How to Invest $100 – A Little Goes a Long Way
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Building wealth takes a lot of patience and time, but most importantly, it will require you to take the proper steps and make the right financial decisions with your money. Nobody can get rich by storing money under their pillow and hoping it multiplies. While $100 may sound like a minuscule amount in the world of investing, there are many other ways to park that money and watch it grow over a long investment horizon.
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Where to invest $100
Successful investing is not about the amount you invest but where you invest it. No matter how much money you have, the key is to get ahead and decide. Here are different ways you can invest $100.
1. An emergency fund
When investing, the first thought will naturally be about doubling the money. Whether investing in stocks or cryptocurrencies, you will try to increase the money in every manner possible. The stock market has proved to be the most accessible way to build wealth, but it is volatile. Your investment could fall in value without any warning or reason. It is not a big deal if you have a diversified portfolio and can buy and hold for the long term. But if you are only starting and do not have an investment horizon, you can start by building an emergency fund.
Starting with money in savings is more important than investing in products you do not know of. Hence, start by building an emergency fund. It should have a few months’ worth of income in cash and will keep you safe from unexpected events that may damage your financial plans. You can put this money in a savings account and not use it for any expense until an emergency.
2. 401(k)
If you have a 401(k) or another retirement plan sponsored by your employer, you can invest $100 in the fund. However, this will only be possible if you have not maxed out your employer’s matching contributions. Most importantly, you benefit from lower taxes when you put the money in 401(k).
Each dollar invested in it will be considered a pre-tax contribution, meaning you do not have to pay any income tax on that amount the year you contribute. This investment will continue to grow tax-free till you start taking the distributions in retirement. Even if you do not have an employer, you can open a 401(k) and take advantage of the pre-tax contribution while watching your money grow tax-free.
3. Fractional shares
You can dabble in fractional shares if you do not have enough money to buy individual stocks. They are just a part of the individual stock and can be purchased for as low as $1. You can consider diversifying the investment across different shares that suit your portfolio. Robinhood allows you to invest in fractional shares, and there is no minimum or commission.
You can own a slice of the stock for $100, trading at $1,000 in the market. It is an excellent option for those who want to diversify and build a portfolio. All you need to do is open an investment account and fund it. You can then choose the stock of your choice and start investing.
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4. IRA
You can consider an individual retirement account if you want to invest an extra $100 over and above the company 401(k). Over time, it will turn even a tiny amount of money into a hefty sum.
You will get the same benefits as a 401(k) in a traditional IRA while enjoying low-income taxes and growing the nest egg tax-free. In a Roth IRA, you get tax-free growth, but instead of lowering the taxable income every year you contribute, the distributions in retirement will remain completely tax-free. It is ideal for those who want to save money for retirement goals and is also a good choice for those who want to access tax-free money later in life.
You can withdraw the funds and pay no taxes after 59.5 years or older. Remember that there is a contribution limit applicable. Most people can contribute up to $6,000 to a traditional IRA and Roth IRA, and those older than 50 can contribute up to $7,000.
5. Robo-advisor
If you are new to the world of stock investment and do not know how to go about it, you can consider a fully automated approach that needs minimal effort. A robo-advisor is an app that will invest for you based on your investing strategy and goals. They will need your basic information, like family size, age, risk tolerance, and income, to build a portfolio that fits your needs.
The robo-advisor will handle the investments and make purchases and sales while keeping you informed. Wealthfront is a great robo-advisor for someone who wants to start stock investing. Some platforms also offer the services of an investment advisor to help you make the right decisions.
6. High-yield savings account
Consider saving the money when you have $100 but do not want to use the cash for emergency expenses. It has low risk, and you can earn a higher rate of return in a high-yield savings account. Putting your money into a high-yield savings account is better than a simple bank account.
It works just like a savings account from a traditional bank, and setting up the account is like a breeze. You earn a better interest rate on the deposits. It helps build savings for emergencies, allows you to access the money whenever you need it, and most accounts come with no fees.
7. Cryptocurrency
Cryptocurrency is a rage these days, and unless you’re living under a rock, you would have heard about it. It is a term used to describe digital currency, including Bitcoin. Cryptocurrency is very volatile, but the industry is still in its infancy and could gain high acceptance and popularity in the coming decades.
You can invest $100 in crypto through different platforms. Simply open an account and fund the crypto purchase of your choice. You can buy, hold, sell or trade cryptocurrency based on your investing goals and needs. However, you will need a high-risk tolerance for investing in cryptocurrency. It is not for those who may need to withdraw money immediately.
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8. Exchange-Traded Funds (ETFs)
Individual stocks are considered a great way to build wealth, but they could be challenging to pick, and if you are only investing $100 at a time, you might not find the best stocks to invest in. This is where the stock index funds come into play.
Investing in an ETF allows you to buy a piece of every company held in that index. It allows instant diversification and can help make money if you can hold it long-term. There are government bond ETFs that have low risk and consistent returns. You simply choose from the many ETFs and put your money in them.
9. Mutual funds
Just like ETFs, you can invest in mutual funds or index funds. The fund will be managed by professionals who will invest in individual companies, and you can hold a share without setting aside a massive amount of money. It is a great choice for those who do not enjoy picking individual stocks and tracking their movement. If you hold the mutual fund for long, you will make substantial returns. Compare the rate of return between different funds and then make a decision.
10. Real Estate
Investing in real estate may seem like a far-fetched dream, but owning real estate with as little as $100. Fundrise and similar platforms allow everyone to buy commercial and residential properties. You can invest any amount through the platform, and they will pool the assets through their platform and allow you to own a part of the asset. It is a low-cost investment that will pay off in the long term.
11. Treasury bonds
If you have a low-risk appetite and are looking for a fixed interest rate, you can consider buying treasury bonds. The minimum investment amount for a treasury bond is $100, and you can buy them directly through TreasuryDirect or from a broker. The bond will carry a regular periodic interest payment and long tenure.
Investment style
When you have $100 to invest, you must be very careful about your investment choices. There are several investment options, but you must pick one that fits your goals and style. It will depend on many factors, including the investment tenure, when you will need the money, risk appetite, and the amount of research you wish to do. The best investment is the one that fits your risk appetite and long-term goals.
If you are investing for the long term and are confident that you will not need the $100 anytime soon, you can look into types of investments that include Roth IRA or fractional shares. If you have a short-term investment, you can consider investing in ETFs or putting the money into a high-yield savings account. Each of these will grow your investment over some time, and most come with zero or minimal costs.
The bottom line
You can choose from the many options to invest your $100 and follow the same strategy when you have to invest $1,000 or $5,000 and are eager to build wealth. Remember to compare all the options and dive in when you are ready. One hundred dollars is not enough, but imagine what can be accomplished once you regularly invest for a few years.
Many people think they can only start their investment journey when thousands of dollars lie around, but this is untrue. Once you get the hang of personal finance, you will create a solid investment portfolio that works for you. Remember, money makes money.
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Writer
Vandita Jadeja is a financial writer and editorial assistant at Joywallet. She loves to read and write about money and brings 7 years of experience from the financial industry. She loves coffee, mountains and sunsets.
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