Investing Simple is affiliated with Fundrise, Betterment, M1 Finance and Lending Club. This relationship does not influence our opinion of these platforms.
You have a crisp $100 bill in your hand and you have two choices. First of all, you could be like most people and spend that money. Or, you could invest it!
Most people do not realize that there are a number of investments out there that you can get started with that do not require thousands of dollars. We are going to be covering a number of different ways you can start investing with as little as $100.
In the past, investing was reserved for people who had thousands if not tens of thousands of dollars on hand. If you go into the office of a financial advisor and tell them that you want to invest $100, they will probably politely give you the boot! The reason for this is because these advisors make a commission off of what you have invested with them, typically around 1%. If you invest $100 with them, they stand to make about $1! It is simply not worth it.
But what about an online brokerage account? The good news is the options have gotten a lot better. When I opened my first trading account, I had to deposit a minimum of $500 and pay a commission of $6.95 per trade. Today, there are countless options for investing that require a minimum balance of $100 or less with little to no commission costs!
The reason behind this is technology. Thanks to modern day technology, automation and paperless communication, the cost of investing has been drastically reduced. This means better options for you and that $100 in your hand!
But is it actually worth it to invest $100? You could have a night out with some friends, go out on a movie date or buy a new gold club. What is the point of investing such a small amount of money?
As soon as you begin investing, you have made a decision. You have transitioned from someone who is living day to day to someone who is planning and preparing for tomorrow. What you are planning for is different for everyone. It could be a home purchase, an education, a new car or simply making sure mom doesn’t have to worry in her later years. The point is, you started. The amount does not matter, the action does.
Let me share with you a story about Warren Buffett. He is arguably the most successful investor of our time with a net worth approaching $100 billion. There is a story about how Buffett was riding an elevator and he noticed a penny on the floor. He was on the elevator with a few other people, but he was the only one that noticed the coin. When the elevator doors opened, everyone walked off except for Warren Buffett. He kneeled down to pick up the penny on the floor while the others watched. As he walked past the others, he muttered “the beginning of the next billion.”
Warren Buffett is the last person in the world who needs to pick up change off the ground, but that does not stop him. He understands that it is the action and the principle behind it that counts, not the amount of money. Just like this story with Warren Buffett, the action of starting to invest is far more significant than the amount you invest.
Recently, we wrote a piece on Warren Buffett about how he invests and how you too can invest like him. You can read it here.
So, let’s get the ball rolling and figure out how you can invest your first $100!
1. Robo Advisor Modern Investing
Remember that financial advisor we mentioned above? If you went into his office with $100 he would send you away. Today, there is an entirely new form of advisor known as the robo advisor. This is an algorithm based investing platform where your money is invested based on your goals and current situation. Instead of having a human do this, it is handled by technology!
The result? A seriously inexpensive financial advisor that doesn’t need thousands of your hard earned dollars to get started.
Take Betterment for example. This is the most popular robo advisor out there. While most financial advisors charge an asset management fee of around 1%, Betterment charges just 0.25%. Since Betterment is algorithm based, you can invest with any amount you have! Thats right, no minimum balance.
If you invest with a financial advisor, it would take them a few hours to have a discussion with you and set up an investment account for you. If they are going to make $1 off you, that is just not worth it! If they took on small clients like this, they would not be in business for very long.
Betterment on the other hand can easily afford to work with you. Betterment doesn’t have any physical brick and mortar locations, and everything is 100% automated. It does not cost them any more money to take you on as a client!
When you invest with a robo advisor, this is a 100% passive method of investing. You simply open an account, answer a few questions about your goals and your current situation and fund the account. After that, you are done! You will not think about this investment until tax season or if you choose to contribute more money.
Your robo advisor will automatically rebalance and reallocate your portfolio. If you are investing for retirement, the closer you get to the retirement date the more conservative your investing strategy should be. Your robo advisor will me shifting more of your money into conservative investments as time goes on.
You will be able to have professional management of your money without having tens of thousands of dollars to invest and paying fees of 1% or more.
If you are brand new to investing and you don’t want to pick individual stocks or funds, a robo advisor like Betterment is a great option. You will have professional oversight of your money without paying a boat load of fees. If you want to pick your own investments, keep reading!
