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Where to invest $ 500: 6 ideas

Фото: Depositphotos

Фото: Depositphotos

Contrary to the general opinion, you do not need to be rich to invest. Even if you have a sum of less than $ 500, you can use a couple of good investment ideas.

Resource GoBankingRates Offers 6 ways to start investing with less than $ 500 - regardless of your goals (save money for retirement, earn extra income or make money), and 2 way to prepare for the correct financing of your small investments.

What you need to do before you start investing

Despite the fact that small investments and new investment ideas do not require huge amounts, they require some financial stability and a responsible approach. Before you start to invest even a little money in something, you should be convinced of your financial stability. For this, there is a 2 method:

1) It is worth having a contingency fund. Expert Paul Moyer of SavingFreak believes that any attempt to invest without a contingency fund is doomed to failure. “As soon as additional expenses appear unexpectedly - for example, the car broke down or went to the doctor - you will take money from your investment account.” And this can undermine your investment - so there should be a contingency fund for such cases.

2) It is worth paying all the debts on expensive credit cards. If your resources are limited, it is better to first invest your cash in the payment of bills on cards with high interest for using money. The faster you pay this debt, the less you will spend money on interest on banks - and the more you will have on your small investment.

Ideas for small investments to create your own investment portfolio

“The main decision you have to make is your level of risk acceptance,” says Moyer. - If you are ready to invest for a long time - more than 5 years - then you can afford to take a little risk with mutual funds, exchange traded funds (ETFs) and so on. If this is a short-term investment, or you cannot afford to lose money, then you will need something more secure - for example, certificates of deposit, short-term promissory notes, or high-yield savings. "

Below we offer 6 ideas for small investments, as well as investment tips for a better understanding of how you can make money from your money.

  1. Take part in the program of capitalization (reinvestment) dividends

The program of capitalization or reinvestment of dividends (DRIP or DRP in the USA) is an option to invest a little money with the ability to buy shares directly from companies without using the services of a broker. You can participate in such a program, starting with the purchase of at least one share.

Additional advantages of the program:

  • Dollar value averaging: you can invest a specific dollar amount, for example, $ 10 or $ 25 every month. By investing regularly, you buy stocks in all points of the market - both above and below. This concept of averaging dollar value is key to long-term investment, because it gives a more representative income over time - that is, your average price per share will reflect high prices when the market is growing and low prices when it falls.
  • Reinvestment of dividends: as is clear from the term, reinvestment of dividends means that dividends paid by the company are paid back into your stake, which allows you to buy more. Dividends are the profits that the company pays to its shareholders.
  • Small rates or their absence: there are DRIPs, for which there are no additional fees at all; some programs need to pay low fees for regular deposits and reinvestment of dividends.

According to Moyer, dividend capitalization programs are low-cost investments that can significantly affect your portfolio.

  1. Invest in individual stocks

If you want to invest in small amounts of shares, the option of buying individual shares will suit you. Through discount brokerage firms such as ETrade, TD Ameritrade, Scottrade or TradeKing you can buy individual stocks with low commissions ($ 5-10 per transaction).

Thus, if you have $ 500 that you want to invest, you will have $ 490 to buy a stock with a value of that amount. For example, if one share is worth $ 25, you can buy 19 shares and become a small shareholder in this company.

For beginners investing, Moyer recommends the Loyal3 broker, which gives investors the opportunity to buy fractional stocks of their choice from more than 70 different companies. Regardless of stock prices, with them you can buy stocks from companies like AMC, GoPro and VirginAmerica even for $ 10.

  1. Choose mutual investment funds

Many mutual funds require a minimum investment of thousands of dollars. However, there are hundreds of such that take a small initial investment of up to $ 500. A quick search through a mutual fund service Morningstar finds around 200 various funds into which you can invest a minimum deposit of $ 500.

If you want to start with an even smaller amount, TD Ameritrade offers almost 300 mutual funds with a minimum required contribution of $ 100 and more than 250 funds with no requirements on the amount of investment.

Mutual funds are one of the best options for those who are just starting to invest. They diversify your portfolio - so instead of one share, you can own several hundred. They are also often recommended for long-term investments.

  1. Choose exchange-traded funds

Exchange-traded funds are another good investment for beginners. Such funds are similar to mutual funds in that they contain various investments. The difference is that exchange-traded funds are listed on the stock exchange as ordinary shares. The cost of participation in such a fund is relatively low.

You can become a member of a stock investment fund at the cost of one share, which attracts supporters of easy investment. The best exchange-traded investment fund for the last 10 years, according to Vanguard, is listed at $ 129 - that is, for this amount you can become its investor.

“If you are willing to invest for the long term and are not afraid of ups and downs, then an exchange-traded fund is a good starting point,” says Moyer.

  1. Become a business founder

“The best thing you can do as an investor is to get to know yourself,” Moyer said. "If you have an entrepreneurial spirit, then this money is better spent on investing in yourself and your own ideas."

Yes, you can also start a business for $ 500 or less. You can, for example, start writing a blog — no investments are needed for this, or very small ones — and earn extra income from it.

Even if you do not have $ 500 for initial investment, there are many creative ideas for small businesses: to offer dog walking services, car cleaning and cleaning services, lawn care services for children. Each of these ideas can be developed into a business if there is a small initial amount - you may just need to print business cards and a few flyers. Additional earnings can also be found through sites like TaskRabbit or Craigslist.

  1. Begin to provide socialloans

Another business idea with a focus on social loans (peer-to-peer lending, P2P). This method of direct debt financing enables individuals to borrow and lend on their own, without the need for an official financial institution.

Through websites like Lending Club or Prosper, you can lend money to people who want to consolidate debts, make repairs, buy a car, pay for medical services, and so on. You will receive monthly payments on the body of the loan and interest. According to the Lending Club, as of July 2016, the percentage of its participants' stable income fluctuated between 5,20% and 8,82%.

***

Everyone has the opportunity to become a small investor, regardless of the amount you are willing to invest. It is important to start now, so that over time the size of your portfolio and savings will only increase.

See also:

How to move to the United States: the option of work or investment

10 regarding honest ways to stay in the USA (7, 8 ways - investment, army)

Start-up investor Nick Belogorsky: a career in Silicon Valley and help to Ukraine

Zarobitchane transferred to Ukraine more than all investors

money savings Educational program investment financial education
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