How to Start Investing with $100: A Simple Guide for Beginners
Have you ever found yourself with $100 in your pocket, wondering how to turn it into $1,000, $10,000, or even $100,000? It’s a common thought, but unfortunately, schools don’t exactly prepare us for the world of investing. Imagine if they did — wouldn’t that have been awesome? Instead, many of us find investing intimidating, especially as beginners.
But here’s the good news: investing doesn’t have to be complicated. In fact, I’m here to simplify the entire process for you. Now, I’m not saying it’s easy to get rich, but with calculated risks, you can grow your wealth over time.
Everyone’s risk tolerance is different, so let’s break down how to invest for beginners with just $100. As we explore these options, keep in mind that as risk increases, so does potential reward. I’ll also be showing you how I would invest $100 in each option so you can see exactly how to do it yourself.
Invest in Yourself First
Before diving into specific investments, my first piece of advice is always to invest in yourself. This could be through buying books or improving your skills — both of which offer invaluable returns. But if you’ve already done that, let’s talk about where to actually put your money.
1. High-Interest Savings Account: The Safe Start (Risk Level: 1/10)
The first place to consider putting your $100 is in a high-interest savings account. This option has a risk level of 1 out of 10, meaning it’s one of the safest ways to start. While it’s hard to find a savings account that offers a substantial interest rate these days, the main reason to consider this option is to start building an emergency fund.
The emergency fund is money you can access when something unexpected happens, like when my hot water system broke shortly after I moved in.
When choosing a savings account, look for two key things: a good interest rate (even though it may not be high) and the ability to access your money instantly.
2. Gold: The Safe Haven (Risk Level: 2/10)
Next up is gold, often referred to as a “safe haven.” I rate this investment a 2 out of 10 on the risk scale. Since the creation of the Federal Reserve in 1913, the U.S. dollar has lost 95% of its value, meaning your money is constantly losing purchasing power. Gold, on the other hand, has maintained its value.
For instance, if you had a $100 nugget of gold in the year 2000, it would now be worth around $580. Gold has not changed in size, but its value has increased as the value of the dollar has fallen. So, for me, gold is actually more of a store of value than an investment.
However, gold has its drawbacks, mainly in the form of opportunity cost. You have to decide whether you want to protect your $100 against inflation or invest it in something with a higher growth potential.
There are two main ways to invest in gold: buying physical gold (like jewelry or coins) or purchasing gold through a broker app. The latter option allows you to buy gold at its true value and sell it quickly if needed.
3. Low-Cost Index Funds: The Slow and Steady Growth (Risk Level: 3/10)
If gold isn’t your thing, consider a simple low-cost index fund. This option rates a 3 out of 10 on the risk scale and is perfect for those who prefer a more hands-off approach.
Investing $100 per month into an index fund with a 7% annual return could grow to $123,000 over 30 years. This is the magic of compound interest working in your favor.
You don’t need to be a stock market expert to invest in index funds. Even Warren Buffett, one of the richest men in the world, bet $1 million that a simple S&P 500 index fund would outperform a professionally picked portfolio of hedge funds over 10 years — and he won.
Think of an index fund like a bag of mixed candies — you get a variety of the most popular stocks in one package, including companies like Apple, Microsoft, Amazon, and Nvidia. Your money is spread across these big names, reducing your risk while giving you a slice of the market’s growth.
4. Individual Stocks: Risk Level 4/10
If you’re feeling more adventurous and willing to take on more risk, investing in individual stocks could be your next step. Unlike index funds, where your money is spread across a variety of companies, investing in individual stocks means you’re putting all your eggs in one basket. This can be more rewarding if you pick the right company but also riskier if you don’t.
Let’s say you invested $100 in Amazon stock back in 2001. Today, that investment would be worth thousands of dollars. But, if you’d invested in a less successful company, you might have lost all or most of your money. That’s why investing in individual stocks is considered a higher risk; you could win big or lose big too.
To reduce this risk, it’s essential to do your research. Look into a company’s financials, their growth potential, and the overall market conditions.
For example, using my $100, I decided to invest in a company that I believe has a solid future. I did my homework, checked out their earnings reports, read up on their management team, and assessed their industry’s growth potential. After weighing the risks, I made my purchase, and now I’m a proud owner of a small piece of that company.
Remember, investing in individual stocks can be exhilarating, but it’s also riskier. You might see more dramatic swings in your investment’s value, both up and down, so only invest what you can afford to lose. And always play the long game.
5. REITs (Real Estate Investment Trusts): Risk Level 5/10
If you’re interested in real estate but don’t have the capital to buy property, investing in REITs could be a smart move. REITs are companies that own, operate, or finance income-producing real estate. By investing in a REIT, you can gain exposure to real estate without having to buy, manage, or finance properties yourself.
One of the benefits of REITs is that they tend to offer high dividend yields, meaning you could receive regular payouts. However, like any investment, there’s a risk involved. The value of REITs can fluctuate with the real estate market, and if the properties they own or manage perform poorly, your investment could lose value.
