Man holding cell phone with graphic coins coming to life out of the screen.
Man holding cell phone with graphic coins coming to life out of the screen.

How to invest with little money

Investing is for everyone, and getting started is easier than ever

Americans are investing more than ever thanks to new apps, easier access, and convenient online information. Regardless of your income, anyone can invest. Getting started may feel daunting, but there are plenty of easy ways to grow your finances. Whether you want to invest some extra money in a company that interests you, or you prefer a more targeted approach, there are plenty of ways to start investing.

Invest in your retirement

One of the most important first steps is planning for your future. While retirement may seem far away, it’s never too early to start depositing money into a 401(k) or pension plan. While the 401(k) is a great retirement savings option for many people, only 68% of employed Americans contribute to one.1

If you’re overwhelmed, try starting small: any amount, even 5%, can lay the foundation for your future. Not to mention, the money you put into your retirement account is pre-taxed – meaning your contributions are not taxed at the time of investment.2 As you get more comfortable with investing, you can increase that percentage as the years go on. It’s also important to note that most companies also contribute to your 401(k) or pension plan in some capacity. When you start investing early, it will become a habit – a habit that more than pays off in the long run.

Use apps to help you invest

Do some research, find out what works best for you and your budget, and browse through the hundreds of investment apps available to help you get started. Here are a few to consider.

Betterment is the automated investing app that customizes your portfolio based on your financial goals, timeline, and risk tolerance. Looking to start even smaller?

Acorns is the micro-investing app that lets you invest small amounts of money at a time, which, just like your 401(k), grows over time.

There are an abundance of apps out there for every kind of investor and every kind of budget. You can find a ranking of the best investing apps here.

Try managed stock portfolios

Maybe you want to dabble in the stock market but are overwhelmed by ever-changing ETFs (a collection of stock managed in a single fund that trades on stock exchanges) and mutual funds (pooling your money with other investors to buy stocks, bonds, and other securities). Then you might be interested in managed stock portfolios, which leaves all the hard work to professionals who work with investments day in and day out. If you’re unsure of where to start, want to learn more about money management, and want to stay committed to investing, then professional management might just be the place to start.

If you’re looking for another hands-off approach, target date funds are another great investing option. Target date funds are a mix of different types of mutual funds, stocks, bonds, and other investments. This mix changes with time and strategy, making target date funds good for long-term investments.3 They’re chosen to maximize funds by a certain date and are often named respectively, like “2030 Funds” or “2055 Retirement.”

Look into CDs, Money Market Accounts, and High-Yield Savings Accounts

If you want a low-risk way to invest your money, CDs, MMAs, and high yield savings accounts are safe choices that yields high interest rates. When you invest in a CD (or Certificate of Deposit), you agree to leave your money in a savings account for a specific amount of time. In return, you receive higher interest rates and a bigger return on your investment than a standard savings account.4

MMAs (money market accounts) act more like traditional savings accounts, allowing you more freedom to write checks and make withdrawals. And while you may not have as high of an interest rate as you would with a CD, MMAs have more flexibility.5

A high yield savings account offers better-than-average interest rates compared to traditional savings accounts. Like a CD and MMA, your account is also FDIC-insured, meaning you won’t have to worry about losing money (up to $250,000). It’s a great way to encourage saving and watch your money grow over time.6 All three options can help you reach your savings goals relatively risk-free.

FDIC-insured: Federal Deposit Insurance Corporation protects the money depositors place in insured banks in the unlikely event of an insured-bank failure. Each depositor is insured to at least $250,000 per insured bank.*

CDs, MMAs, and high yield savings accounts are all good ways to safely invest your money. And starting with a 401(k) is one of the most beneficial ways to build your wealth. For a little more risk, and hopefully a bigger return, you can start with apps, target date funds, and other investments. Everyone can (and should) invest their money, and investing wisely is always a good idea.

If you want more information or are looking for more answers on investing, First Financial is here to help.