The best-kept secret to financial independence is investing! However, most people often assume that you need thousands of dollars to invest and make significant returns. This is a myth that will only stop you from becoming financially independent in 2021. In this article I will show you ten different ways of investing $100. While you will not be able to make a sizable income to live from, this will help you learn how to invest. It will also teach you the habit of investing and spreading the risk of your income.
The investment options detailed below are drawn from different fiscal sectors to provide you with an extensive portfolio. While this is a start towards attaining your fiscal goals, always remember that investments are like plants. They need to be attended to daily to grow. Just as plants need water and manure to grow, so do investments need money and attention to grow. $100 is a starting point that needs to be improved on a periodic basis. One tip that will help you attain your financial goals easily is to always reinvest your earnings from these investments. For instance, if you invest in dividend paying stocks, always reinvest the dividends into attaining more shares either from the same portfolio or from a different one. This will help your portfolio increase and help you retire on your own terms. How can you invest $100 and become more financially independent? This article details the assets you can acquire and investment schemes you can join to become more independent.
So which assets can you invest $100 and make returns from? This article details how to invest $100 in a range of risk options.
Table of Contents
Micro-Savings/Micro-Investment Apps
While this article is focused on ways of investing $100 and making returns, it also provides ways through which you can invest less than $100 and build an impressive investment portfolio. A few decades ago it was practically impossible to invest if you did not have a substantial initial investment. However, tech innovations in the 21 st century have opened up this sector to even those who do not have these initial capitals. One of these innovations include the Micro-Savings/Micro-Investment Apps. These apps are designed to help you invest and also accumulate or save the money needed to make these investments. One of the most popular apps in this sector is Acorns. This app is based on a simple mission: simplify investing for millennials. This app works on the idea that most times we often forget how important loose change is towards our financial independence. Accounting for every penny is the principle way of achieving financial independence. As such, this app utilizes a process called round up that helps you save and account for each penny which is then invested.
Let’s say you purchase a starbuck coffee for $2.25. Acorns will round off the purchase to $3 where $2.25 will be paid to the merchant and $0.75 saved by Acorn towards your investment fund. Once these funds reach $5, they will be transferred to an Acorns investment account where it is managed by the Acorns robo-advisor. This type of investment schemes are utilized with a number of Micro-Savings or Micro-Investment Apps that are suitable if you are looking to invest anything below $100.
Peer-to-peer lending
As the name suggests, peer-to-peer lending refers to business platforms where people borrow money for personal loans. These types of loans are often unsecured and can be as high as $10,000. The provider of the P2P lending platform often determines the interest rates and payment period of these loans which may vary based on the credit rating of the borrower. This platform offers a good way to invest $100 as it allows investors to purchase “notes” which refer to funds made accessible as personal loans to the users. Different platforms have different requirements.
Some platforms allow notes to be purchased in small units. For instance, one platform can allow these notes to be purchased in units of $25 which allows the investor to decide if they spread the loan across four borrowers or two. It is often advisable to spread the risk in investment thereby most of these sites would ask the investor to spread the risk across different profiles. One of the most popular P2P platforms is Lending Club which allows investors to invest funds as little as $25. They also advertise high returns ranging between 4% and 7% that comes with risk as the borrower may default on the loan. However, these rates indicate the default rate and returns that are higher than you will be given by banking and other financial institutions. As such, this is a great way of investing without having to worry about initial capital. You will be surprised at how much you can save if you constantly round up your purchases.
Invest in Personal Development
Personal growth and development is integral in becoming financially independent. Think of investment as a Chess game where intellect dictates the outcome. Most affluent people often state how important reading is. If you want to be wise with your investments and personal finance management then you need to learn about money. Not everyone has an accounting or finance degree. Various platforms like Edx, Udemy, and Coursera have made it quite easy to enroll in personal development courses. Some of these courses are offered for free while others come with affordable certificate courses starting from $49.
Personal development and growth is not only limited to financial education. There are a plethora of courses that will help you learn new skills which can improve both your personal and career life. For instance, let’s say you are a stay at home mum with three kids and you only get time to yourself when your kids are asleep or when they are in school. You can enroll for an Amazon AWS course which is often delivered online that comes with lucrative jobs. Amazon AWS offers four training and certification paths which include Cloud Practitioner, Developer, Architect, and Operations. In 2019, the average salary of an AWS-certified IT professional was $129,868 ranking as one of the highest paying jobs in North America. The best part about this job is that you can work remotely, meaning that you wouldn’t have to sacrifice on spending time with your kids! Imagine how you could upgrade your career and financial independence by investing towards your personal growth?
Invest in Dividend Stocks
Dividend stocks refer to companies which pay shareholders regular dividends. Most companies that pay dividends are usually well-established and have a record of their dividend payouts. American dividend paying companies often distribute a fixed amount of their earnings on different schedules. For instance, there are monthly paying dividend stocks where you get dividend checks at the end of each month or quarterly-paying dividend stocks where you are paid after every three months or yearly-paying stocks where you are paid annually. Regardless of the company scheme you choose to invest in you will always get a check depending on how a company performs. There are two main ways through which you can invest in dividend stocks and they are mutual funds and individual dividend stocks.
You can choose to either purchase the stock by investing in mutual funds such as index-funds or exchange-traded funds that have dividend paying stocks or buy these stocks independently. The difference between these two is that investing through mutual funds will give you access to an extensive portfolio of companies helping you spread the risk of your investment while purchasing individual stock will increase your risk. For instance, let’s say you choose to invest through mutual funds and choose three companies that offer different dividend stocks. Let’s assume that all these companies pay the stocks quarterly. If one company underperforms and the other two surpass their targets then you are still sure of receiving a check. However, if you invest in individual funds and the company underperforms then you will also have to partake in the company’s losses.
