How to Invest $250

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How to Invest $250

Investing is not something that everyone is familiar with. This typically because the entry points into most markets are incredibly complex or expensive. As a result, those with only small amounts of capital simply find themselves being left out in the cold.

Not to mention, just the term investment can cause a great deal of suspicion or dislike as not many people understand the elements involved. Fortunately, you don’t have to be wealthy if you don’t want to dabble in financing. Not only are there several ways that you can do this, you also don’t need more than a couple of hundred dollars. Here are some of the best ways to invest $250:

Binary Options Trading

If you really want to be entrenched in the world of finance and trading then binary options is the way to go. There are several reasons for this. First, most brokers ask for very little in terms of registration. There are some that require as little as $10 or $100. There are the more well-established ones that may make higher deposit demands such as $250. Some of the brokers don’t even need registration fees. They give you an account and only ask that you deposit money when you are ready to begin trading. The other advantage is that you don’t need years of skills, experience, or knowledge to trade binary options. In fact, most traders do the research and teach themselves this craft. What’s more all of this can be done for free or just a very small amount.

Purchasing Physical Gold

This is a great option for those who are afraid of losing their investment. It is also quite useful for financiers who don’t wish to spend a great deal of time trying to figure out how to make money with their asset. The main benefit of physical gold is that it never actually loses value. Yes, the price may fluctuate and may be lower for a period but it typically always bounces back. Therefore, if you are looking to make a profit, simply wait for a moment when the precious metal is priced at higher than what you paid for it. Gold has also proven to be an excellent way to always make sure that you have some cash for a rainy day.

Real Estate Investment Trust

Everyone hopes to invest in real estate at one point or another. Nonetheless, few people have the money required to buy houses or commercial buildings. This doesn’t mean that you have to sit this opportunity out, however. Instead of actually purchasing real estate, you can be a part of a trust that does it for you – a REIT. The benefit of this, of course, is that you have to put up a fraction of the cost. Now, even the cheaper REITs do require at least $500 or $1000 as an initial investment. However, this can be divided into smaller amounts. This is as long as you are willing to continuously invest in the trust over a period of months.

Stocks

It is easy to see stocks as a pipe dream if you only have $250 to spare. With this amount, there are certain restrictions on profit over a period of time. This is not to say, however, that have to stay away from stocks. One of the main reasons that stocks get so pricy is because you have to sign up with a broker. There is a way to overcome this, however. You can simply purchase the stock directly from a plan that the company may have. This could require to make a one-time investment of $250. Or, the company will agree to take at least $50 out of your savings account for about six months.

These are the best ways to invest $250. So, if you do find yourself with this amount, don’t spend it on something frivolous – invest it instead.

How to Invest $20, $100, and $1,000 (and More)

How much you got?

This article was updated on Dec. 30, 2020.

Got only $20 to put away right now?

It may not sound like much, but you can use it to buy shares in Ford Motor. Or Bank of America. Or Hertz. And those are just a few of the thousands of options available for cash-strapped investors. What if you can spare $100 — or $1,000? Your options are even broader.

We’re not here to tell you where to invest your money. We won’t lay out a handful of stocks on a “buy” list. But what we can tell you is how you can invest your money — the mechanics of investing small, large, and medium amounts of cash. We can even help you choose a broker.

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How to invest $20
Let’s start with $20. We’ll assume that you’ve already paid off any high-interest debt and that you have some money stashed in a safe place (like a savings or money market account) that you can get to quickly in case of an emergency expense. Now you find yourself with a little extra dough, and you want to begin investing for your future.

Is it even worth it to invest such a pittance?

Heck yeah it is! One of the best ways to invest small amounts of money cheaply is through Dividend Reinvestment Plans, commonly known as DRIPs. With a DRIP, any cash dividends you receive from a company are automatically reinvested in more of that company’s stock. This means you’re steadily building your position in that company, so your capital gains will increase exponentially over time.

On top of that, DRIPs — along with their cousins, Direct Stock Purchase Plans (DSPP) — allow you to bypass brokers (and their commissions) by purchasing stock directly from the companies or their agents.

Thousands of major corporations offer these types of stock plans — many of them free, or with fees low enough to make it worthwhile to invest as little as $20 or $30 at a time. DRIPs are ideal for those who are starting out with small amounts and want to make frequent purchases (a powerful investing tactic known as dollar-cost averaging). Once you’re in the plan, you can set up an automatic payment plan, and you don’t even have to buy a full share each time you make a contribution.

DRIPs may be one of the surest, steadiest ways to build wealth over your lifetime (just make sure you keep good records for tax purposes). For more details on Drips, see “What if I can only invest small amounts of money every month?”

