Investor advice is often geared towards those who have thousands or more to invest.
We all know how important it can be to add investment in traditional taxable accounts to our retirement. It may be difficult to invest in traditional taxable investment accounts by simply maxing your IRA contributions. For a year, it takes only $100 per month.
Why Should You Invest in
It is crucial to prioritize your financial needs. Do not invest if you have high-interest credit card debt. It is possible to invest more than what you lose on finance charges. However, this is extremely unlikely. It is best to lower credit card balances.
You should also consider delaying this plan until you have at least three months of salary savings.
Direct investing is not recommended if you are utterly devastated that all your money is lost. Although it’s unlikely, even if you are prudent, you can lose all or part of your investment, regardless of how secure.
Start Investing with Just $100
- A low-cost broker online can help you open a brokerage account. You should not pay more than $5 per trade. This is money that will come out of your investment. You should also ensure that there is no minimum account balance. Otherwise, fees could eat into your entire account balance. You can find out more about discount stock brokers by visiting our broker comparison chart.
- Fund your account. You can send the first $100 to your broker by wire transfer, check, or ACH transfer. Because a check takes a few weeks to process, and wire transfers are too expensive for small amounts of money, I recommend an ACH transfer.
- Make your first investment.
It is very important to choose the right investment. Professional advice can be too costly if you only have $100. However, studies show that diversifying portfolios provides the greatest returns.
You can’t have a diverse portfolio of securities with just $100. That won’t get you one share in Google (GOOGL) or Toyota (TM). Because they are shares of a larger number of securities, Exchange Traded Funds make it simple to invest small amounts of money in many securities. Vanguard Total Stock Market VIPER(VTI) tracks more than 6,000 U.S. stocks. It’s almost like investing your first $100 in the entire U.S. Stock Market. The iShares MSCI EAFE (EFA), invests in thousands of issues from Europe, Australia, and Asia. The iShares Lehman Aggregate bond (AGG), tracks the Lehman Brothers Aggregate Index. It’s similar to investing $100 in the entire bond marketplace.
After three months, $100 has been invested in each fund. This will give you a well-diversified portfolio that should be able to withstand the market’s fluctuations. Gains in other markets should offset losses in any sector of the stock exchange. You will see your account’s value grow as fast as the stock market.
Jack Davis
There are many ETFs available, and the variety is increasing. I personally would avoid them until there are at least $1,000 in stock or traditional bond ETFs.
You can watch your investment grow, then pull back, and then grow again. This is when you need to learn more about asset allocation, and portfolio diversification, and how they are key factors in investment success. You will be more able to weather volatility in markets when stocks drop if you have more investments.
You should seek professional investment advice when your total investment exceeds $10,000. Then, transfer your holdings to the traditional mutual fund. These funds are easier to manage but have lower investment minimums.
