Content of the material
- 1. Automate Investing With Betterment ETF Portfolios
- Best investments for short-term money
- 4. Invest in Stablecoins on a High-Interest Rate Platform
- What Is Stablecoin?
- What should be my minimum investment?
- 7. Get a Roth (or Traditional) IRA
- Can I Invest As Little As $100?
- What are the Best Investment Strategies for Beginners?
- 1. Understand Your Goals Before Doing Anything
- 2. There’s No Such Thing as the Best Investment for Everyone
- 3. You Have to Build up to Different Investments
- 4. You Have to be Patient as an Investor
- Set aside a certain amount to invest regularly
- Summary: Tips for investing small amounts
- Invest $20
- Don’t Wait
- Don’t Save It
- Avoid Money Traps
- 6. Own a Piece of Real Estate Through REITs and Crowdfunding
- Whats the best way to invest money for the short term?
- What’s the best way to invest small amounts of money?
- Invest in ETFs
- Tracking Your Investments
1. Automate Investing With Betterment ETF Portfolios
There are a number of “robo advisors“, online investment platforms that offer professional management of your portfolio with very low fees.
One of the best for small investors is Betterment.
You start by completing an online questionnaire that enables the site to determine what your risk tolerance is.
Based on that evaluation, a portfolio is created for you with an allocation that includes several different exchange-traded funds (ETFs). By purchasing ETF’s you’re essentially buying a diversified portfolio of stocks that you don’t have to manage.
Because of this allocation, your only responsibility is to fund your account – there is no need to concern yourself with investment selection, or with re-balancing your investments.
Currently they offer a variety of investing options with their Betterment Core, Goldman Sachs Smart Beta and Innovative Technology portfolios:
With these portfolios you’ll get access to familiar ETF’s with Vanguard and iShares, both popular in the investing community.
Betterment investments actually has no minimum initial account deposit requirement. And just case you missed that…
You can start investing at Betterment with $0.
You can open up an account by committing to monthly contributions of as little as $100. The annual management fee to maintain your account is 0.25% of your account balance, on accounts of less than $100,000.
If you’re not ready to invest, they also offer a “No-fee” checking account that pays a competitive variable rate greater than what your bank is paying (currently 0.35%)
The management fee works on a sliding scale, and drops as your account balance grows.
Best investments for short-term money
|When you need the money||Investment options||Potential interest rate||Risk|
|A year or less||High-yield savings and money market accounts, cash management accounts||Around 1.2 percent||Low risk and accounts are backed by the FDIC.|
|Two to three years||Treasurys and bond funds, CDs||2.5+ percent||Bank products and Treasurys are safest, corporate bond funds slightly less so.|
|Three to five years (or more)||CDs, bonds and bond funds, and even stocks for longer periods||3.0+ percent (or much more if you’re investing in stocks)||CDs and bonds are relatively low risk compared to stocks, which can fluctuate a lot and are high risk.|
4. Invest in Stablecoins on a High-Interest Rate Platform
You may be aware of high-yield savings accounts, where interest rates on your savings could be 10 to 20 times that of your regular bank savings account. That sounds great, but it’s nowhere near what any of the current popular cryptocurrency platforms will give you for your dollar. High-yield savings interest rates are far outclassed by investing in stablecoin on a trading and lending platform like Blockfi or the Celsius Network.
What Is Stablecoin?
You’ve likely heard of popular and widespread cryptocurrencies like bitcoin and ethereum. However, fewer people have heard of stablecoins. These are cryptocurrencies pegged to an asset such as the U.S. dollar. Some of the most popular stablecoins are USDT, USDC, and GUSD, which are from Tether, Coinbase and Gemini.
These stablecoins purport to be backed by the U.S. dollar primarily, and perhaps other assets, like short-term debt instruments, so each coin is backed by cash or other assets held in reserve. As such, stablecoins are thought to be safer because they can be converted back to a dollar at any time. However, there’s no guarantee. The stablecoin tether, for example, recently “depegged,” dropping to as low as $0.29. But typically, stablecoins only experience small fluctuations of one or two cents at times due to changes in liquidity or supply and demand.
By keeping stablecoin on trading and lending platform like Blockfi, you can earn high interest while investing with relatively little money.
These platforms can afford to pay out such high interest due to their lending rates. They lend out cryptocurrency that users keep on their platform with very high interest rates for the lender, allowing them to then pay out a portion of that interest.
As with all cryptocurrency trading, keeping your money as stablecoin on these platforms should be thought of as investing, not as an high-yield savings. Keep in mind that you are still converting your dollars to a form of cryptocurrency — that money can be lost if something goes wrong.
What should be my minimum investment?
Some brokers have a minimum investment requirement. Therefore, if you only want to invest small amounts, this is also something to consider when choosing a broker. We do not have a minimum trading limit imposed on our investors. You have the freedom to invest however much you want, even if it is just €1 per year.
