Looking to invest in 2023 but looking to keep the costs low? Then let’s get started and take a look at 7 of the easiest options available for investors to begin investing with little money that seek to offer good returns.
7 Best And Easy Options To Start Investing With Little Money
- Start Saving The Pennies
- Take a look into Robo-Advisors
- Look into investing in ETFs
- Enter the stock market with little money
- Consider investing in the real estate market
- U.S Treasury Bonds and Worthy Bonds
- Certificates Of Deposit (CDs)
If you are a beginner investor you may not be familiar with the term ‘Latte Factor’.
This popular term was given by David Bach, an American Financial author who made it simpler for beginner investors to realise that their daily coffee habits are a great example of the way we unconsciously spend in order to gain a little value to our everyday lifestyle.
So if you decide to pull away from these pricey everyday indulges and place this money into an investment, it can potentially be more beneficial in the long run, unless you are in a position to do both. But regardless this term is still a great way to confirm that you can invest with a little sum.
Investing is not as daunting as some may believe and it is not all that you see in the movies.
Yes, you have the big Wall Street investors that are in it for the big game but there are also many small-time investors who want to be a part of the action but at a mere fraction of the cost.
Either way, this avenue is a great route to enter and is just as simple as any other form of normal everyday activity, if not easier.
What Is An Investment?
Whilst we are on the subject of being new to investing and looking at the easy ways in order to start investing with little money, first it pays to know exactly what an investment is.
In simpler terms, to invest is to place money into an asset in order for the asset or assets to generate higher returns as they seek to grow over a period of time. The time frame can be held by an investor in both the short-term or the long-term period, it all depends on the investor's strategy.
Additionally, you can invest in a lot of things in the world today and it does not mean that it has to be carried out via Wall Street, there are many ways.
For example, you have real-estate investments where an investor can place funds into property with the hope that they will appreciate well overtime, of course, you have stocks, ETFs, bonds and many more that are traded across various international markets, you can buy the timeless product gold or you could look to purchase any valuable object that could maintain or increase in value over time.
In 2023 there are many forms or different ways to place your investments that require little or sometimes no further work that is required after you have entered into an investment. Two prime examples are a savings account or a Certificate of Deposit (CDs) as once you have placed your investment you do not need to take any further action until you wish to withdraw your funds.
As the world has shifted more into the digital world, so too has investing which is why investing has never been as easy, quicker and efficient. You can invest in any of your chosen investments anyplace, anytime and anywhere in the world.
The world of investing is not as scary, although it may seem this way at the start of your investing journey. If you invest in the right investments, conduct as much research into your chosen investments as you can and invest wisely, you will have a successful journey awaiting ahead of you.
Now we have explained that it is possible to invest with little money, let's take a look at 7 of the easiest and most rewarding investing options that investors should consider to buy into with little money.
7 Ways To Start Investing With Little Money
1. Start Saving The Pennies
The point may come as no surprise as it is the most vital step to begin this journey and it can be quicker and much easier than you think.
To begin, it's advised that you should pick a plan that suits you best in order to save your money that you are looking to invest. This could be done in one of the popular forms such as the ‘Cookie Jar’ savings technique which in modern terms is the non-electronic way of opening a separate savings account, the envelope saving technique and many more.
It is also strongly advised within investing to keep your personal liabilities separate to your disposable income for many reasons, with the main one being that you do not end up sitting in a tricky situation financially with unpaid bills. So opting to take on board one of these techniques is the first step in the process.
Always remember that you are the one in control of how much you save, and in turn how much you spend or place within an investment. So if you decide to save $10 per month over the course of 12 months, this will accumulate to $120 that you have in order to invest. But this all comes down to your financial goals to how much you wish to invest and the timeframe that you give yourself.
As briefly touched on, electronic savings accounts are the modern day way of saving funds and come as one of the safest forms of investments for an investor as they are straightforward, easy and manageable. These savings accounts are offered by all mainstream banking firms whilst you can search online to find the best online high-yielding savings accounts on the market currently.
Here are three high-yielding savings accounts for investors to consider in 2023:
- Marcus Online Savings Account - Start with $1 - No fees or charges - 0.40% AER (variable). This account is given by the financial investment bank Goldman Sachs and has been given the thumbs up by many leading financial advisors as a savings account for 2023.
