Investing can be life-changing, but it’s a common misconception that you need to have thousands of dollars to begin investing. In reality, you can get started with just $100 or even less.
If you have $100 on hand that you want to invest, there are some great opportunities for you out there. You can begin investing your way to long-term financial independence by placing your money in one or more of these categories based on your short- and long-term goals.
Start an emergency fund
You never know when an unexpected expense or financial hardship will arise. Instead of having to borrow funds and pay interest on a loan or cash advance, start an emergency fund to ensure you’ll have cash on hand when you need it most.
Experts recommend putting away at least three to six months’ worth of expenses. The best place to keep emergency funds is in an interest-bearing bank account that can be easily accessed without fees or taxes, such as a money market account or a savings account.
Put it towards your 401(k)
It may be a wise use of your investment funds to contribute to your 401(k) or another employer-sponsored retirement plan, especially if your employer is matching the contributions.
Furthermore, 401(k)s are associated with some key tax benefits. Before taxes are deducted, the amount you decide to put towards your 401(k) will be deducted from your paycheck. As a result, your overall tax rate may be lower because you’ll be paying taxes on a smaller portion of your salary.
Open an independent investment account (IRA)
An excellent option is an individual retirement account (IRA), which can help even the most modest of sums grow into sizable nest eggs over time. IRAs are alternative investment opportunities designed mainly for self-employed people who don’t have a company retirement plan, that being a 401(k) plan.
There are two types of IRAs, including traditional IRAs and Roth IRAs. The goals of both types are similar, but the timing of the tax advantages are the key difference.
Traditional IRAs are funded with pre-tax dollars, which reduces your taxable income during the year. You won’t pay taxes on the investments until you begin taking withdrawals. You can also deduct traditional IRA contributions on your state and federal taxes for the year during which you made the contribution.
Roth IRAs are funded with post-tax contributions, meaning the investments have already been taxed. Although there are no immediate tax benefits of Roth IRAs, once you retire, both the money you invested and the income the IRA generates are tax-free.
If you’re under 50 years old, the maximum traditional IRA contribution for 2022 is $6,000. People over the age of 50 can contribute an extra $1,000 per year.
Create a brokerage account
An investment account that is used to buy and sell securities like stocks, bonds, mutual funds and ETFs is known as a brokerage account. There are many authorized brokerage companies where you can open an account, ranging from more expensive full-service stockbrokers to free online accounts.
Similar to a bank account, you can deposit and withdraw funds from your brokerage account. However, unlike banks, brokerage accounts give you access to the stock market as well as various other investments.
When compared to other types of investment accounts, investing in a brokerage account offers the most flexibility, making it the best choice for long-term investors.
Invest in fractional shares
You hold a fractional share, or stock slice, if you don’t own a full share of the company. You may end up with a fraction of a share, a whole share or even more shares if you invest in stocks using fractional shares, which let you invest in stocks based on a certain dollar amount.
As an example, if a share of stock for fictional company ABC is currently trading for $200 but you only have $100, you can purchase half of a share, provided the company offers fractional shares in the first place.
Explore exchange-traded funds (ETFs)
ETFs, or exchange-traded funds, combine features of mutual funds and common stocks all in one place. An ETF is a pooled investment fund, similar to a mutual fund, that grants investors ownership in a professionally-managed and diversified portfolio of investments.
However, ETF shares trade similarly to stocks on stock exchanges, and ETFs can be bought or sold at changing prices throughout the trading day, which contrasts with mutual funds. ETFs can provide more flexible trading, enhanced security, greater transparency and lower operating costs than conventional open-end funds as well.
Research REITs
REIT is short for real estate investment trust. These companies own income-producing real estate, including commercial real estate, like offices, apartment buildings, warehouses, hospitals and shopping centers.
A REIT’s stockholders will receive a portion of the income that is generated without actually having to go out and purchase, manage or finance any real estate. In addition to the dividend-based income associated with investing in REITs, other benefits include competitive market performance, transparency, liquidity, protection from inflation and portfolio diversification.
Essentially, REITs give the average person the ability to own a share of commercial real estate.
Buy treasury bonds
Did you know that $100 is the exact minimum amount needed to purchase a treasury bond from the government? Treasury bonds, also known as T-bonds, are U.S. federal government debt securities with maturity terms between 20 and 30 years.
Treasury bonds accrue interest on a semi-annual basis until the point of maturity, at which time the owner will be compensated with the principal amount. For those seeking security and a fixed interest rate, treasury bonds can be a good investment.
Bonds play a significant role in the asset allocation of an investment portfolio because their consistent return helps to balance out the volatility associated with stocks and other investments. The composite rate for bonds issued through October 2022 is 9.62% and you can hold onto a bond until either the bond matures or you decide to sell it.
These bonds can be purchased via the federal government site Treasurydirect.gov or through a brokerage account.
Consider a robo-advisor
A type of financial advisor known as a robo-advisor manages investments and offers financial advice online with little to no human involvement. They use mathematical principles and algorithms to generate digital financial advice.
Robo-advisors typically use an online survey to gather information about your overall financial situation and investment goals. That information is then used to provide advice and automatically invest on your behalf. Some features to look for in a robo-advisor are easy account set-ups, in-depth goal planning and portfolio management.
