Start Investing with Little Money: 7 Easy Steps

You don’t have much money in your bank account, and you’re even in debt. So, you think investing is not for me.

WRONG!

Starting to invest with limited funds can seem as intimidating as trying to buy a beach house on your monthly coffee budget. But with the right strategies and a little smart thinking, it’s not only possible, it’s a very wise financial move.

Here are the steps you need to follow to get started investing, even if your wallet feels lighter than a helium balloon.

Step 1: Realize You Don’t Need a Fortune to Start

First of all, get rid of the idea that you need a boatload of cash to start investing. If you have five bucks, you’re in.

Seriously, some platforms let you start with the price of a fancy latte. So, no more excuses about being too poor to invest.

Let’s talk about how you can start with what you have.

Step 2: Use Micro-Investing Apps

This is the 21st century, where technology does the heavy lifting. Apps like Acorns, Stash, and Robinhood let you invest small amounts of money. Acorns, for example, rounds up your purchases to the nearest dollar and invests the change. Yep, your coffee addiction can finally start to pay off!

These micro-investing apps are perfect for beginners because they do complicated stuff for you. So, if you can use a smartphone, you can start investing.

But be careful, the design of these apps encourages you to trade. If you don’t understand the market, don’t try to become a trader, play it safe.

Why It Works:

• Low Barrier to Entry: No need to wait until you have hundreds or thousands of dollars.
• Automation: The set-it-and-forget-it approach makes investing effortless.

Step 3: Start Buying Fractional Shares

Have you ever looked at the price of Amazon stock and thought, “Huh, maybe in another life?”

Well, now you don’t have to buy a whole share. Fractional shares let you invest in expensive stocks without selling a kidney. You can buy a piece of stock for as little as $1. Yes, you too can own a piece of Jeff Bezos’ empire.

Platforms like Robinhood and Charles Schwab offer fractional shares, making it easier for small investors to diversify their portfolios.

Advantages:

• Diversification: Spread your limited funds across multiple stocks.
• Affordability: Invest in high-priced stocks without breaking the bank.

Step 4: Invest in ETFs and Index Funds

Exchange-traded funds (ETFs) and index funds are like prepackaged shopping baskets. Instead of picking individual stocks, you invest in many stocks at once. It’s less risky and perfect for most people who aren’t stock picking experts.

Starting with low-cost index funds that track major indexes like the S&P 500 is a great move. This is a set-it-and-forget-it approach that is ideal for beginners.

Key Points:

• Diversification: Reduces risk by spreading investments across various sectors.
• Low Fees: Keeps more of your money working for you.

Step 5: Automate Your Investments

Do you know how to set up automatic payments for your bills so you don’t get left in the dark? Do the same with your investments.

Many apps and brokers allow you to automate your investments so you can invest consistently without even thinking about it.

Automating your investments helps you get in the habit and takes advantage of dollar-cost averaging. This allows you to balance your investments over time by buying more shares when prices are low and less when they are high.

Step 6: Learn the Basics (Without Getting a Finance Degree)

You don’t have to become the next Warren Buffett overnight, but a little knowledge can go a long way. There are plenty of free resources online to get you started. Sites like Investopedia and NerdWallet offer beginner-friendly articles and tutorials. You can also keep following me ;).

Understanding basic concepts like compounding and risk tolerance before you start investing can save you a lot of headaches.

Why It Matters:

• Informed Decisions: Reduces the risk of making costly mistakes.
• Confidence: Increases your ability to make smart investment choices.

Step 7: Start Now and Keep Going

The biggest mistake you can make is waiting for the “perfect time” to invest.

Spoiler: it doesn’t exist.

The best time to start investing was yesterday; the second-best time is now. Even if you start small, the key is to get started and stay consistent.

The sooner you start, the more time your money has to grow. Compound interest is like a snowball rolling down a hill — it starts small but can grow tremendously over time.

Final Thoughts:

• Long-Term Focus: Keep your eyes on your financial goals.
• Resilience: Weather market ups and downs with a steady hand.

Do the Math

Let’s do a little math to better understand the power of this snowball effect. Let’s say you set aside $5 a day and start investing, that’s $150 a month.

If you put it in a simple index fund, you will have over $50,000 saved in 15 years, $90,000 in 20 years. But if you invest on your own and choose relatively successful stocks, you can make $75,000 in 15 years and almost $150,000 in 20 years.

The important thing is to start right away and keep going for a long time. Because with compound interest, the rate at which your money grows gradually increases.

Let’s say you make $150,000 in 20 years, if you keep it up for another 10 years, you’ll have half a million dollars, you know what I mean?

Buffett has been doing this for over 50 years, there is no secret to his success, do the math.

Conclusion: Get Over the Excuses

Investing isn’t just for the wealthy; it’s for anyone who’s willing to get started. So, stop buying those lottery tickets and start putting your money to better use. Whether it’s through micro-investing apps, fractional stocks, or index funds, there are plenty of ways to get started on a shoestring.

Starting to invest with little money is not only possible, it can set the stage for significant financial growth over time. Remember, every great investor started small — so can you.

And who knows? Maybe one day you’ll be sipping that fancy latte knowing that your investments paid for it.