan refinancing giant that allows retail investors to start investing with as little as $1.
The broker has no fees. It even offers resources like educational tools and screeners to help you amplify your efforts.
The benefits of using SoFi Invest include:
- Commission-free trades
- Investing in partial shares of stock through its StockBits program
- Cryptocurrency investments
- Retirement and non-retirement accounts
- Custom-built exchange-traded funds (ETFs) exclusive to SoFi
You also receive access to other benefits, like career coaching and financial planning, at no additional cost. The broker has no minimum balance requirement, making it perfect for new and seasoned investors.
*Right now Better Finance Info readers who sign up for an Active Invest brokerage account for the first time are eligible to play “The Claw” interactive game. Play and you could win a random dollar amount of stock ranging from $5 to $1,000!
3. Invest Your Spare Change
Do you want to begin investing but have no cash to spare? Micro-investing apps let you invest your spare change in the stock market.
Acorns is one of our favorite small investment apps and is simple to use. When you open an Acorns account, you link a credit or debit card to your account. After you make a purchase, the app rounds up your purchase and invests it.
For example, if you spend $5.03 at Starbucks, it rounds up to $6 and invests the remaining $0.97. Funds are invested in one of their six low-cost index funds. This means that you don’t invest in individual stocks.
You can open an account with as little as $5. Acorns has two account levels that cost $3 or $5 per month. If you’re under 24 and attend college, you can invest for free.
Read our guide on stock trading apps to learn about similar platforms.
4. Use Your 401(k)
The best way to invest with little money is through a company-sponsored 401(k). This requires no outlay of cash since funds come out of your paycheck each pay period.
Company-sponsored 401(k) accounts let you begin saving for retirement immediately. Most of the time, the cost is super low.
Yes, your paycheck will be smaller. That said, funds come out pre-tax. This means that less taxes are withdrawn.
*Related: Starting with little money? Check out our guide of free passive income apps that let you start investing with little money.*
If your company matches a portion of your contributions, that’s even better since you are getting free money for retirement. Each plan operates differently, but they’re an excellent way to invest if you have minimal funds.
For those who currently have a 401(k) and are not sure if they are invested wisely, Blooom is a helpful free service. Blooom analyzes your investments to find savings and ensure that more of your money will work for you.
5. Crowdfunded Real Estate
Don’t like the stock market but still want to start investing with $500 or less? Real estate is another avenue to grow your wealth. Thanks to crowdfunding, you can invest in real estate with little money.
Fundrise is a leader in the space and lets you start with as little as $10. The service finds and vets investment opportunities so you don’t have to locate properties on your own.
You can invest in multiple property types, including:
- Apartments
- Commercial property
- New home construction
This lets you invest in real estate without being a landlord.
Average annual returns were a competitive 9.47 percent, net the .85 administrative fee for 2019 (the most recent year returns are listed).
*Related: Do you want to invest in real estate but have limited funds? Read our detailed guide of the best real estate crowdfunding platforms that let you invest with little money.*
If you want to diversify your investing or like real estate, crowdfunding provides considerable potential.
Don’t like the idea of real estate, but want to invest in a small business? Mainvest is a fantastic option that allows you to invest as little as $100 in a brick-and-mortar business.
Read our analysis of Mainvest to see if it’s a viable option to invest in a small business near you.
6. Kill Your Debt
Paying off debt seems like an odd way to invest $500. However, if you have high-interest debt, using spare funds to attack it can be a wise investment.
For example, if you have a credit card with an 18 percent interest rate and you pay it off or significantly knock it down, you “earn” considerably more than any of the above choices.
The reason for this is that you save on interest. In turn, this allows the next $500 you have to go towards other investments.
If you have high-interest debt, consolidating or refinancing it to a lower rate is a great way to save on interest. Take the time to compare lenders to find the best route.
Credible is a useful platform that lets you simultaneously compare up to ten lenders to find the best available rate.
Comparing rates won’t negatively impact your credit score. Instead, it may save you considerable money.
Steps to Take When Investing $500 or Less
When it comes to investing with $500, it’s essential to take a few steps to ensure you make wise decisions for your situation.
Here are several tips to follow.
Know Your Goals
Each situation is unique. It’s important to look at your finances as you begin investing.
As you take a holistic look, ask yourself the following questions:
- Where do I want to be financially in the next three to five years?
- What unique opportunities and challenges do I need to be mindful of?
- How can I accomplish what I want and avoid debt?
- When do I want to retire?
- How can I start investing now, even if it’s a small amount?
You may need to ask yourself additional questions, but the options above provide a good way to create a plan to work towards your goals.
Be Fluid
Having spare cash saved for emergencies is vital to your financial health. It helps you avoid debt and handle unexpected expenses.
If you have enough saved for an emergency, saving spare cash also lets you take advantage of small investment ideas that arise. Rates aren’t high, but it’s a good idea to hold money aside for opportunities and emergencies alike.