Check out cryptocurrency
Digital currency, or cryptocurrency, is an alternative payment method that is developed using encryption algorithms. By utilizing encryption technologies, cryptocurrencies can act as both a medium of exchange and a virtual accounting system.
You will need a cryptocurrency wallet in order to use cryptocurrencies. You should only invest in cryptocurrencies if you are aware of their high volatility and overall risks. Like most high-risk investments, cryptocurrency has the potential for high rewards.
Invest in your education
One of the absolute best investments you can make is in yourself. Education can enhance your life for the better. Put $100 towards the cost of taking a course or getting a certification to further your career.
Similar to a Roth 401(k) or Roth IRA, a 529 college savings plan invests your after-tax contributions in mutual funds, ETFs and other comparable securities. Your investment will grow tax-deferred, and it will also be withdrawable tax-free if the funds are used to cover eligible costs of higher education. You can set up a 529 regardless of your age as well.
Start building your investment portfolio today
When it comes to investing, it’s not necessarily about how much you invest. While $100 may seem like an insignificant amount of money, those dollars can still help you achieve financial independence. Everyone starts somewhere.
Consistency and patience are essential. If you invest $100 today, you can start building your investment portfolio and creating long-term wealth for the future.
FAQs
What can I do with 100 dollars to make more money?
Investing 100 dollars is an easy way to make more money off of your initial investment. There are various ways to invest, including stocks, retirement accounts, bonds, cryptocurrency and through your education.
How can I make $100 per day with a side hustle?
You can make $100 per day with a side hustle, like selling secondhand clothing, flipping items on social media, driving for a grocery or food delivery company, renting out a space and walking dogs.
Where should you invest $100?
The right way to invest $100 will be largely based on your goals. You can invest $100 in the stock market or opt for a low risk, long-term investment like a Treasury Bond issued by the U.S. government.
Jacinta Sherris Jacinta Sherris is a full-time writer with a B.A in Economics from New York University. Since 2017, she has contributed numerous lifestyle and finance articles to a wide range of companies and publications, including MoneyLion. In her free time, she enjoys pursuing her artistic passions and traveling.
As an enthusiast and expert in personal finance and investing, I bring a wealth of knowledge and practical experience to guide you through the diverse investment opportunities mentioned in the article by Jacinta Sherris. My in-depth understanding of financial instruments, investment strategies, and economic principles will help demystify the world of investing for you.
Let's delve into the key concepts outlined in the article:
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Emergency Fund:
- Purpose: To cover unexpected expenses or financial hardships.
- Recommendation: Build a fund equivalent to three to six months' worth of expenses.
- Ideal Location: Interest-bearing bank accounts like money market accounts or savings accounts.
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401(k) Contributions:
- Wise Use: Contribute to your 401(k) or employer-sponsored retirement plan, especially if your employer matches contributions.
- Tax Benefits: 401(k) contributions are deducted before taxes, potentially lowering your overall tax rate.
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Individual Retirement Account (IRA):
- Types: Traditional IRA (pre-tax contributions, taxed upon withdrawal) and Roth IRA (post-tax contributions, tax-free withdrawals in retirement).
- Purpose: Alternative investment opportunities, especially for self-employed individuals without a 401(k).
- Contribution Limits: $6,000 for those under 50 (2022), with an additional $1,000 for those over 50.
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Brokerage Account:
- Definition: An account used to buy and sell securities like stocks, bonds, mutual funds, and ETFs.
- Flexibility: Offers the most flexibility among investment accounts, suitable for long-term investors.
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Fractional Shares:
- Concept: Investing in partial shares of a company based on a specific dollar amount.
- Example: Useful when the cost of a full share exceeds the available investment amount.
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Exchange-Traded Funds (ETFs):
- Definition: Pooled investment funds combining features of mutual funds and stocks.
- Benefits: Flexibility, enhanced security, transparency, and lower operating costs compared to traditional mutual funds.
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Real Estate Investment Trusts (REITs):
- Definition: Companies owning income-producing real estate.
- Benefits: Dividend-based income, competitive market performance, transparency, liquidity, protection from inflation, and portfolio diversification.
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Treasury Bonds:
- Minimum Investment: $100.
- Features: U.S. federal government debt securities with maturity terms of 20 to 30 years.
- Benefits: Fixed interest rates, consistent returns, and a balanced portfolio.
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Robo-Advisor:
- Definition: An automated financial advisor using algorithms for digital financial advice and investment management.
- Features: Online survey, goal planning, and portfolio management with little to no human involvement.
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Cryptocurrency:
- Definition: Digital currency using encryption algorithms.
- Caution: High volatility and risks associated with potential high rewards.
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Education Investment:
- Recommendation: Invest in self-improvement through education.
- Options: Courses, certifications, or a 529 college savings plan for higher education expenses.
By understanding and strategically combining these investment options based on your financial goals, risk tolerance, and time horizon, you can embark on a journey to financial independence. The article emphasizes the importance of starting small, highlighting that even $100 can be a significant step toward building a robust investment portfolio over time.
