Many people put off investing because they think it requires a lot of money, a strong financial background or they’ve just been flat-out procrastinating.
Here are the facts:
- You can start investing with as little as $5
- Technology has made it very simple for the average person to invest and to achieve desirable results
- The key to accumulating wealth requires developing good habits and it helps to start early
No matter what stage of the game you are in, you can probably start to employ one of the following strategies.
PIGGY-BANKS STILL WORK:
In order to invest, you’ll need money so your first step is to save some up. This will take a lot less time than you think and you can do it in small steps.
Start by scraping together loose change. Take a $10 bill and put aside in a safe place. Create a reminder to do the same thing next week.
Download the ACORNS app. It’ll round up any credit or debit card purchases to the nearest dollar and invests the difference (read more below). It’ll accumulate fast.
ENROLL IN YOUR EMPLOYERS RETIREMENT PLAN:
The simple step of enrolling in your employers 401(k) plan is an amazing way to start investing and it comes with incredible advantages.
Elect to contribute a small percentage of your paycheck and increase the rate as you see fit. This will enable you to receive a tax deduction at the end of the year and will hopefully entitle you to an employer-match. This means that the government may tax you on less of your income and your employer will also be putting money into your retirement account just because you are.
This is an excellent way to accumulate wealth and take advantage of compound interest. Make sure you read the details of your employer’s 401(k) plan closely and don’t hesitate to reach out to the plan provider if you need some additional guidance — that’s what they’re there for.
OPEN AN ACCOUNT WITH AN AUTOMATED INVESTMENT ADVISOR:
Before we start, an automated investment advisor, or “robo-advisor,” is a new breed of financial advisor. These are companies that utilize digital platforms to provide automated, algorithm-driven financial planning services with little to no human supervision. Don’t be scared, they have easy-to-use platforms, charge lower fees than traditional investment advisors (which will save you a lot of money over the long-term) and many of them have a great track record of returns for their clients.
The first robo-advisor launched in 2008 and is the largest with over $7 billion in assets under management. Betterment has no minimum account balance, offers an amazing web and app-based platform to manage your portfolio and only charges a 0.25% annual fee for its standard plan.
You can set up an account in minutes and based on a risk questionnaire, Betterment will provide you with a customized, diverse portfolio that you can amend at any time. They offer a mix of low-fee stock and bond index funds, automatic portfolio rebalancing and tax-loss harvesting (an excellent combination to take advantage of compound interest). You can even open or roll IRA’s onto their platform with ease.
Another robo-advisor that will build you a personalized diverse portfolio based on your answers to a risk questionnaire. The primary difference between Wealthfront and Betterment is that Wealthfront has a minimum account balance of $500 but will actually waive fees for any account under $10,000. Therefore if you’ve got more than $500 but less than $10,000, Wealthfront presents a compelling option.
If you’re not somebody that wants to set aside a portion of your savings to start investing, ACORNS presents a great option. It’s also a great option if you use a credit/debit card for most purchases.
Simply put, ACORNS uses the “spare change” of all your debit/credit card purchases to make investments on your behalf. For example, if you purchase a cup of coffee for $2.70, ACORNS will round that purchase to $3.00 and invest the difference of $0.30 cents.
The company costs $1 per month for any account under $5,000 while charging 0.25% each year on any account over that amount. When signing up, the platform recommends a specific portfolio for each user depending on age, investment time horizon, annual income, lifestyle goals and risk tolerance. Your money is invested in exchange-traded funds and will not allow you to make investments in individual stocks of your choice (I.E. you can’t instruct ACORNS to participate in the snapchat IPO for your portfolio).
If you want to invest but also want to select your own investments, Robinhood is a good option.
Robinhood lets traders buy and sell individual stocks for $0 a trade. Thats right, no fees or commissions charges unlike traditional online brokerage accounts. There are also no minimums — users can invest as little or as much as they’d like.
There are plenty of ways to start investing with small sums of money as online and app-based platforms have made it easier than ever. The important thing to do is start somewhere and begin investing within your tolerance for risk. It will become easier as you gain more familiarity with whatever platform you choose and you can start investing more money as your comfort level with the platform increases.