Investing in the stock market may seem daunting to some people, but it is really quite simple to get started -- even if you don't have thousands of dollars and your own broker to build a portfolio. You can get started for just $100 or less and watch your portfolio grow from there. Here are three good ways to get started.
1. Open an online brokerage account
There is currently a huge influx of new investors into the markets, as brokerage firm Charles Schwab detailed in a recent survey. The survey, released in April, said that 15% of all current investors just started investing in 2020 during the pandemic.
There are likely multiple reasons for that, but one of them is the ease of investing brought on by online platforms, like Schwab and Robinhood, to name a few, that have no fees and no minimums to get started. So, you can open an account in a few minutes and get started by investing as little as you like -- $20, $50, $100, or whatever. You can invest in a few stocks, add more positions and funds, make trades, and hopefully watch your portfolio grow, all from an app.
2. Invest in big companies for small money
Even if you only have $100 to invest, that doesn't mean you have to take a flier on buying only penny stocks and hope to get lucky. The odds of finding the next Amazon or Apple are not in your favor. But you can get access to these types of companies for just $100 in a few different ways.
You can invest in exchange-traded funds, or ETFs, which are baskets of stocks that track an index and trade like a stock. So, you could invest $100 in an ETF that tracks the S&P 500 and invest in the 500 largest companies on the planet. The S&P 500 has averaged about a 10% annual return since its inception in 1926, so you're going to see that capital appreciate over time.
There are thousands of ETFs, tracking hundreds of different indexes, many of them customized by the fund company. So if you want to invest in say, technology, you could put that money toward an ETF that tracks the Nasdaq 100.
Investors can do the same through fractional shares, a new type of investing that just started taking hold within the last couple of years. By investing in fractional shares, you can invest in a portion of a stock for as little as $1. So, while Apple, for example, costs over $140 for one share, you can invest in a fraction of that share price through this method. It allows you to create a diversified portfolio of major large-cap stocks that you wouldn't otherwise be able to invest in.
3. Contribute to your 401(k)
If you have a 401(k) plan, this is probably the easiest way to put your investing dollars to work. The funding for your plan, of course, comes out of your paycheck, and usually includes an employer contribution, but you can add additional contributions in any amount you like. You could contribute an additional $100 per month to the plan, for example, and that money would go toward the investments in your plan, which are typically a selection of mutual funds.
When you invest in a 401(k), you can contribute as much or as little as you want. You could set up your account to invest a set amount weekly, monthly, or per paycheck, or whenever you choose.
It doesn't take much to get started as an investor, and using these three ideas, you can do it for little money. These strategies will also help you invest that money wisely. The earlier you start investing, the more time that money has to work for you, so that initial $100, if you begin early enough, can grow a lot bigger.
Consider this: $100 invested now, adding $100 per month, at a 10% annual return, would grow to $133,000 in 25 years. That's a nice chunk of change.