- CIT Bank Base Tier Savings Account - Minimum start $100 - No account opening fees 0.42% APY. The Base Tier savings account offered by CIT Bank is a great online savings account but it does come with a higher deposit rate of $100 minimum to open an account. You also have to open a eChecking everyday account in order to receive up to 0.50% interest on your savings. But the additional benefits of this account and the eChecking account are definitely something to strongly consider if it is within your reach.
- Barclays Everyday Online Saving Account - 0.01% AER- Minimum £1 to open - Access to withdraw online or over the phone. Barclays Bank is offering many online saving accounts at present with the Everyday Saver being its most popular. Another additional benefit that Barclays offer investors is that of their investing savings accounts. These accounts are designed to help both beginners to experienced investors get their investing goals met along with offering exclusive offers that are subject to restrictions and limitations.
2. Take a look into Robo-Advisors
Although you may wish to take charge and be hands on yourself within your journey into investing, additionally there are services such as Robo-Advisors that can take over this for you and make your journey much easier, quicker and can be more time efficient as they take over the groundwork.
What is a Robo-Advisor?
If you are a beginner to investing you may not be familiar with the term Robo-Advisor which is why we thought we would explain.
A Robo-Advisor is a digital platform that provides automated, algorithm-driven planning services that require barely or no human interaction as they seek to optimise straightforward investments and look to build passive index portfolios for investors.
Robo-Advisors are also known to be fairly cheap to invest in as well as being able to run on low operating funds, which is why using a Robo-Advisor at the start of your investing journey may be the best way forward as you begin to find your feet and lean more on the ways of investing.
In short, a Robo-Advisor is a digital service that is seeking to create a low-cost diverse portfolio mixed up of a collection of various investments including stocks, bonds and maybe ETFs might make their way in. As they keep a hold and rebalance the portfolio in order to opertermise better returns, add further diversity to the collection, optimise for tax reasons and more.
In essence doing it all for you.
Robo-Advisors have been recognised for many standout features including low fees, been given a Nobel-Prize award for their investments models and lastly not all Robo-Advisors are designed to just target certain sectors they can have a collection across the broader market in various industries.
But just like all investments and services, Robo-Advisors do come with their cons which are worth pinpointing.
Firstly they are not 100% personalised to tailor around an investors wishes although this is their aim, sometimes it will not be the case. They can also seem to be in-personal at times as there is no face-to-face interaction or very little interaction at all. Finally, we did pinpoint that this service can be cheap but they can sometimes hold higher fees when it comes to their annual fee as most base this on a small percentage of your balance and this can be high depending on what your balance is.
You can search and look around at other online digital platforms that offer this service and pick whichever suits you best. Although, it is wise to consider the bigger picture in case you change your mind or look to add more diversity down the line so choosing a platform that offers a great mixture with good benefits is essential.
Besides the few cons of Robo-Advisors this service is a popular way of investing in 2023, especially as more investors come to join the party. For ease, time and expertise opting to use a Robo-Advisor might be the best route for you to start out your journey.
3. Look into investing in ETFs
ETFs are many investor’s go-to investments and it does not take a lot to figure out the reasoning behind this.
What is an ETF?
An Exchange-Traded Fund (ETF) is a type of investment that is traded on stock exchanges that is made up of a basket of securities which could include gold, stocks and bonds and more that track a certain leading index. For example, take First Trust Nasdaq Cybersecurity ETF (CIBR), this fund is designed to track the performances of cybersecurity engaged companies across the technology and Industrials sectors.
The aim and purposes of these funds are to give investors a range of diversity as ETFs are made up of various instruments, lower fees as an investor is just investing in one investment that is spread across into various sectors and lastly, they are designed to be traded just the same as a stock on the market yet hold their strongest advantage of being safer investments.
It is worth pointing out that ETFs are similar but different in ways to Mutual Funds.
As ETFs are designed to track various indexes they do hold the upper hand over mutual funds and tend to be more cost-effective. Yet mutual funds do provide more active management as they are seeking to get the better-performing stocks inside the fund in order to achieve greater returns, but this can lead to be more costly.
