How To Start Investing With $100: 7 Best Ways

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Many financial experts suggest putting at least 10% of every paycheck into a savings or investment account. Some recommend more. Jaspreet Singh, for instance, recently told viewers of his Minority Mindset YouTube channel that you should invest 15% of your income while putting 10% into a savings account. That way, you’re building future wealth through investments while building a nest egg for emergencies.

See: 3 Things You Must Do When Your Savings Reach $50,000

But if you can’t afford those percentages right now, it’s OK. You can start investing with as little as $100 — or even less.

Is $100 Enough To Start Investing?

If you only have $100 per month, or even $100 in extra cash just once, $100 is enough to start investing. Here are seven ways you can get started:

• Buy fractional shares through an investment app
• Invest in index funds or ETFs
• Put your spare change to work for you
• Use a robo-advisor or investment app to rebalance your portfolio
• Reinvest your dividends
• Invest in your employer’s 401(k) plan
• Open a Roth IRA or traditional IRA

Read on to learn how to get started investing with just $100 right now.

1. Buy Fractional Shares Through an Investment App

Investing is easier than ever with the variety of apps available today. Many apps, including Robinhood, let you begin investing in stocks and ETFs with as little as $1. And if you have your eyes on a pricier blue-chip stock like Apple or Amazon, you can purchase a fractional share through the app.

2. Invest In Index Funds or ETFs

Index funds and ETFs also represent a viable way to invest $100. An index fund is a collection of investments, typically stocks or bonds, sold as a set. An index fund is a specific type of exchange-traded fund or mutual fund. Both ETFs and mutual funds, in general, are collections of investments that typically track a specific theme or industry. Index funds aim to track a market index, such as the S&P 500. Mutual funds and ETFs can minimize your risk by offering exposure across multiple investments.

You can purchase mutual funds through investment companies like Vanguard or Fidelity. ETFs, on the other hand, are sold on an exchange, just like stocks. ETFs provide “intraday liquidity,” which means you can sell an ETF at any time. On the other hand, mutual funds are priced at the end of the day, so even if you put in a sell order for a mutual fund midday, you will receive the closing price.

Both mutual funds and ETFs offer a good way to invest in multiple companies, often with some similarities, if you’re looking to invest $100. Thanks to their diversity, ETFs and mutual funds tend to be less volatile than stocks, but you can still lose money on these investments.

However, as a whole, index funds represent solid long-term investments, especially if you maintain a balanced portfolio.

3. Put Your Spare Change to Work for You

If you only have $100 to start investing, you want to not only maximize that money but find easy ways to increase your investment over time.

The personal finance app Acorns lets you round up your spare change from any linked debit or credit card. Once you have $5, you can invest in fractional shares of ETFs.

4. Use a Robo-Advisor or Investment App To Rebalance Your Portfolio

If you only have $100 to invest, it’s important to find ways to make that money grow. One way to minimize your risk of loss on mutual funds, ETFs or even a stock portfolio is to rebalance your portfolio frequently. When you invest, you want to consider the asset class (such as stocks, bonds, mutual funds or ETFs), their volatility or risk and the potential rewards.

As time goes on and you buy more investments that are performing well and sell off others for profit or losses, your portfolio may become riskier or more conservative. Or you may not have a good blend of asset classes.

By using a robo-advisor to manage index funds, not to mention other asset classes, your portfolio is more likely to reflect your long-term financial goals. Acorns automatically rebalances your portfolio to ensure your money is working hard for you.

Some other robo-advisors have no minimum deposit required to start, so you can enjoy the benefits of automated investing with $100 or less.

5. Reinvest Your Dividends

One of the benefits many investment apps offer is the ability to reinvest dividends earned from your stocks, ETFs or mutual funds. This is a great way to grow your initial $100 investment even faster.

You can set up a dividend reinvestment plan so that when you choose dividend-earning investments, the app automatically reinvests those dividends when you receive them.

6. Invest in Your Employer’s 401(k) Plan

If you’re living paycheck to paycheck, you might be hesitant to take money out of that paycheck each month to invest. But it’s even harder to pull money out for investing once it’s hit your bank account. That’s why experts recommend automating your investments and savings with automatic transfers.

Investing in your employer’s 401(k) plan is one of the best ways to make $100 work for you. The money is deducted from pretax dollars, which can reduce the money you might owe in April. And if your company offers matching funds, you can turn that $100 investment into even more automatically.

If you really can’t afford to have $100 in pretax dollars deducted from your paycheck each month, consider a side gig or freelance work to bring in extra money. Then, use that money for living expenses and take advantage of the 401(k) at your full-time job with at least a $100 contribution each month.

7. Open a Roth IRA or Traditional IRA

If you’re self-employed or work side gigs — or if your employer doesn’t offer a 401(k) program — consider opening a Roth individual retirement account or a regular IRA. A Roth IRA is similar to a 401(k) except there are no matching funds and contributions are made after taxes. Also, a Roth IRA has smaller contribution limits and income limits to participate.  

Nonetheless, a Roth IRA offers some benefits over a 401(k), including a wider range of investment options. Plus, you won’t pay taxes when you withdraw the funds since you’ve already been taxed on your contributions. You also won’t have to take required minimum distributions on a Roth IRA, which you do with a 401(k).

A traditional IRA offers tax deductions for contributions if you’re eligible. There are no income limits for participation. The downside? No matching funds from your employer.

Final Note

Even if you only have $100 to start investing, the important thing is to start now. You will be surprised how fast your investment can grow.

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