If you want to invest but have no money trees growing in your yard, you can still get started -- with as little as $20. Here's how.
We're going to assume that you've already paid off any high-interest debt and that you have some money stashed in a safe place (such as a savings or money market account) that you can get to quickly in case of an emergency expense. (Here are tips and deals on short-term savings.) Now you find yourself with a little extra dough and you want to begin investing for your future.
Is it even worth it to invest such a pittance?
Heck, yeah! One of the best ways to invest small amounts of money cheaply is through Dividend Reinvestment Plans (DRPs), also known as Drips. They and their cousins, Direct Stock Purchase Plans (DSPs), allow you to bypass brokers (and their commissions) by buying stock directly from the companies or their agents.
More than 1,000 major corporations offer these types of stock plans, many of them with fees low enough (or free) to make it worthwhile to invest as little as $20 or $30 at a time. Drips are ideal for those who are starting out with small amounts to invest and want to make frequent purchases (dollar-cost averaging). Once you're in the plan, you can set up an automatic payment plan, and you don't even have to buy a full share each time you make a contribution.
While you have to keep good records for tax purposes, Drips may be one of the surest, steadiest ways to build wealth over your lifetime. (For more details on Drips, see "What if I can only invest small amounts of money every month?")
To learn more about brokerages and possibly find a better brokerage for yourself, check out our Broker Center, which features a bunch of questions and answers on brokerages. Since your short-term money shouldn't be in stocks, learn to put it to good use in our Savings Center, where we also offer you some good deals on interest rates.
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