How to invest a couple of hundred bucks
So you’ve weeded out all the nickels from your spare-change jar and have tallied up a few hundred bucks. Instead of blowing it on snack food and Elvis memorabilia, consider investing it in an index fund. An index fund that tracks the S&P 500 index, for example, will match your returns to those of an investment that has historically returned about 10% per year.

Some index funds require an initial investment as low as $250. This low minimum is usually restricted to individual retirement accounts (IRAs). After your initial investment, you can add as much money as you like, as frequently as you like, with no additional costs or commissions. You can purchase index funds directly from mutual fund companies, so there are no commissions to pay to a middleman.

If you have a few hundred dollars to start with, then this is a great, low-cost way to establish an instant, broadly diversified (500 companies!) stock portfolio.

How to invest $500
Once you’re up to $500, your investment options open up a bit more. You can still buy an index fund, and now you’ll have your pick of fund companies that require higher initial investments. This freedom will enable you to shop around for a fund with the lowest expense ratio.

You should also seriously consider opening a discount brokerage account. You’ll want to focus on the account option that best serves your needs; some accounts require a minimum initial deposit, and some don’t. That means you can open up an account with whatever investing money you have available and start researching, and perhaps purchasing, individual companies. (Or, if you’re enamored of index investing, you can easily invest in the SPDR S&P 500 ETF (NYSEMKT: SPY) , a stock-like investment that mimics the performance of the S&P 500.)

The key here is to keep your costs of investing (including brokerage fees) to less than 2% of the transaction value. So if you’re planning to add to your position in stocks a few times a month, then a DRIP or an index fund may still be the way to go.

How to invest $1,000-plus
What can you do with a grand? Obviously, with $1,000 you can open up a discount brokerage account, but consider the rewards if you can scrape up an additional $1,000 a year to add to your original investment.

Say you have 30 years until retirement. If you start with $1,000 and invest an additional $1,000 each year, and your money earns 10% annually, then in 30 years you’ll have about $200,000. Keep at it for another 10 years, and your money will more than double to $532,000. That seems worth it to us. And if you have earned income, you can set up a Roth IRA, and you won’t even pay any taxes on your savings when you withdraw them in retirement.

Again, even at this level, the key is to keep fees from eating up your earnings. So make sure the costs of investing (including brokerage commissions, stamps to mail in checks, and books that help you learn to invest) are less than 2% of your account’s overall worth. With small accounts, that can be a challenge, but with such low commissions being offered by discount brokers, it’s definitely doable.

How To Invest $50 In The Stock Market: A Beginners Guide To Investing Like A Pro

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Most people wait to start investing until they have a significant amount of money saved up. This made sense a few years ago for two reasons:

  1. Mutual fund companies had high account minimums — some were as high as $3,000.
  2. Brokerage firms also charged high fees, which ate up the returns of small accounts.

But now there are high-quality, low-fee investment providers that let you get started for $50 (or even less, in some cases).

If you’re wondering how to invest $50 in the stock market (or any small amount, for that matter), this article can help you get started.

How to Invest $50 in the Stock Market

Before You Start Investing

Before you start investing in the stock market, you want to make sure it makes financial sense.

The #1 reason why you shouldn’t start investing is high-interest debt. If you still have high-interest debt (like credit card balances), it’s in your best interest to hold off.

The stock market has returned an average of about 7% per year after inflation.

So, if you have debt at a higher interest rate than 7%, paying that off is your best investment. It’s also a guaranteed rate of return — something the stock market can’t provide.

Next is understanding that investing in the stock market is a long-term commitment. Warren Buffett (one of the greatest investors of all time) famously said, “our favorite holding period is forever.”

In other words, go in with the mindset that you’re going to hold your investments long-term (or at least five years).

If you’re going to need your money in a month or even a year, the stock market isn’t the right place to put it.

Taxable Accounts vs. Retirement Accounts

There are two primary types of investment accounts.

  1. Taxable Accounts
  2. Retirement Accounts

In a taxable account, any income earned is taxable. That includes dividends and gains if you were to sell. Examples of taxable accounts include standard brokerage accounts, like the ones you’d get by signing up with Webull or Robinhood.

With retirement accounts, such as IRAs and 401(k)s, taxes are either deferred or paid upfront.

The difference between these account types is huge!

Let’s say you invested $50 per month for 40 years (between the ages of 25 and 65). If you placed those funds in a taxable account, you might end up with a figure around $50,000. If you placed them in a traditional retirement account, that figure might be closer to $75,000.

These figures are completely hypothetical and used here for teaching purposes only. Your actual returns would vary depending on many factors, including your investment choices and the overall economic environment. However, these figures (as illustrated in the chart below) show the impact of fees and taxes on the value of your portfolio over time.

Taxes eat away at your gains, so it’s important that you pick the right investment account. If your employer has a 401(k) and offers an employer match, this is a great place to start. You won’t come close to matching the returns your employer’s 401(k) match will provide.

