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“I always knew I was going to be rich. I don’t think I ever doubted it for a minute”
Is it even possible to invest when you don’t have a lot of money to start?
Today, it’s possible to invest when you are not wealthy. Long gone are the days when investing was accessible mainly to rich people. Thanks to technology, investing has become much more democratic.
There is a new breed of investing platforms dedicated to serve the non wealthy small investor. These are specially designed with millennials and college students in mind, but anyone can use them.
Yet, the world of investing is still a bit confusing for many. Young people specially, say that they have fear of investing in the Stock Market. This fear, however, can be overcome with education and research.
The biggest myth about investing is that you need a large sum of money to start. This is simply not the case. There are so many platforms that allow you to make your first investment with as little as $5.
Investment in stocks should be a long term game, if you want to grow your money. This is not the same as day trading or short term trading. It’s not investing in Bitcoin, Penny Stocks and other speculative vehicles, either. It’s a strategy of buying solid stocks and holding them long term.
Long term investing requires a span of at least 5 years. If you need your money before 5 years, then the stock market is not the place to put it. You may be better off with a Certificate of Deposit or High yield Savings for that time span.
Related content: 5 Ways to start to invest for young adults
5 platforms for investing with little money and for earning daily returns
Here are some of the apps and web platforms where you can start investing. Investing thru these apps is also known as micro investing because it can be done with small sums of money. Getting a small return daily may not sound like a lot, but it adds up over time. Regular small contributions, dividends, compound interest and time can build you wealth.
1.Acorns is an app and web based platform where you can invest small amounts of money. The target clients are the millennials college students in order to get them to start investing before they start their career. However, anyone can invest using Acorns.
Acorns is for the person who is starting out to invest in the stock market. The person who has no idea yet on how to invest and doesn’t have a lot of money to invest. It’s a way for getting your start or baby step into the stock market. You can progress later to more traditional brokers.
How it works? You set up an account with Acorns using credit cards and checking account information. You can start investing when you have accumulated $5 of spare change. “your spare change is round off” and invested. The money is automatically deducted form the checking account you have linked up to Acorns.
The pros of investing with Acorns include; Savings is done automatically, no decision from you, there is no minimum investment and the complexity of investing is taken away.
The cons include; fees are high if you keep a small balance and there is limited choices for investment.
Acorns is a good choice for younger investors who don’t understand the stock market. They can start getting into the habit of savings and investing. If you’re an investor looking for higher returns, Acorns may not be for you.
2.Betterment – This platform is a robot-advisor. This type of advisor doesn’t use humans to make investment decisions. The investments are decided by algorithms based on your goals and risk profile.
How it works? Betterment only invest in Exchange Traded Funds or ETFs. These are passive investments in funds the invest in various industry. There are no minimum balance to invest with Betterment.
The pros of Betterment include; Automatic investments management and experts are available for you. This feature is great if you don’t understand investment strategy and need advice.
The cons of this platform include; limited investment choice, only ETFs. If you have a lot of money to invest, you may be better off with a broker paying per transaction.
Related Content: Simple ways for investing in Index Funds
3.Wealthfront – this platform is very similar to Betterment, it’s also a robot-advisor for millennials investors. The investments are made into passive income ETFs. You open an account with a minimum of $500 and the platform selects your investments automatically.
Wealthfront has more options than Betterment when it comes to investment types. At Wealthfront you can invest in retirement accounts, like 401K plans and education accounts or 529 plans.
4. Robinhood — this is an app and web based investment platform. This platform is ideal for the new small investor who doesn’t need all the things a full broker, like TD Waterhouse or Fidelity has to offer. The app is simple to use and it walks you thru the process of buying and selling.
Robinhood offers commission free ETFs and stocks investing for the small investors. However, you are on your own to select the shares of stocks you wish to buy. There are no experts available to service you.
I included Vanguard on this list because although this company has become mainstream, it was the first one to offer the small investor access to the stock market via Mutual Funds and ETFs investing. Vanguard, like many of these app based new platforms, was a disruptor when it first opened for business in 1975.
Although Vanguard has minimum for investments, from $1,000 to $3,000, this is relatively low compared to the brokers serving wealthier individuals.
You can invest in a robust list of mutual funds offer at Vanguard or in ETFs with a Vanguard Broker account. You also have access to Vanguards investment advisors. It offers retirement accounts and educational 529 plans to investors.
Related Content: How to set up passive income investment for financial freedom
Which platform to choose?
These are only 5 of the platforms for individuals to start investing with little money. Before choosing a platform you need to:
- Decide which instruments you want to invest in. Stocks, ETFs etc.
- How much money you have available for investing
- Where do you feel more comfortable investing. Do you want an app, a website or a more traditional platform
- Do you rather use a robot advisor
Bottom line: 5 Places to Invest with Little Money for Daily Returns
All these platforms have been established to serve the small non wealthy investor. The person setting out to invest with little money can use any of these 5 platforms. The apps and web based applications specialize in ETFS, stock trading and mutual funds (Vanguard). Therefore, there is a variety of instruments to invest for the new small investor.
The more you invest and the longer you invest for, the greater your potential for returns. Remember, 5 years is the span for long term investing, not 5 days. If you make small periodic contributions, reinvest your dividends, receive compound interest, leave your returns for reinvestment, you can end up doing well in the long term.
Also, Investing in the stock market has risks, including loss of partial or all your capital, so take risks accordingly.