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Whether your student loans are being forgiven, you received a gift or earned some extra cash this month, using $100 or less to start your investment journey is possible now more than ever.
Thanks to investment products like fractional shares and exchange-traded funds, or ETFs, you can enter the market for dollars and cents — and quickly build a diverse portfolio with little money. Not to mention the apps that can help you save or invest spare change.
So if that extra Benjamin lands in your lap, here’s what you need to know about how to start investing, the financial products that can help you diversify your portfolio for less, and how to make your money work the hardest for you.
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What to consider before you begin
Before you begin investing, be sure you’ve taken care of more immediate financial needs like paying off high-interest debt and building up an emergency or rainy day fund, says Jen Hemphill, an accredited financial counselor in Fairfax, Virginia.
If you’ve got that covered, it can feel nerve-wracking to consider beginning to put cash in an investment account instead of your savings account. One strategy for overcoming fears about investing is to focus on your goals, according to Hemphill, who also works with clients and provides free bilingual financial education on her podcast “Her Dinero Matters.”
Hemphill suggests you first consider why you are investing. Whether your reason is college, a home, retirement, a medical procedure, a trip or something else, why you want to invest affects what type of financial product is the best match for your timeline and goals.
Why you want to invest also informs how much risk you’re willing to take. Investments always involve risk, says Hemphill. It’s normal for markets to go up and down, and you need to understand that before you start investing. If you need the money for something in the next five years, for example, a high-yield savings account might be a better option because even though your money has less growth potential, there’s less risk involved.
But if you have a very long investment timeline, you could take on more risk, with the thought that it will pay off eventually.
“When the market is down,” Hemphill says, “you have to be able to just press on.”
If you want to start investing but don’t have a lot to start, consider these tips for how to establish your portfolio and grow your wealth with $100 or less.
How to start investing with little money
Some beginners might feel confused or stuck on what exactly to invest in and how.
“The hardest part for beginners is to actually start to put the money in the account and click buy,” says Orlando, Florida-based certified financial planner Maggie Gomez. Gomez’s experience of financial insecurity and homelessness early in life informed how she approaches making financial education and services accessible to a more diverse range of people.
If you share that uncertainty about how to begin, here are four ways to start investing.
1. Retirement plans for retirement goals
If your investing goal is retirement, you might already be invested if you’re taking part in an employer-sponsored 401(k) plan.
If you’re not and want to start saving for retirement, you can set up a tax-advantaged plan on your own with an individual retirement account, or IRA. Since some providers do require account minimums for IRAs, be sure to look for a provider with a low or $0 minimum.
Roth IRAs are tax-advantaged accounts for long-term investors who want to contribute after-tax dollars and withdraw their investment tax-free in retirement. Traditional IRAs, on the other hand, allow you to invest pretax dollars. With this type of account, you pay income taxes upon withdrawing the money in retirement.
2. Low-cost brokerage accounts for (nonretirement) financial goals
If you have a different investment goal, a brokerage account may be right for you. Brokerage accounts allow you to invest in things like stocks, ETFs and index funds. They’re easy to open and differ from retirement accounts in that you can sell at any time and withdraw your funds without penalty. However, note that you’ll still likely have to pay capital gains taxes if you make money on your investments.
If you’re opening a new account, be sure to look for a brokerage that offers commission-free trades, no account minimum and no fee to open the account.
You can look for a brokerage that offers fractional shares, which let you buy portions of a single share of a company’s stock, rather than a whole share. So if you only have $20 to contribute to a stock that’s priced at $50, fractional shares can get you there.
3. Index funds and ETFs
Buying and selling individual stocks generally carries a high level of risk. You could instead invest in ETFs and index funds, which are baskets of investments that include dozens, hundreds or even thousands of stocks. These products can track various assets, like stocks, bonds, currencies and commodities, or even an entire market.
In buying a share of an index fund or ETF, you’re instantly gaining access to shares of a wide range of companies, offering easy and quick portfolio diversification, which makes them an excellent choice for beginners. However, note that while index funds and ETFs are similar in many ways, they have their differences.
Once you’ve selected an account, consider whether you want to invest all at once or over time. The $100 you have could be your first contribution, or you could break it up into smaller contributions such as $20 a month.
Spreading out your purchases over time like this is a financial strategy called dollar-cost averaging. Micro-investing apps also dollar-cost average by rounding up purchases to a debit card and investing tiny amounts into ETFs.