The last difference that sets these two funds apart from one another is that ETFs are traded throughout the day, whereas mutual funds are traded at the end of each trading day.
Investing in ETFs can be just as simple as investing in stocks but they are easier to manage as they are managed by a professional. All you will have to decide upon is choosing the right ETF you wish to invest in and follow the route.
Depending on your financial status, there are many ETFs that you can seek to invest in at a good price today. Below are three ETFs that are looking to be the most attractive to invest in:
- First Trust Nasdaq Cybersecurity ETF (CIBR)
The cybersecurity fund tracks the equity fund Nasdaq CTA Cybersecurity Index SM and currently holds Cisco Systems Inc at 6.57%, Splunk Inc at 5.89% and CrowdStrike Holdings Inc (Class A) at 5.71% within its top 10 holdings. Over the past year CIBR has gained over 80%, outperforming the broader Technology market. Whilst the Cybersecurity market is predicted to reach just over $350 billion by 2026 from $156 billion in 2020, this ETF fund could just be the right pick of the bunch.
- iShares Edge MSCI USA Quality Factor UCITS ETF (IWQU)
The IWQU ETF is an American ETF from iShares Edge MSCI World Quality Factor UCITS ETF (IWFQ).
Although IWFQ is a good ETF to be a part of it does come at a significantly higher cost which is why the America ETF IWQU comes above to be added.IWQU provides exposure to some of the biggest performing companies within the USA which include Microsoft Corp (MSFT), Apple Inc (AAPL) and Johnson & Johnson (JNJ) to name just three holdings from its top 10. IWQU has a Total return of just under 50% from March 2020 to March 31st 2021 and currently holds a NAV Total Return of 8.02% YTD.
- iShares Mortgage Real Estate ETF (REM)
The real-estate ETF REM offers investors a good opportunity to add diversity to their collection as this ETF is designed to give exposure to the U.S residential and commercial mortgage real estate markets. The ETF currently has 14 holdings as of 14th April and includes Annaly Capital Management Reit Inc (NLY), AGNC Investment Reit Corp (AGNC) and Starwood Property Trust Inc (STWD) as its top holdings. REM has a current management fee of 0.48% and is holding up well with a Total Return of -1.40% down YoY despite strong challenges.
4. Enter the stock market with little money
Okay, you may have put two and two together as ETFs are a form of investing similar to stocks, but they are not classed as stocks per say which is why entering into investing in the world of stocks comes next.
Investing in stocks can be a daunting and scary thought for any beginner investor and you may think that it requires a lot of money to even enter this world, but both are not the case, in fact the opposite.
One of the first steps to mention if you are considering beginning your investing journey into stocks and you are looking to do so via an online trading platform, then you may not be aware that you can practice trading via an online virtual trading platform.
A virtual platform will enable you to participate in the whole process of stock trading. From buying and selling stocks too creating a diverse portfolio for you to manage. And it all comes with the added advantage that you are using virtual funds and not your own.
This is a fantastic tool to use, especially if you are a beginner into this avenue as it will help you to put your understanding into practice along with helping you manage your money wisely for when you do decide to step into reality.
Because the world has moved heavily into a digital world, online trading platforms are extremely popular among investors globally and with many now offering very little or no costs in order to open an account or even on commission fees when placing an investment. This was not the case a few years ago as it was almost mandatory that stockbrokers would charge at least a couple of dollars every time you either bought or sold a stock.
You have an array of options to choose from in the world of stocks, it all comes down to your budget and how much of a challenge you are wanting to take.
As a beginner investor, Penny Stocks are also linked closely if you are aiming to keep the costs low. These stocks are good additions but they do come with stronger risk factors compared to stocks.
What are penny stocks?
To keep it simple. Penny stocks are shares in small companies. These companies can be traded on public markets such as Nasdaq and New York Stock Exchange (NYSE) but the majority you will find will trade on over-the-counter (OTC) markets.
The reason as to why you may ask why they all do not operate on public markets could be for numerous reasons. These reasons could be that they face too many challenges to be placed on a public exchange including higher costs to be listed on a public exchange, they may not wish to be on a public exchange or many more factors could be the reason behind why they don't operate on public markets.
