The sooner you start investing, the better. All great fortunes started out with a small amount just like big, tall trees started as a tiny nut.
Many people think you need over $1,000 to invest but that's just not true. You can start your journey to financial independence with as little as $100.
Can't come up with $100? Learn how to stop living paycheck to paycheck and start saving money by paying yourself first.
In the long term, starting the habit of investing is more important than the amount so you take advantage of compound interest. Your money continues to grow well past the initial $100, even if you don't add any more money to your account.
Best Ways to Invest $100 in the Stock Market
- Open an IRA account and buy index funds
- Invest in individual stocks
- Choose a good roboadvisor
- Invest in fractional shares of America's best companies
- Trade stock options
Before we cover how to invest $100 in the stock market, please make sure you have an emergency fund to cover unexpected expenses in your life. Investing without an emergency fund is dangerous so start building that right away.
Dave Ramsey recommends you build up an emergency fund of $1,000. I think that's a great starting point with your long term goal of savings at least 3 to 6 months worth of monthly expenses. This will protect you from unexpected job loss or anything that life throws your way.
1. Open an IRA account and buy index funds
Planning for retirement is a top priority for anyone who wants to achieve financial independence. You have to plan now so you don't have to keep working well past retirement age. The earlier you start, the better.
Even if you have a 401k plan with your employer, start your own IRA account and buy low cost index funds to grow your retirement account on autopilot.
Why index funds? Because you don't have to worry about picking stocks and will own the entire market for an extremely low cost. In fact, Fidelity launched zero fee index funds in 2019 so you can buy index funds for free!
There are several different type of IRAs available. Here's a general recommendation guide based on your current situation:
- For Working Professionals: Open a Roth IRA so your contributions grow tax free
- For Self-employed or Freelancers: Open a SEP IRA so your contributions grow tax free
Time flys and you want to be well prepared when you decide to retire or walk away from your job. Every job comes to an end so you need to prepare for the next chapter of your life.
2. Invest in Individual Stocks
Investing in stocks is probably the best way to grow your wealth but it comes with extra risk. Smart investors buy stocks in companies they understand and can explain easily within 30 seconds to a complete stranger.
Consider investing in companies whose products you use on a regular basis. That way, you are putting your money where your mouth is. For example, I own Visa stock and Netflix stock because I use my Visa debit card and watch Netflix with my Roku every day. When you enjoy a product, why not get some of that money back by owning stock too?
Investing in what you buy is the easiest way to find great stocks for investment. Another good strategy is to subscribe to investing Youtube channels and keep your eyes open while moving around society. Listening to what your friends, coworkers, and family spend their money on is another great tip.
For advanced investors, read through company quarterly reports and study their annual reports. These reports provide lots of insightful information directly from the company's CEO and other C-level executives.
3. Choose a good roboadvisor
If you aren't into picking individual stocks, then selecting a good roboadvisor automates your decision making process with their balanced portfolio allocation tools.
Roboadvisor builds a portfolio based on your unique personality and investment goals then help you stay on track with regular portfolio adjustments as your balances increases over time. The downside is you will pay extra money in fees.
You will earn higher overall returns by selecting stocks but roboadvisors do help people who don't have time to learn about investing yet desire extraordinary investment returns.
My Recommendation: Open an Acorns account and invest in a balanced ETF fund
4. Invest in Fractional Shares of America's Best Companies
Fractional share investing is a powerful tool to invest in expensive stocks by buying parties shares in smaller amounts. For example, Apple stock (AAPL) currently trades at $320+ so most investors simply pass on the opportunity to own shares. With fractional share investing, you can invest $100 now and own 1/3 of a share. If you invest $100 per month in APPL stock, you will own 1 whole share in just 4 months.
Beginner investors should embrace fractional shares because it removes a huge barrier for most investors: cost. $100 is enough money to buy fractional shares in up to 5 companies then continue adding to your investments over time.
My recommendation: Open a Stash Invest account and invest in fractional shares
5. Trade Stock Options
Stocks options allow investors the right but not the obligation to buy or sell large amounts of shares with a tiny premium. Options traders hope to resell those contracts at a profit if the underlying stock price goes up or down. This is a strategy for more experienced investors who want to grow their account balance much faster because options move fast!
It's possible to grow $100 into $1,000 or more if you know what you are doing. Trade stock options once you completed all the steps above.
My recommendation: Open a Robinhood account and trade stock options for free.