4. Help from robo-advisors
A robo-advisor is an automated investing service that makes portfolio recommendations after assessing your risk tolerance, investment preferences and time horizon through a questionnaire. The recommended portfolios are often composed of ETFs and range from more conservative to aggressive investment options. Once you choose a portfolio, the robo-advisor does the investing for you.
While some robo-advisors charge portfolio management fees around 0.25%, others charge no management fee at all. You’ll want to look for robo-advisors with low or zero account minimums.
There’s a lot to consider as you begin your investing journey, but the important part, says Hemphill, is to just “start where you’re at.”
5 ways to save this holiday shopping season
Preparing for Black Friday and the holiday season shopping
This holiday shopping season is shaping up to be longer, pricier and in some ways more chaotic than in previous years, which makes it easy to overspend. But there are also opportunities for significant savings if you know where and how to search for them.
“There are supply chain issues, inflation, major retailers reducing inventory — when you put all of that together, it looks like a recipe for disaster,” says Jill Cataldo, a consumer coupon expert based in Chicago. Her solution? “I started shopping now. If you see something and it looks like a good deal, it’s time to pick it up.”
That’s because while prices are higher overall, retailers have already launched the holiday deal season, spreading out discounts and sales over the final three months of the year. Given that complicated background, here are the best ways to save money this Black Friday season:
1. Shop early and often
It might sound counterintuitive, but starting early can ease the impact on your budget and allow you to score the best deals. “I watch prices, see which retailer is offering the best price and always look for coupons before I buy — anything is better than paying full price,” Cataldo says. When she makes an early purchase, she keeps the receipt handy in case the price drops and the retailer offers a price match.
2. Be relentless about comparing prices
Apps, browser extensions and other tools that will help you track and compare prices abound; you just have to pick the one that you like using most. You can find choices that scour the web in the background while you shop and alert you to lower prices, coupon codes and cash-back opportunities.
For example, the shopping app ShopSavvy will follow price changes on specific items. John Boyd, co-founder and CEO of Monolith Technologies, which owns ShopSavvy, says he uses that feature for things he has his eye on, like a digital single-lens reflex camera. “I want to get an alert the second those things get marked down, because it might only be on sale for a few minutes and then the quantity runs out,” he says.
The Camelizer app performs a similar function for Amazon prices specifically.
Greg Lisiewski, vice president of PayPal Shopping , which includes the shopping browser extension Honey, says when he wants to buy something, he looks up the retailer in the PayPal app to see if any discounts are available (under the “Deals” section).
Those discounts are especially valuable now because PayPal Honey reports that toys and games are 11% more expensive this year compared with last year, coffee machines have increased 7%, and cycling gear and equipment is up 9%. The company also reports that the biggest discounts this holiday season have been in cosmetics, musical instruments and general department stores.
3. Layer on coupon codes and cash back
Getting a good deal isn’t only about price: You can add on other savings with coupon codes and cash-back offers.
Cataldo takes advantage of cash-back offers, which are available through apps like Rakuten, CouponCabin and Ibotta. “It’s just one extra step if you are going to buy online, and then you receive a check,” she says. “I like things that are easy, and that’s very easy.”
Scott Kluth, founder and CEO of CouponCabin, says stores with excess inventory will often have discounts of 10% to 15%, and cash-back offers range from 3% to 20%. “Stack all of those savings on top of each other,” he says, adding that sometimes online retailers accept multiple coupon codes plus provide free shipping.
5. Talk to friends and family about scaling back
With so many people feeling the strain of rising prices, it’s a good year to talk with family and friends about setting limits. For Sarah Schweisthal, social media manager at the budgeting app You Need a Budget, that means creating a gift exchange with family members so each person purchases just one gift within an agreed-on spending cap. “We used to all buy gifts for each other, but there are a lot of adults in our family. It just took one of us to say, ‘Hey, this doesn’t feel sustainable,’” she says.
Schweisthal estimates that the gift exchange approach has saved her family hundreds of dollars — and this year especially, that’s more important than ever.
4. Get to know your local stores
Deborah Weinswig, CEO and founder of Coresight Research, a retail research and advisory firm, says that getting to know your local stores and attending in-person events can be the way to score the biggest deals. “Store managers are being given the ability to negotiate and price match or price beat,” she says, especially when they have excess inventory in stock.
She suggests joining livestreams, following your favorite brands on social media and signing up for brand loyalty programs to be the first to hear about discounts or sales. “Some codes are only good for 24 hours and some prices are only good for four hours,” she says, so if you want the best deals, be ready to move quickly.
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The article 4 Easy Ways to Start Investing With $100 or Less originally appeared on NerdWallet.
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