If you thought that you need a huge amount of money to start investing, you are mistaken. You can start building your portfolio with $1,000 or even lesser. Do not wait to have more money, as the sooner you start investing, the higher your returns will be. Here are some simple ways to start your investment with a small amount of money.
The first investment option that you should consider is the 401(k) plan offered by your employer. Any investment you make will be matched by the company. You will also get the benefit of tax deferral due to which you will have a bigger fund by the time you withdraw the money. You can opt for automatic transfer of money to 401(k) from your salary.
You can get a small amount of U.S. Treasury bonds by investing through a TreasuryDirect account. This is a low risk investment, but the returns are also going to be low. You do not have to pay any fees or commission for holding or buying Treasuries. Savings Bonds for retail investors are a popular investment option from the Treasury. They are available at a reasonable price and they protect you from inflation. Another option is to get Treasury Inflation Protection Securities (TIPS), which can be bought in increments of $100.
Incremental Purchase Plan
Incremental Purchase Plans allow you to automatically purchase stocks, mutual funds and ETFs from a fixed amount of money every month. There is no minimum investment and you can allocate a small amount to buy shares. You can use an incremental purchase plan to even buy fractions of shares and add diversification to your portfolio. At the same time, you get more control over your portfolio than you do in case of mutual fund or ETF investments.
Individual Retirement Account
You can also start a Traditional or a Roth IRA from your money. You do not need a huge corpus and many discount brokers will allow you to open an IRA with a very small amount of money. The advantage of investing in an IRA is that if you start early, you will be able to build a large enough fund for your retirement.
There are many other options that you can consider – Direct Stock Purchase Plan (DSPP), Dividend Reinvestment Plan (DRP), or mutual funds.
Always remember that you need to give your investments a long enough period to grow. So don’t worry about starting small when it comes to investing.