2. Pick Your Own Stocks
Are you looking to be more active with your investments? If so, another option for investing is to pick some individual stocks or funds. This can be one of the most exciting ways to invest, but we recommend doing some research first!
In the past, your options for investing in individual stocks were the in person stock broker or the online discount broker. Your in person broker was someone you would call on the phone to make trades on your behalf. This was an expensive way to trade, with commission costs of $10 or more per trade common.
This method of trading was largely phased out by the online discount broker. These services would offer an online trading platform and by cutting out the human involvement, commission costs were lower. My first brokerage account was an online discount broker, and I would pay a commission of $6.95 per trade. On top of that, as I mentioned the minimum to get started was a whopping $500!
The reason why I am telling you about this is so you appreciate the array of great options you have today! Just a few years have resulted in some major changes in the brokerage industry.
Thanks to paperless communication, technology and high frequency trading platforms, there are now an array of free investing platforms out there. Two of the most popular platforms are M1 Finance and Robinhood.
Both of these platforms allow you to invest in stocks and ETFs traded on the major stock exchanges for free. Robinhood has a minimum account balance of $0 and M1 Finance has a minimum balance of $100. There are a number of differences between these two platforms that we discussed here.
To summarize them, Robinhood only allows you to buy whole shares while M1 Finance allows you to buy fractional shares. If you wanted to invest $100 in Amazon stock, you would only be able to do that through M1 Finance due to the share price. Second, M1 Finance allows you to automate your entire portfolio as well as dividend reinvestment. Unfortunately, Robinhood lacks these automation features. Third, retirement accounts are offered through M1 Finance and not Robinhood. And finally, M1 Finance offers some expert built portfolios you can invest in for free. With Robinhood, you are on your own when it comes to building your portfolio.
Most people will find that the features M1 Finance offers make this a superior platform to Robinhood. Stocks are a long term investment, and M1 Finance has a platform that is better suited for this.
3. Invest In A Business
Watch out! If your friends approach you about a business opportunity, do your research on it. If this business requires you to buy a starter package, pay for your own website or buy inventory, it might be a multi level marketing business. While most of these are perfectly legal, they often require you to leverage your personal network of friends and family. There are probably better opportunities out there!
So, aside from selling tupperware and candles to your friends on Facebook, what businesses could you start with $100? The answer is quite a few! Here is a list:
- Bucket + Sponge + Soap = Car Wash Business
- Blog/YouTube Channel
- Rent a truck for a day for a Junk Removal Business
- Ride Sharing
- Child Care
- Social Media Marketing
- Window Cleaning
- Resume Writing
- Vacation/Event Planner
Looking for more ideas? Here is our list of 50.
4. Invest In An FDIC Insured CD
If you are totally afraid of risk, you could invest in a certificate of deposit through your bank. Most of these bank investments have a minimum deposit amount and time threshold, but you could find one that has a minimum of $100 or less. The first certificate of deposit that I opened was a $500 deposit. This was a 12 month CD that renewed annually and the purpose of this CD was to secure a line of credit I had with the bank. At the time, I was 18 and I needed to establish credit. I was offered a $500 line of credit from the bank if I backed it with a certificate of deposit. I earned an interest rate of 0.5% on that short term CD, meaning I was earning $2.50 per year.
For most people, the returns from a CD are not what they are looking for. The purpose of a CD is to earn interest that is a little better than what you would earn from a checking or savings account. Bank CD’s are FDIC Insured for up to $250,000 meaning there is no way that you could lose money by investing in one.
If you are a young person and you do not need the money you are investing in the short term, you should probably look beyond the bank CD. The interest you are receiving will not outpace inflation and you will be losing the buying power of your money.
Recently, a new bank opened nearby where I live. To get people in the door, they were offering a number of CD’s with great rates. The best one was a 48 month CD. The minimum balance to open it was $25,000 and the interest rate was a guaranteed 3% per year. This would be a great investment for someone who was saving for college or a major life purchase. You would not want to invest that money in the stock market as stocks are volatile and higher risk. Instead of leaving that money in the bank earning very little interest, a certificate of deposit is a great option.