7. Get a Roth (or Traditional) IRA
If you don’t have an employer-sponsored retirement plan, you can almost always set up your own retirement plan. All you need to qualify is earned income.
The two best plans for most people are either a traditional IRA or a Roth IRA. Much like an employer-sponsored retirement plan, any returns on investment that you earn are tax-deferred until you begin withdrawing the funds in retirement.
Also, contributions to a traditional IRA are generally fully tax-deductible.
Roth IRA contributions are not tax-deductible, however, withdrawals will be free from taxes as long as you are at least 59 ½ at the time the withdrawals are made, and you have participated in the plan for at least five years.
Roth IRA’s offer tax-free money at retirement – Holla! 🙌🏼
And though there is no employer matching contribution (since there is no employer), a self-directed traditional or Roth IRA can be held in a brokerage account that offers nearly unlimited investment alternatives.
You can contribute up to $6,000 per year to either a traditional or Roth IRA ($7,000 if you are age 50 or older), which means you can build up a substantial portfolio in just a few years.
Also with the best Roth IRA providers, there is a very low entry cost. Of the investment ideas we’ve offered so far; Betterment, M1 Finance and Fundrise all offer Roth IRA accounts. This is huge for all the small investors out there!
Can I Invest As Little As $100?
With $100, you can invest in fractional shares, group real estate projects, savings and retirement accounts, or even start a side hustle or business. Thanks to living in the 21st century, there are investing apps that allow you to invest in just about anything you want.
For more detailed options, read our post on How To Invest $100.
What are the Best Investment Strategies for Beginners?
There are many different investment strategies out there. You could read material from Warren Buffett, Dave Ramsey, and other personal finance experts who will all have different beliefs on investing and managing your money.
Before you start investing, here are a few things to consider with all investing strategies.
1. Understand Your Goals Before Doing Anything
What are your investment goals? Here are some goals you may be pursuing:
- Saving up for early retirement.
- Investing in real estate so that you can become a landlord.
- Investing in the stock market so you can buy that dream home in 10 years.
And so on. The good news is that investing your money is a personal decision, so no goal is the wrong goal.
Here are a few helpful tips to keep in mind if you’re investing as a beginner:
- Money that you need within five years should not be invested in the stock market.
- Money that you’ll need before retirement should not be in a 401(k) or IRA.
- When saving for retirement, get the employer match, then max out your Roth, then go back to max out your 401(k). Anything after that should be in a brokerage account or real estate.
2. There’s No Such Thing as the Best Investment for Everyone
I have friends who refuse to even think about cryptocurrency. Then I have other friends who only invest in cryptocurrency. I know people who swear by real estate investing while my dividend stock investing friends are terrified of getting into the real estate investing space.
It’s important to remember that there are many different investment strategies and there’s no such thing as a one-size-fits-all solution. You may find that investing your money with robo-advisors works best or you could lean towards getting into real estate investing.
3. You Have to Build up to Different Investments
One thing you have to accept as a new investor is that there are different investment strategies for every stage of life.
For example, when you first get out of college, you may want to focus on opening a few investment accounts with just a bit of funding, as you tackle your student loans and build up an emergency fund.
You have to start investing your money with what you already have before you can get into bigger investments.
4. You Have to be Patient as an Investor
Warren Buffett is known for the following quote about patience in investing: “The stock market is designed to transfer money from the active to the patient.”
What this means is that many beginner investors will lose money because they’re too impatient or because they’re looking to make a quick buck from investing.
Set aside a certain amount to invest regularly
It is also possible to invest small amounts of money on a regular basis, whether it’s every month, quarter, year, etc. In this case, you may want to consider a strategy called dollar cost averaging.
In short, with this investment strategy, you invest equal sums of money at regular intervals, regardless of the asset’s price or what is going on in the financial markets. A dollar cost averaging benefit is that it takes emotional factors out of investing. Since you are regularly making investments no matter what the market conditions are, emotions are eliminated out of the decision-making process. The idea behind this strategy is that when prices are high, you can only afford a certain number of shares. When prices drop, you can purchase more shares with the fixed amount you are investing in each period. Then, when the market recovers, you benefit from having more shares when you bought them at a low price.
It is important to keep in mind broker fees if you choose a dollar cost averaging investment strategy. If you invest periodically on a regular basis versus invest in one lump sum, you may pay more brokerage fees, which can be significant especially if you are investing small amounts at a time.
Summary: Tips for investing small amounts
Let’s say you are looking for the best way to invest CHF 5,000 or a smaller amount. Here are the key points to keep in mind:
- Investing amount: Think about how much you want to invest. If you would like to invest small amounts, consider saving plans and automatic reinvestments.
- Risk profile: Think about how much risk you are comfortable with. Ideally, there should be a balance between the potential of growth and safe investments.