A money market at CIT Bank is a perfect solution. It pays 0.55 percent, offers the same FDIC coverage as a savings account, and has a minimum balance of just $100.
As you grow it, you can use the funds to pursue other low-cost investment ideas.
Leave it Alone
The key to investing your $500 wisely is to ignore it. You don’t want to touch it.
Yes, you want to analyze performance, but you want to leave it alone. It’s important to give your money time to grow.
Time is the best gift you can give your investments. The amount you invest matters, but time plays a more significant role.
Touching the cash or withdrawing it only jeopardizes your efforts.
Summary
Investing with $500 or less may seem pointless. Don’t let that myth deter you.
Small investments can and do return big things. You just need to give your money the time to grow.
What is holding you back from investing? What’s another way to invest with limited resources?
Brian @DebtDiscipline says
You have to start somewhere even if its small. If you continue to make excuses you will never get started and begin to learn more about investing. All about taking that first step. The sooner the better too, to take advantage of compound interest.
John Schmoll says
Completely agreed Brian. Taking that first step is vital. You’re only hurting your future self if you don’t.
Miriam says
Here in Canada we have something called a TFSA (I’ve forgotten what the letters stand for) but it is essentially an account where the earnings (not the capital) are not taxable. I have roughly $4 thousand invested through that account in a mutual fund held by my bank. I don’t seem to be making much money but it’s better than the no money I was making when it was just a cash account. I’m leery about doing anything on my own because whenever I have tried in the past I only lost money. Do you know of any services like you’re talking about – Etrade et al who operate in Canada? Should I consider moving my money ? I add to this fund sporadically because of other priorities right now (paying down debt) but hopefully I will be able to start adding regularly to it soon.
John Schmoll says
Those are good questions Miriam. I don’t know a whole lot about TFSAs – Tax Free Savings Accounts, other than it’s not taxed when withdrawn and such. I’m fairly certain that Etrade operates in Canada, as does Vanguard, Schwab, Fidelity and others. I don’t know exactly what their requirements and such are but would generally send you in that direction as I know they’re solid here in the States.
If you did move it, I’d make sure you’re comfortable with what you’re doing first – generally speaking I’d direct you to the Canadian equivalent to our index funds so you’re staying with the market. But, not knowing your entire situation it’s hard to say exactly what you should do.
Holly@ClubThrifty says
Any of the options you mentioned sound good for people just starting out. Whatever they choose, they should just start!
John Schmoll says
Exactly!
Kayla @ Femme Frugality says
As soon as I’m able, I plan to ramp up my savings and investing as I know it’s super important to reaching my financial goals. First I just need to get rid of my debt! 🙂
John Schmoll says
Very cool Kayla! Once you kill your debt you’ll be able to hit the ground running.
Dominic says
John, having just found your site yesterday and you helping me with some questions on Twitter yesterday as well, this article was exactly what I was looking for! (Get out of my head!!!) I’ve just finished reading Rich Dad, Poor Dad and at 33, have decided I need to get my butt in gear! I’ve got about $20k in my 401k but my company quit matching due to starting an employee ownership plan. Our 401k is handled through Paychex with only a handful of funds available.
I spoke with an investment friend a few months ago regarding reallocating because frankly, I have no clue what I’m doing! Right now, I’m sitting at 1.5% RoR, so I’m thinking I need to change up a bit.
Since the company stopped matching, I’m thinking of starting up a separate Roth IRA or even starting small like this article suggests with either Motif, Sharebuilder, or Betterment.
Say I can scrape up $100 to get started, and $50-$100 a month, what would be my best course of action? Got to tell you again, I love the site!
John Schmoll says
Ha ha, what can I say – I double as a mind reader. 😉 Seriously though I’m glad to be of help Dominic. Sorry to hear that your company is no longer matching funds, but sounds like you’re definitely on the right path with your book selection.
I think a Roth, generally speaking since I don’t know your entire situation, is a great way to go! All three of those are solid options to look at. Sharebuilder is really good, though has a fair number of restrictions so would direct you away from them unless you have specific stocks you know you want to buy each month.
That said, I think the Motif vs. Betterment question comes down to how much control you want. Betterment is going to do more hand holding. You, of course, can control it and do what you want at any time, but they act like a virtual financial advisor. Based on a few questions you answer, they’ll put you in a selection of some of the 12 or so ETFs they work with. They have no minimum balance requirement, so you can start with as little as you want, but if you can’t put in $100/month you’ll be charged $3 month – so $36 per year, BUT you won’t have trading fees on top of that.
Motif is a good one to look at because you can start with as little as $250. However, you control more of it so if you’d rather not have that then you might not want to go with them. With Motif you basically create your own mutual fund or ETF and pick up to 30 stocks. They also have about 150 pre-made ones you can choose from if you like. To trade each Motif you pay $9.95, but is still a relatively good value.
