Most people think it takes thousands of dollars to start investing, but that’s just not true. In fact, I started investing with just $100 when I started my first job in high school (yes, high school).
It is possible to start investing in high school or college or even in your 20s.
More food for thought: If you had invested $100 in Apple stock in 2000, it would be worth $2,300 today. Or if you had invested in Amazon stock at the same time, it would be over $1,000 work today. And that’s only once you’ve invested $100. Imagine investing $100 a month since 2000? You would have well over $20,000 today.
Hopefully that’s pretty motivating for you, and proves that you don’t need a lot of money to start investing. Just check out this chart:
Remember, the hardest part of getting started investing is simply getting started. Just because you start with $100 doesn’t mean you should wait. Start investing now!
Let’s break down exactly how you can start investing with as little as $100.
Where to start investing with as little as $100
If you want to start investing, the very first thing you need to do is open an investment account and brokerage firm. Don’t let that put you off – brokers are just like banks, except they focus on holding investments. We even keep a list of the best brokerage accounts, including where you can find the lowest fees and best incentives: Best Online Stock Brokers.
Given that you’re only starting with $50 or $100, consider opening an account with zero or low account minimums and low fees. Our preferred brokerage to get started is M1 Finance. The reason? $0 in commissions and you can invest in pretty much anything you want – for free!
Keep in mind that many brokers charge $5-20 for placing an investment (called a commission). So if you don’t go for a low cost account, 5-20% of your initial investment could be lost in cost.
There are also other places where you can invest for free. Here is a list of the best places to invest for free. Just keep in mind that many of these places have strings attached that require you to invest in their funds or invest in an IRA to invest for free.
We also have a list of the best brokers to invest with. M1 Finance is on this list along with other popular options.
What type of account should you open
The next decision you need to make is the type of investment account you want to open. There are many different account types so it really depends on why you are investing. If you’re investing for the long term, you should focus on retirement accounts. If you invest short-term, you should keep your money in taxable accounts.
What to invest in
The next challenge is what to invest in. $100 can grow a lot over time, but only if you invest wisely. If you bet on a stock, you can lose all your money. And that would be a terrible way to start investing. However, it is very rare that you will lose all your money while investing.
To start, you should focus on investing in a low-cost index-focused ETF. Wow, that sounds like a full mouth. But it’s really quite simple. ETFs are just baskets of stocks that follow a specific index — and they make a lot of sense for investors who are just starting out. Over time, ETFs are the most cost-effective way to invest in the broad stock market, and since most investors can’t beat the market, it makes sense to simply mimic it.
If you don’t know where to start, we’ve put together a great resource in the College Student’s Guide To Investing, where we break down different ETF options for building a starter portfolio.
Consider using a robo advisor
If you’re still unsure about what to invest in, consider a robo-advisor like Betterment. Betterment is an online service that does all the “investment stuff” for you. All you have to do is deposit your funds (and there is a minimum of $0 to open an account) and Betterment will take care of the rest.
When opening an account for the first time, answer a series of questions so that Betterment can get to know you. It then creates and manages a portfolio based on your requirements from this questionnaire. So robo advisors. It’s like a financial advisor managing your money, but the computer takes care of it.
The use of Betterment (and similar services) is subject to a fee. Betterment charges 0.25% of the account balance. This is probably cheaper than what you would pay a traditional financial advisor, especially if you are only starting with $100. In fact, almost all financial advisors would probably refuse to help you with as little as $100.
Alternatives to investing in stocks
If you are unsure whether you want to start investing right away with just $100, there are alternatives. Remember that investing is simply making your money work for you. There are many ways to achieve this.
Here are some of our favorite alternatives to investing in stocks for as little as $100.
savings account or money market
Savings accounts and money market accounts are safe investments—they are usually insured by the FDIC and held with a bank.
Interest is paid on these accounts, so they are an investment. However, this interest is typically less than what you would earn from investing for the same period of time.
However, you can’t lose money in a savings account or money market, so that applies to you.
The best savings accounts are currently earning over 1.00% interest – that’s the highest level in years!
Certificates of Deposit
Another alternative to investing in stocks is to invest in a Certificate of Deposit (CD). Here you lend money to a bank and they pay you interest on your loan. CDs have different maturities from 3 months to 10 years – and the longer you invest your money, the higher interest you get.
For example, CIT Bank has an 11-month penalty-free CD that earns 1.65% APY. That’s a bit more than your high-yield savings account – but you’ll have to ‘lock’ your money for 11 months. The cool thing is that the CD is fee-free, so you can withdraw your funds at any time without penalty. Some CDs have penalties that can add up to 1 year interest!
Check out our list of the best CD plans.
If you’re afraid to invest in the stock market with your $100, you can try becoming a peer-to-peer lender on a site like Peerstreet. Peer-to-peer lending is exactly what it sounds like: you lend your money to others and they pay you back with interest.
The reason peer to peer lending is great for borrowers with a small amount of money is that you can split your investment into many small loans. If you start investing with $100, you can lend from as little as $25 per loan. That means your initial $100 can be invested in four different loans. These loans then pay you back principal and interest each month, which you can then invest in other loans.
Over time, your initial $100 could be loaned out to multiple loans beyond the original four, and you’ll continue to see your growth compound over time.
Investment options to avoid
There are several companies that advertise that you can start investing for as little as $5. We want to make sure that when using these companies you have a “buyer-beware” mentality and fully understand what you are getting into.
For example, Stash Investing allows you to invest for as little as $5. However, they charge a fee of $1 per month for accounts less than $5,000. If you invest just $5 a month — and pay $1 in fees every month, your portfolio returns will suffer (or even lose money).
If you invest just $5 a month for a year, you have $60 locked up. However, you paid $12 in fees, leaving you with $48. That’s 20% of your money spent on fees.
Only in 32 of the last 100 years has the stock market returned over 20% in any given year (and that year usually followed a really bad year). The average return was around 11%.
Because of this, you must avoid services that charge you high investment fees. $1 a month may not seem huge, but it’s a percentage of your $100 investment. This is why we love services like M1 Finance that offer commission-free trading with no annual fees.
Just start investing
Remember, you invest to grow your money over the long term. That means you’re harnessing the power of time and compound interest.
Time works on your side. The earlier you start investing, the better. So, even if you only have to invest $100, just start.