Investing in penny stocks can be rewarding if you research wisely into the right ones as they aim to grow and offer great returns to their shareholders.
Additionally, there are fractional or partial shares as some may refer to them as.
These shares are basically what they mean they are a fractional share of a company's stock. The benefits of investing in fractional shares are great when looking to invest in stocks with little money, as these shares enable investors to have access to some of the best and biggest stocks on the market for a little price of $5 into some of the worlds biggest companies like Alphabet Inc (GOOG) who sits on the market today at $2,288. These shares bring more investors to the market because they are more affordable to enter the stock trading world and lastly fractional shares benefit the stock to be able to grow by developing and delivering new products and services as more people are involved.
Read Also: What Are The Top Stocks To Buy Under $5?
5. Consider investing in the real estate market
For many years now investing in real estate has been a go-to for many investors. Whether it be physically buying a property or properties or if it is investing in "real estate crowdfunding".
Real estate crowdfunding is very similar to equity investing where it enables investors to be able to invest into fractional shares of property companies, adding to the companies aims of being able to gain capital that they may not have been able to achieve.
So in reality, crowdfunding benefits both investors and the companies as they both aim to gain higher profits and returns in the short-term outlook as well as achieving good growth in the long-term if the companies manage to sustain their position or if they keep on growing.
The pros to investing in real estate crowdfunding are that it enables investors to invest in properties that may not of been possible, you can invest in a specific property if you wish, the industry has a solid track record of making investors wealthy over time, and lastly crowdfunded real estate deals offer high profit potential as many have brought in revenue returns over recent years of just above 15% annually.
The cons of investing in real estate crowdfunding are that it can be costly compared to other forms of investments as you could see that a minimum fee could be $2000 instead of $20 for a stock for example. Secondly, real estate crowdfunding can be a lot more riskier as you are essentially mainly placing your money into one asset with no guarantees of any returns. And one of the last drawbacks on these deals is that they are not liquid investments, meaning that you can not seek to gain cash quickly from these deals.
If investing in real estate has always been on your agenda and due to the high cost factors involved you have not been able to invest in this industry, then we strongly recommended that you consider real estate crowdfunding. These assets will strengthen your diversity, give you good returns over the long-term period along with being able to learn and understand the full ins and outs on how the property industry operates.
Even though the costs can still be pricey to invest in these deals, the positives way out the negatives. Including that you do not have to build up a pot of spare cash in case of any maintenance issues, this is just one benefit of indirectly investing in the real estate market.
6. U.S Treasury Bonds and Worthy Bonds
Treasury bonds are deemed to be one of the safest or if not the safest form of investments that are available to investors.
Bonds are fixed income instruments that represent a loan from an investor to a borrower (company), in modern terms are like I.O.U’s. The positives of investing in bonds is that they always come with stability. One reason is that they come with an agreement between a lender and borrower so there is always an end date of when the final payment is due and secondly, lenders can also place both variable and fixed interest rates into the contract that can be paid quarterly and annually to the lender.
Holding treasury bonds within your collection of investments can lower the risk factors as they are classed as risk-free investments, can reduce volatility along with diversifying your portfolio and provide a good safety net.
Realistically these investments will not make you wealthy but they are a great place to place your money and earn interest on your funds, until you make the choice to move forward into a more rewarding investment.
In recent times with interest rates being ultra-low and other factors impacting the market within the U.S and other countries, many investors have looked to back away from stocks and have jumped to the safer investments such as Bonds, Index Funds and ETFs to provide security in uncertain times.
If treasury bonds are an investment of interest take a look at Treasury Direct portal. Here you will be able to look and invest in these bonds from as little as $100 and for a length of up to 30 years plus. The last positive to mention is that you do not need to be a U.S citizen to invest in treasury bonds, although you may be required to have a U.S tax identification number or alternatively an email address in order to open an account to invest in these bonds.
Conducting further research and holding on for the right time to invest in treasury bonds is advised as the yield on 10-year treasuries have declined by 9.3 basis points in recent days.
Then take a look at worthy bonds.
Worthy bonds are modern investments which have become an attractive investment for investors who are looking to invest little money with the aim to make good returns whilst sitting in a safe position.