I personally have a Motif account and the platform is relatively simple to use. I don’t have a Betterment account, but have worked in it quite a bit as well and seems similarly simple to use. I don’t think you can really go wrong with either – just comes down to that control piece I mentioned above. The key, as you pointed out, is simply starting and make sure not to focus on a few dollars in cost but getting started.
Anyway, I know that’s a lot to take in. 🙂 If you have any further questions – feel free to reach out to me through my contact page: https://www.frugalrules.com/contact/
Thanks for the compliment, glad you like the site!
DC @ Young Adult Money says
Great post, John. I think the thing that made me not start investing when I didn’t have a “lot” of money to invest was the thought that the transaction fees would be killer. I prefer to buy at least $2k of stocks to offset the cost of the trade, but I think you would agree that it’s better to get started than to worry about a $5 or $7 fee. I’ve changed my view on this and now realize how harmful the “I don’t have enough” mentality is. I’m actually a big fan of investing while paying down student loans, as I think long-term it’s better to get in the habit and get some dollars flowing into your investment account than to wait until every last student loan is paid off. Lots of people will disagree with that approach : )
John Schmoll says
Thanks DC! I tend to be the same way with my investing – I like to buy in blocks so as to mitigate any trading fees. But, like you said, as long as you’re not paying crazy fees sweating a few dollars should be the last of your concern as you’re just starting out – it’s that getting started that truly matters.
I’m with you on investing while paying down debt. I didn’t when I was in credit card debt and wish I would have. Many don’t and they have no clue what to do when they’ve freed up that cash each month. That’s also not to mention the fact that it’s best for the long run to get those investing dollars to do what they need to be doing.
Jayson @ Monster Piggy Bank says
I agree with you John that setting a kind of goal is really the factor here whether you lose or win, in spite of how much your money is. Proper mindset should be obtained and a good approach must be adopted prior to investing.
John Schmoll says
Yep, a goal is definitely nice to have.
Fervent Finance says
I’d recommend opening a Vanguard account. When buying their own ETFs on their brokerage platform I do not believe they charge a transaction fee. For example if you like VTSAX but can’t meet the minimum you can buy VTI which is the ETF equivalent.
John Schmoll says
Yes, I do believe you’re correct in that you should be able to buy their ETFs without a commission. The only concern, and why I typically wouldn’t recommend them to someone just starting out with a little amount is their tiered pricing structure, especially once you move away from their ETFs. I’d rather see someone build up $3-5k then move over as they’ll benefit more from what Vanguard has to offer.
Jen says
If you like ETFs, I recommend Betterment, WiseBanyan and Acorns. There are no minimums to open an account, but fees do vary. For example, Betterment charges .35 if you set up monthly contributions of $100. WiseBanyan doesn’t charge a fee…
John Schmoll says
I like Betterment as well, especially if you want a hands off approach. I’ve heard relatively good things about Acorns, though they have a limited offering and is just really spare change – but is better than nothing I guess. I’ve done a little bit of research into WiseBanyan – they do have some good selling points, but would direct towards Betterment in most cases.
Natalie @ Financegirl says
Every now and again I go for the ETFs through Trade King. Easy, cheap, and definitely doable with under $500.
John Schmoll says
TradeKing is another relatively good option Natalie. As long as you can stay away from their maintenance fees you can’t beat their price.
WG @ Wealth Gospel says
These places are all doable. Like Natalie said above, ETF’s can be the way to go. Many of the robo advisors will help you get started for less than $500 with those as well.
John Schmoll says
Exactly! You can’t go wrong with a low-cost ETF.
Shannon @ Financially Blonde says
Great suggestions John!! We just opened an investment account for my son’s money through Motif and it was not only easy to do, but I loved the minimum balance requirement. I also recommend Drive Wealth for people with low starting balances, they have low minimums and also let you create a starter account where you can practice investing before you actually do it.
John Schmoll says
Thanks Shannon! I really like Motif for that as well – they make it very easy to manage and love the specialty twist to it. I’ve never heard of Drive Wealth – I’ll have to check them out.
Mrs Lewis says
You’re such a good mom! I remember handing every dollar from birthdays and holidays to my parents for “savings” as a kid. Today I have no clue what happened to it all. I look forward to having kids so I can teach them about building their own wealth and not leaving it all to me.
Brittney @ Life On A Discount says
Wow, I wasn’t aware about some of these options. I have a 401k and an IRA, but haven’t dabbled much in regular investing. Once we finish paying off our debt, I think we will venture into stock market investing.
Reuben says
I’m not sure if I’m correct in saying this but the Robinhood app is great for iOS. I’ve been playing around with it and the benefits are no commision trades (stocks, ETFs) and an easy to use interface. No research/balancing but there a no minimum balances to maintain so you can start with as little as the lowest cost ETF. I’d love a review of it to make sure my comments aren’t off base!
Mrs Lewis says
Investing makes me nervous and I think it’s because i haven’t hit every savings goal yet or pay off my debt. Being the only income earner in my family makes it hard to juggle priorities.