Invest in Your 401(k)
This is a tax-advantaged retirement account where employees contribute to build their individual portfolios. This plan is available in the US as the 401 (k) and in other countries as retirement/pension schemes and funds. It is cited as one of the easiest ways of investing $100 as you can contribute this amount either monthly, biweekly or periodically according to your income. The only limit to this form of investment is that you can invest up to an annual limit. Additionally you are only allowed these tax advantages if you withdraw your 401 (K) after you attain the age of 59½. If you withdraw it earlier, you will be liable to some tax penalties.
This investment option is a definitive way of investing for your retirement. Some of the advantages include matching contributions provided by some employers. Some employers often “match” their employees annual contribution by contributing an amount based on your annual contribution towards your retirement fund. The money contributed is often invested in your choice of variety of mutual funds that have returns which help you grow your retirement fund. Who does not like the idea of securing their financial independence during old age? Checkout this option to ensure that you take care of yourself after you retire from normal jobs.
Build an Investment Portfolio with Robo-Advisors
Robo-Advisors are safe ways of investing as they offer digital platforms which provide automated solutions to financial planning. These platforms often have little-to no supervision and are algorithmic driven which speak to their accuracy in mapping out financial mathematics. There are numerous robo-advisors online with a number that do not require any upfront investment. If you choose to invest $100 in this option, you will get a fully-managed, well-diversified portfolio of stocks and bonds with impressive returns. These platforms often use a subscription fee model where the robo advisors customizes a portfolio based on your preferences and manages it for a minimal fee.
Some of the most popular robo advisors include Fidelity Go, Betterment, Ellevest, and M1 Finance. All these companies do not have a minimum opening balance meaning that you can invest whatever amount you have. Additionally, Fidelity Go charges up to 0.35% to manage your portfolio, Betterment charges 0.25% management fee, Ellevest charges between S1 to $9 per month to manage your portfolio, while M1 Finance does not charge an investment fee bur rather charges for supplementary charges such as account maintenance, request for paper copies, direct account transfers, miscellaneous charges, and bank fees. Some of these platforms also offer lending facilities to their clients. For instance, if you register with M1 finance you can access your portfolio line of credit once you reach $10,000 at only 3.5% interest rates.
Index-Based Exchange Traded Funds (ETFs)
You can buy a portfolio with Index-Based Exchange Traded Funds (ETFs) which allows you to buy into an entire market of stocks. This option is quite suitable for people looking to spread their investment risk with diversified portfolios. EFT often contains a variety of investment options including stocks, commodities, bonds, or a combined investment option. This is a secure way of investing because EFT funds have marketable security meaning that they come with associated prices which allows them to be easily bought or sold.
Open a Traditional or Roth IRA
Individual Retirement Accounts (IRA’s) are investment schemes that offer valuable tax benefits for people interested in saving for their retirement. These are commonly referred to as tax-free or tax-deferred ways of opening a savings account that safeguards your retirement. There are three main types of IRAs and they include Traditional, Roth, and Rollover IRAs. In this article we will focus on Traditional and Roth IRAs. Traditional IRA’s refer to saving investments where the taxes are deferred for the investments while the contributions might be tax deductible. On the other hand, Roth IRAs the investments are tax-free and the final withdrawal is also tax-free. Opening and contributing to one of these schemes will help you create a retirement fund that will ensure you have a financial cushion to fall back on when you decide to retire. Most financial advisers often advise on opening Roth IRAs because of the tax advantages. However, both IRAs have some advantages that could help you become more financially independent by saving for your future. Both of these IRAs have no minimum requirements, so you could open an account with $100.
Payoff Debt
Debt is like an anchor that will keep you in dire straits. Some debts often snowball and make it harder and difficult to access other credit options or become liberated from the paycheck-to-paycheck routine. Paying off your debt is one of the most integral steps in becoming financial steps. How can you pay off your debt if you are living paycheck-to paycheck? Do not worry, there are a number of tested and proven ways through which you can organize and pay off your debts even if you do not have enough funds left over from your paycheck. Check out our list of 50 FREE Budget Templates that will help you manage your debt through various budgeting techniques including Dave Ramey’s infamous Zero-based Budget.
Buy individual stocks
Individual stocks have always been considered profitable ways of investing. In the past, you would often be compelled to buy full shares which could be expensive and out of reach for most individuals. However, the introduction of fractional shares has made it easier for people to buy a fraction of shares and still make money from them. For instance, if you are interested in buying Amazon shares but do not have the $3,311.37 needed to purchase a full share, you can begin by investing $100 and work your way up. You can buy these stocks under $100 through distant brokerages like Robinhood and Stash who allow users to invest in stocks starting from $1. Investing $100 in stocks will definitely help you become more financially-savvy as you will become more empowered in the world of finance and investing.
Conclusion
Investing should not be considered an expensive or out of reach venture. Whether you are a stay-at-home mom or a student or an employee living paycheck to paycheck, you can invest in a variety of schemes that will help you become financially independent. Remember that patience is key to investing. Do not invest your money today and expect it to grow overnight. Realistically speaking, most investments often generate income after one to three years depending on the option chosen. If you are determined to become more financially independent in 2021 and stop living paycheck to paycheck then download one of our budgeting templates, choose an investment medium, and begin contributing periodically. Also to be successful at investing you need to be highly disciplined. Imagine how much you could save and invest if you stopped unnecessary bills and spending and invested in any of the above mentioned schemes; or if you stuck to a stringent contribution schedule, you will be financially independent much sooner than you expected!
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