If you don’t have access to a 401(k) with an employer match, I’d recommend a Roth IRA. A Roth IRA allows you to contribute after-tax money today, then withdraw that money tax-free starting at the age of 59 1/2.

Why You Don’t Want to Pick Stocks

You might be thinking that you want to take your $50 and invest it in a company like Amazon, Facebook or Tesla.

However, if maximizing your returns is your goal (which it should be), that may not be in your best interest.

First, many investment firms don’t allow you to buy fractional shares. As I write this, a share in Amazon is trading around $2,000. You’d have to buy an entire share to just to get started.

But the most important reason why you might not want to buy individual stocks is because most investors don’t succeed with that strategy.

Few investors are able to pick individual stocks and beat the market. They might get lucky once or twice, but study after study has shown that few succeed in the long run.

To quote Warren Buffet again:

“Just pick a broad index like the S&P 500. Don’t put your money in all at once; do it over a period of time. I recommend John Bogle’s books — any investor in funds should read them. They have all you need to know….if you invested in a very low cost index fund — where you don’t put the money in at one time, but average in over 10 years — you’ll do better than 90% of people who start investing at the same time.”

What Is an Index Fund?

An index fund is a mutual fund that holds a collection of stocks.

For example, an S&P 500 index fund holds stock in all the companies that make up the S&P 500 (which includes the 500 largest companies in the U.S.).

There are a number of advantages to investing in index funds, especially for those wondering how to invest $50 in the stock market:

  • Low fees — instead of paying a commission every time you invest, index funds charge one very low rate
  • Tax efficient — because they don’t trade a lot of stocks, index funds incur minimal taxes
  • Low maintenance — you get a totally hands-off investment that beats 80% of investors

Where You Can Invest as Little as $50 in the Stock Market

The one downside to getting started with as little as $50 is that you’re limited to certain investment providers.

Many investment firms still have minimum deposits that start at $1,000.

Fortunately, there are a few good options I’d recommend to someone looking to invest a small amount.

Option #1: Betterment

First on the list is Betterment.

Betterment is what’s known as a robo-advisor.

One of the reasons why I recommend Betterment is because getting started is incredibly simple. Instead of making you pick from among hundreds of mutual funds, Betterment starts you off with a risk tolerance questionnaire. Then, they give you options based on your risk profile.

Their portfolios are made up of index funds, so you’re getting quality investments.

Just as important, their fees start at only 0.25%, and they have no minimum investment amount. That means you can get started for as little as $1.

Learn more about the company in my comparison of Betterment vs. Vanguard.

Option #2: M1 Finance

An alternative to Betterment is M1 Finance.

M1 Finance allows for a bit more customization of your portfolio. For example, if you wanted to invest 90% of your portfolio in index funds and 10% in individual stocks, the platform allows you to do so. (By the way, that 90/10 ratio is a decent compromise for those wanting to pick at least a few individual stocks on their own.)

You can read more in my detailed M1 Finance Review.

Option #3: Acorns

One other option worth considering for small investors is a micro-investing app called Acorns.

While you can make automatic contributions to your Acorns account, the company is best known for its round-ups feature. How it works is that every time you buy something, Acorns rounds up your purchase to the nearest dollar. Then, once a day, Acorns invests your “spare change” into your portfolio.

For example, if you purchase a coffee for $3.75 with a linked credit card, Acorns will invest 25 cents.

The downside of Acorns is that there’s a $1 monthly fee.

Learn more about Acorns on their website.

How to Invest $50 in the Stock Market: After You Invest

Once you’ve made your first investment, you may be wondering what to do next.

First, you want to set up an automatic deposit into your investment account.

Ideally, set up a recurring transfer from your checking account to your investment account for the day after your paycheck hits. This will help you make sure you actually move the money over (rather than using it for some other purpose).

Next, challenge yourself to increase the amount you’re investing.

If you increase the amount you invest by $10 each month, you’ll be up to $170 per month after just a year.

Next is being patient.

Investing is a long-term game. Those who win are those who are patient. This isn’t gambling, and you’re not going to find the next Google or Amazon — your goal is steady, consistent gains that compound over time. That may sound boring, but it’s the best way to grow your wealth.

You may want to check in every month or so to see how your investments are doing. That’s fine! Just don’t get too concerned if your portfolio value drops. Down markets are inevitable. Be patient. The last thing you want to do is sell when your investments have bottomed out.

And remember, that dip is just one brief moment in time. Remember the financial crash of 2008, when investors lost billions upon billions of dollars seemingly overnight? Well, here’s how that dip looks a little over 10 years later, on a chart showing the ups and downs of the S&P 500:

The worst crash in market history looks like little more than a blip on the radar.

So stick with it and have faith, even when things are looking ugly. That trend line is sure to take a sharp turn down at some point sooner or later, and that’s just fine — you’re in this for the long haul.

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