- Choose your stocks: Select your stocks according to your personal values and risk profile. Keep in mind that it is essential to have a well-diversified portfolio. (At Inyova, we take care of this for you!)
- Buy the stocks: Buy the stocks of your choice. Pay close attention to transaction costs and hidden fees!
- Hold: You are now in a great position for long-term growth of your investment.
Alright, maybe your idea of a small investment is closer to the $20 range. That’s totally fine – baby steps are better than no progress at all.
The fact that you’re even thinking about investing when you only have $20 means you’re in the right mindset. One of the best things that you can do to begin investing when you have very little money is to form good habits. Practice these good habits with $20 and you’ll have a rich future ahead of you.
You can start forming good habits by taking money out to invest as soon as you receive your paycheck.
Most often, people end up taking the exact opposite approach, waiting to see how much money they have leftover before they invest. However, if you wait to see how much money you have leftover before investing it, the number will almost always be a big ‘ol zero.
Instead, invest your $20 straight out of your paycheck and watch it work for you. Setting aside money to invest right away, even as little as $20, can become a natural, nearly subconscious act when you do it regularly.
Don’t Save It
Saving isn’t inherently bad, but if you want to get a great return on your money and create generational wealth, it won’t happen by throwing it in a savings account.
Most saving accounts provide less than 1% interest, which means you can’t even beat inflation, which means your money won’t really grow at all.
Often, people will also look to a money market account, as it offers many of the same benefits, however, a money market account generally requires a higher minimum deposit than a savings account.
So, instead, think of your investment account as your savings account and you’ll be well on your way to “saving” $10,000 this year (if you’re lucky).
Avoid Money Traps
It’s simply too easy to spend money rather than investing it if you make spending it an option.
Things like fancy cars, new tech, and weekend parties can mean you have less to invest. Avoid these money traps and focus on the promise you made to yourself.
Take your $20 and invest it in a great company rather than its fancy product.
6. Own a Piece of Real Estate Through REITs and Crowdfunding
Given that owning real estate has a high barrier to entry, real estate investment trusts and real estate crowdfunding platforms serve as a way to invest in the real estate market with relatively little money.
A REIT is a company that owns or finances different types of property. You invest in a REIT in the same way you invest in a stock or ETF — by buying shares of the company. You then earn a portion of the profits from rising prices and rental income of the REIT’s investments, in the form of high dividend yields and regular investment return.
Real estate crowdfunding platforms operate similarly. Everyone chips in to invest in a full piece of physical real estate. However, using crowdfunding will typically be riskier than a REIT since your investment is limited to specific pieces of real estate. This is similar to buying an individual stock.
To get started, check out these popular real estate crowdfunding platforms, all of which have minimums of $500 or less:
- Fundrise: $10
- Diversyfund: $500
- Groundfloor: $10
Investing in real estate through these means is much simpler than the traditional method. There is no need to obtain a loan to purchase the property or to pay for its maintenance.
Whats the best way to invest money for the short term?
If you are likely to need your money in less than five years, it’s best to leave the money in cash rather than invest.
The stock market could fall in the short term, meaning you would lose money on your investments if you tried to take it out when the market was down.
But be warned, interest rates are historically low at the moment so you won’t get a great return.
What’s the best way to invest small amounts of money?
The stock market is generally a good balance between risk and return as long as you intend to hold onto your investment for at least five years. That’s because although the market moves up and down constantly, it’s always moved in an upward direction in the long term.
Sure, stock market investments are riskier than leaving your cash in a bank account, but they also offer a much higher potential return (historically 6% per year on average — even including all the big downturns, such as the Global Financial Crisis in 2008). So if your goal is to increase your wealth over time, the stock market is an excellent option for investing small amounts of money.
Invest in ETFs
Are you thinking of investing in something like a mutual fund so that you can achieve instant diversification? If you don’t have a high initial deposit to make it happen, you may want to consider buying shares of an exchange-traded fund. Unlike mutual funds, which may impose a minimum initial investment, ETFs trade like stocks. They have a specific share price and can be purchased through virtually any broker. With an ETF, you can buy just a couple of shares as long as you have enough money to buy them.
ETFs don’t come without drawbacks. For one thing, you have to purchase whole shares. Second, you’ll typically pay a trading commission each time you make a trade. Since commissions can generally run anywhere from $4.50 to $11, they can quickly eat into your investment. If you purchase ETFs less frequently and with slightly larger amounts of money, you can keep your transaction costs down.
Tracking Your Investments
One of the most important practices in investing is to monitor your overall financial growth to see how your wealth is accumulating over time—a practice called net worth tracking.
Thankfully, there’s a free app for that! The best tool to help monitor and track your investments is called Personal Capital.
Personal Capital is an online investment management company that allows you to connect all your financial accounts and view them in a single dashboard. They offer free budgeting tools, expense tracking, and a number of advisory services to help monitor and grow your wealth.
- Check out our full Personal Capital Review