Rome wasn't built in a day. Neither is your savings account.
Many people think that it's impossible to start investing with limited funds. The truth is, it's more difficult, but you just need to know what options are available for you. Even $100 can offer many ways to invest and make it worth your while. I can think of two reasons why. First, investing should become a regular habit. Second, everyone has to start somewhere. Starting with a little puts you far ahead of those who don't start at all.
Here are some easy ways to invest $100:
1) An Emergency Fund
Okay, I know...not that exciting. But the evidence showing the importance of having an emergency fund is very compelling. Most say that you should have six month's living expenses saved in an emergency fund account. A decent sized margin of safety means that when the unexpected occurs, your'e prepared. The best way to do this is with a liquid asset like cash.
2) Your 401(k)
This may be one of the easiest ways to invest any amount of money. Even better, you can have money taken directly out of your paycheck and deposited here. If your employer has a 401(k) match, it would be wise to take advantage of it, right?? Keep in mind that you should know what your'e investing into within the 401(k).
3) Index Funds
Index funds are a type of mutual fund that are constructed to match or tract a market index. Basically, you get a broad market exposure with low operating expenses. Because of this, they are popular for a portfolio for retirement accounts. Beware of fees though. Its best to go with a major provider who's fees are already low. Here's a great article on how to get started.
4) Roth IRA
Since the most you can contribute to these is $5,000, a Roth IRA is a great way to invest with little cash. Roth IRAs are funded with after-tax dollars, meaning that the contributions are not tax deductible. But when you start withdrawing the funds, qualified distributions are tax free. Check eligibility requires though, as not everyone can contribute to one.
Finally, a short list of poor investments:
1) Penny Stocks
2) Gambling
3) Pyramid Schemes
All three of these investments have a high probability of you losing your money.
I hope this post opened your eyes to more ways to invest $100. Excluding the simplest way: blowing it in a store.
More soon!
-mms