5. Peer To Peer Lending
Have you ever loaned your friend some money and later on he paid you back with some interest? You gave your friend a personal loan! Traditionally, this type of investment has been reserved for the banks. Recently, a number of platforms have surfaced that allow you to loan your money to others just like the banks do! One of the most popular platforms for this is Lending Club.
These peer to peer lending platforms allow you to either lend or borrow money. Borrowers will pay interest to lenders based on a number of factors such as credit score, income and borrowing history. With Lending Club, you can invest in loans for personal reasons, medical bills, auto refinancing and even small business loans! You can purchase fractions of a loan called a note with as little as $25. Most people who have had success with peer to peer lending have suggested investing in at least 100 notes to be adequately diversified.
These peer to peer lending platforms have a dashboard where you can screen loans and pick them individually. If you have a greater risk appetite, you can find higher risk loans that will pay a higher return. If you are more conservative, you can invest in only the safest loans from the low risk borrowers. If you don’t want to pick loans individually, you can invest in a preselected collection or portfolio of loans!
Peer to peer lending allows you to access an asset that was traditionally reserved for the banks! Now, you can be the bank.
6. Invest In Yourself
This is probably not an option you want to follow, but at least consider it! There are a number of small investments you can make in yourself that can generate huge returns in the long run. Here is a list:
- Invest in a professional resume edit and review
- Invest in new job interview clothes
- Invest in books (or read at the library for free!)
- Learn a new skill though an online course
- Find someone you look up to and take them out for lunch
- Invest in a gym membership for your health
- Find continuing education classes at your local school
Often times, when it comes to a job interview the first impression is what matters. Something as simple as a fresh haircut and a new shirt and tie could put you ahead of the other candidates. If a $100 investment in your looks means you get the job, that is well worth it!
7. Invest In Crowdfunded Real Estate
One of the most exciting investments that has recently emerged is crowdfunded real estate investing. Platforms like Fundrise allow you to pool your money with other investors to invest in real estate projects.
I am sure we all have that rich friend or family member that made a fortune by investing in real estate. Typically, this is through buying multifamily properties and renting them out. While this can be a great investment, there is one problem with this. It is really difficult to get started! If you want to buy a piece of real estate, get ready to put down as much as 25% of the total price of the property, not including closing costs!
Thanks to crowdfunded real estate platforms, you can now invest in real estate projects with other people without shelling out thousands of dollars! It is a lot easier to get started. Real estate is one of the most popular investments out there, and you are able to make money while providing much needed housing to other people. This type of real estate investment is 100% passive, meaning you will not have to do anything after you invest! If you buy a piece of real estate to rent out to someone else, that is going to be a very active income source. You will be getting calls at all hours of the day, and night! On top of that, if your tenant does not pay rent you will have to evict them! This is a very time consuming process and you will not be making any money from that unit during that time.
With crowdfunded real estate investments, you own a small piece of hundreds or thousands of different properties! You won’t have to worry about vacancies or evictions.
How NOT To Invest Your First $100
What you do with your money is up to you! You might decide to follow one of the strategies listed above or continue searching. The last thing I want to do is cover a few things that you probably should not do with your $100 investment. Most people who do these things end up losing most if not all of the money. We want you to have the best chance at success!
- Avoid investing in penny stocks. While they may appear cheap, they are often cheap for a reason. If you are going to invest in individual stocks, stick to those listed on the NYSE or NASDAQ.
- As mentioned earlier, watch out for multi level marketing opportunities. This typically requires you to pester your friends and family to buy products from you. Consider this, if it is such a great opportunity why is someone telling you about it?
- These days, there are a lot of people running ads on Facebook and YouTube. Some of these ads include attractive people and sports cars. As I am sure you know, not everything on the internet is true! Watch out for these ads trying to sell you a course or training. While online courses can be extremely helpful, don’t just buy one because you think it will get you behind the wheel of a Lamborghini!
- Don’t waste your money on gambling. Lottery tickets are an optional tax that you do not have to pay! The odds are against you when it comes to lottery tickets.
- Do not use that $100 as a down payment. You might be tempted to put $100 down on a new toy, but all you will be doing is putting yourself in debt. Car dealers often advertise deals where you can drive a brand new car with $100 down or less. This is not an investment! You will be buying a depreciating asset and going into debt.