These asset-backed bonds are designed to fund loans to creditworthy American businesses, yet have different requirements that borrorows have to meet than of treasury bonds such as a 36 - month term and interest is paid weekly instead of quarterly or annually.
But the biggest attraction with these bonds is that they are designed to take investors money to invest into various bonds but only if the companies can look at achieving a return of above 5%.
It may seem too good to be true, but it is true which is why these bonds are becoming more popular as investors learn more on what is entailed within these investments.
To round it up you will make a profit and the company will make a profit, making it a win-win investment for all involved.
To invest in worthy bonds you need a little deposit of $10 to become a big part in a small worthy portfolio.
If Worthy bonds are of interest and you wish to learn more visit www.worthybonds.com to discover more on these rewarding worthy investments.
Alongside these two types of bonds there are other forms of bond investments that are available to investors such as Corporate Bonds, Municipal Bonds and more that all hold various advantages to suit investors various financial needs.
7. Certificates Of Deposit (CDs)
Certificates of deposit or CDs as they are more commonly known, work in a very similar way to that of savings accounts.
One of the key differences between the two is that investors can receive higher interest rates from CDs as they look to lock in your money for a set period of time, whereas a savings account will enable you to withdraw funds the same day or in a matter of a couple of days leaving the interest rate to be lower.
Subsequently, the gains from the interest rates still might not be as much as what you would gain from other investments, but you can shop around in order to invest in the best CDs on the market as they all come with assorted yields and maturities from a range of various banks and credit unions.
Additionally, you always know where you stand with a Certificate of Deposit as you will find that the prices are fixed no matter how the economy may fluctuate making your investments easier to manage.
Other benefits of CDs are that you can look to change interest rates if the price does change with certain institutes, you can invest as little as $100 along with most CDs offering no fee charges, CDs pay interest monthly and lastly you can even look to broaden your horizons as time moves forward with Jumbo CDs. Jumbo CDs offer much higher interest rates but do hold a minimum deposit requirement of $100,000, typically in order to receive the full benefits.
Although, just like any investment CDs do come with some disadvantages that you need to be aware of before investing. These include:
- Low liquidity - As your money is tied up for a longer period in order to meet the ‘term’ requirements, this leaves the option ruled out if you need cash quickly. Alongside, you will find that most CDs hold withdrawal fees and they can look to take away the cost in various forms including lowering interest if you decide to go down this route.
- Returns of CDs are often low - As previously mentioned the returns on CDs can be low in comparison to other investment options such as stocks on bonds. So if you are looking to generate good respectful returns CDs may not be your first choice to invest into.
- CDs are subject to tax - In relation to retirement accounts that are not funded with post-tax wages, these accounts are also subject to tax implications. The interest in which your CDs gain are subject to income tax which will be taken either monthly, quarterly or annually. You should read the terms on income tax within your chosen CDs before investing.
Here are three CDs that investors should consider for the one-year outlook in 2023 that offer the best interest rates, various additional benefits for investors, little or smaller deposits required and have been the best performing CDs in recent times:
- Synchrony Bank CD - 0.50% APY - Minimum deposit $0.
- Marcus by Goldmans Sachs - 0.55% APY - Minimum deposit $500
- Ally Bank High Yield CD - 0.55% APY - Minimum deposit $0
CDs are a safe, reliable and easy investment for investors who are looking to invest with little money. You can keep these investments for a short period of 3 months leading up to 30 years plus if you wish, whilst its strongly recommended that you build up a portfolio of other additional investments that can seek to offer you higher returns and enable you to experience fully what the world of investing can offer.
Overview: 7 Ways To Start Investing With Little Money
All of the investment options above are great ways to start investing with little money. These investments all hold individual titles of being the most commonly used, being the safest, quickest and easiest forms of investments available to investors on the market today. All with the added benefit of being able to place your investments easier and quicker via an online digital platform or an online website making your investment journey that much smoother.
It is also worth noting that there are further ways of investing with little money, as there are plenty of new and older investments options available. Just be sure to take the time to research thoroughly and make sure that you are 100% satisfied with any investment that you are going to place.
That being said, it is time to reward yourself and start investing.