It’s understandable—investing is scary. After the financial crisis, people are hesitant to risk their money and keep it close to their chests. If you are one such person, you should know that there are easy ways to get started with investing, even if you do not have much money on hand. You don’t need thousands of dollars to risk on the stock market to augment your wealth (you should be investing in a retirement fund, though). If you want to be an investor like Thomas Zaccagnino one day, here are a few ways to ease you into the process.
Save for retirement
Take advantage of compound interest, and sign up for an employer-sponsored 401(k) who will match your contributions if possible. Employer matches can help you save thousands of dollars by the time you are ready to stop working, and you don’t have to do anything extra other than put in what you can afford.
If you are a freelancer or employee of a company that does not offer 401(k) programs, there are other 401(k)s you can open, or you can consider a Roth IRA. With the latter option, you can set up automatic contributions each month, such as $25. It’s small enough that you probably won’t notice it month-to-month (even if you are living paycheck-to-paycheck), but it could be worth significantly more over time. You can also increase your monthly deposits to higher amounts once you are investing and earning more money.
Don’t neglect the power of compound interest. As David Rae writes for Forbes:
“Saving just $100 per month, from 22 to 67, equates to approximately $1,048,000 provided you earn 10 percent growth per year. Waiting until your 32 years old to get started will cause that number to drop to $379,000. As you can see, waiting ten years will result in a loss of about 64% of your retirement nest egg, all else being equal.”
It is unlikely that you will find an option offering 10 percent per year, but even if your annual rate of return is around seven percent, you’ll still have more money the earlier you start. So don’t put it off.
Use investing apps
Instead of sitting down with $1,000 and a computer to research the best companies to invest it in, you can invest small amounts of money at a time through apps like Acorns. It takes only a few minutes to sign up and be a part of something four million people are leveraging. When you connect Acorns to your bank account, Acorns will round up the money you spend every time you make a purchase (if you buy something for $2.59, for example, it could round that number to $3 and invests it into companies on your behalf). You can set your preferences to a variety of risk levels between “conservative” and “aggressive,” accumulating money a little bit at a time.
Use other investing platforms
There are a variety of other investing platforms you can take advantage of (so you don’t have to hire a financial advisor). Betterment is an example that creates a portfolio for you based on your answers to a questionnaire, and all you need to do is fund it and watch your money increase (or decrease—such is the nature of investing, but Betterment does an excellent job of analyzing risk factors for you).
Other platforms like Loyal3 (for individual stocks), Prosper, Motif, and Lending Club are worth looking into. Lending Club and Prosper are peer-to-peer platforms where borrowers can come to find loans, and people like you can provide those loans. Double-digit return rates are not uncommon, and you can invest as little as $25 at a time (though you must meet your state’s minimum net worth requirements). Depending on the platform, you can choose how much responsibility you want when it comes to selecting entities worth giving your money to.
US Treasury Securities
The government often backs lenders when you borrow from them, but when you purchase a US Treasury security (such as a note, bond, or bill), you are the one lending to the government for a select period of time. Such securities are often considered the safest form of investment due to the government’s pledge to pay you back, with interest. Interests rates will be low due to reduced risk, but securities are a sure way to get some form of profit in the future.
Investing may sound complicated and frightening, but there are easy ways to get comfortable with saving and sharing money. How will you start investing?