With my $100, I decided to invest in a REIT that focuses on commercial properties. This allows me to be a part of the real estate market without having to buy a physical property myself. Over time, I’ll collect dividends from this investment, which I can then reinvest to grow my wealth.
6. Cryptocurrency: Risk Level 6/10
Now, let’s talk about something that’s been grabbing headlines for the past few years: cryptocurrency. If you’re looking for an investment that can potentially deliver massive returns but also comes with a high degree of risk, crypto might be for you.
Cryptocurrencies like Bitcoin, Ethereum, and others have seen explosive growth over the past decade. However, they’re also known for their extreme volatility. One day, your investment could skyrocket, and the next, it could plummet.
When I first heard about bitcoin many years ago, I, like many others, didn’t know much about it. But after seeing its potential with blockchain and doing some research, I decided to invest in crypto as well. I started by buying a small stake in bitcoin with $100. Over the years, I’ve seen its value fluctuate wildly, but it’s also given me some of the highest returns of any investment I’ve made. I now have a significant portion of my portfolio in crypto, but these are all carefully selected projects with high potential.
If you’re considering investing in cryptocurrency, it’s crucial to understand the risks. The market is still relatively young, and prices can swing dramatically. Only invest what you’re willing to lose and consider spreading your investment across multiple cryptocurrencies to reduce risk.
7. Peer-to-Peer Lending: Risk Level 7/10
Peer-to-peer (P2P) lending is another investment option for those willing to take on higher risk for potentially higher returns. P2P lending platforms connect borrowers directly with investors, cutting out traditional financial institutions. As an investor, you can lend your money to individuals or small businesses and earn interest on the loan.
However, P2P lending isn’t without risk. There’s always the possibility that the borrower defaults on the loan, meaning you could lose some or all of your investment. To mitigate this risk, many P2P platforms allow you to diversify your investment across multiple loans.
P2P lending can be a great way to earn passive income, but it’s essential to understand the risks involved. Do your due diligence on the platform you’re using and the borrowers you’re lending to.
8. Startups & Crowdfunding: Risk Level 8/10
Investing in startups through crowdfunding platforms can be thrilling but also incredibly risky. When you invest in a startup, you’re betting on a new business with the potential to grow exponentially or fail entirely.
Crowdfunding platforms like Kickstarter, Indiegogo, or specialized equity crowdfunding sites allow you to invest in startups with relatively small amounts of money. In return, you could receive equity in the company, meaning you own a small piece of it.
I decided to put my $100 into a startup that caught my eye. The company had a strong team, an innovative product, and a solid business plan. However, I’m fully aware that this investment could either turn into something significant or result in a total loss.
Investing in startups is not for the faint of heart, and it’s essential to understand that many startups fail. However, the ones that succeed can offer massive returns. If you’re considering this option, make sure to diversify your investments across several startups to reduce the risk.
9. Trading & Speculative Investments: Risk Level 9/10
For those who crave the thrill of high-risk, high-reward investments, trading and speculative investments might be appealing. This could include day trading stocks, options trading, or investing in speculative assets like penny stocks or highly volatile commodities.
These types of investments can yield significant returns quickly, but they can also lead to substantial losses just as fast. Successful trading requires a lot of time, research, and a deep understanding of the markets. It’s not something to dive into without proper preparation.
Speculative investments are not for everyone, and they should only be done with money you’re willing to lose. If you’re new to investing, it’s usually better to start with safer options before moving into speculative territory. And don’t use leverage.
10. High-Risk Ventures: Risk Level 10/10
Finally, the highest risk level is reserved for high-risk ventures, which could include anything from starting your own business to investing in highly speculative markets or unproven technologies. These ventures can either lead to massive wealth or result in a complete loss of your investment.
Starting your own business, for example, can be incredibly rewarding, but it requires significant time, effort, and money. Many businesses fail within the first few years, so it’s important to be fully prepared for the challenges ahead.
I once used $100 as seed money for a side business idea. I knew the risks were high, but I was passionate about the project. Over time, I reinvested the profits back into the business, which eventually grew into a successful venture. However, I was also prepared for the possibility that it might not work out.
High-risk ventures are not for everyone, and they require a strong stomach and a willingness to face potential failure. If you’re considering this route, make sure you’re fully committed and have a solid plan in place.
Final Thoughts
Starting with as little as $100, you have a variety of investment options, each with its own level of risk and potential reward. Whether you choose to play it safe with a high-yield savings account or go all-in with high-risk ventures, the important thing is to invest wisely and within your comfort zone.
Remember, the goal is not to get rich overnight, but to grow your wealth steadily over time. By taking calculated risks and continuing to educate yourself about different investment opportunities, you can build a solid financial foundation for your future.
My final piece of advice is to divide the amount you invest into chunks and allocate them to the ones that suit you best. For example, you could put half of your money in an index fund, a quarter in stocks of your choice, and the remaining quarter in crypto or REITs.
Always balance risky investments with safe investments!
Feel free to ask me any questions about anything. Have a good day and see you later.
