How to invest with a small amount of money?
With historically low interest rates, you lose money by saving. Due to rising prices (inflation), the amount of goods you can buy with the money in your account decreases over time. But there’s a better option! Did you know that it’s now possible to invest even small amounts of money? It doesn’t matter if you have 50, 100, or 1000 dollars/pounds, you can still invest! In this article, we will explore howto start investing with a small amount of money.
Is it worth investing with a small amount of money?
Many people decide not to invest with a small amount of money because they believe it’s not worthwhile. But that’s not true at all! If there was ever a good time to start investing, it’s today. Even with small amounts of money, you can build up a large amount of wealth over the long term. This is possible through the so-called snowball effect.
When it snows, one snowflake doesn’t have much effect. However, when all the snowflakes come together, they can form a snowball, which can then turn into an avalanche! The same goes for investing. Of course, investing 10 or 50 euros per month on its own won’t make a difference. But by constantly investing a small amount of money, your invested capital will naturally increase.
Furthermore, you benefit from compound interest. When you reinvest the money you earn from your investment, your money grows even faster. You then receive returns not only on the amount you initially invested but also on the returns you reinvest. This pays off in the long run! Let’s see how much money you’ll have left when you invest a small amount for 30 years with a 7% return:
- 10 dollars per month turns into $ 11,761
- 25 dollars per month turns into $ 29,402
- 50 dollars per month turns into $ 58,747
- 75 dollars per month turns into $ 87,293
- 100 dollars per month turns into $ 113,352
- 1000 dollars per month turns into $ 1,133,529
How can you invest with small amounts of money?
It can definitely be worth it to invest with small amounts of money! But how can you invest a small amount of money? In this part of the article, we will discuss the various options.
It’s definitely possible to buy shares with small amounts of money. Here are some options:
- Fractional shares: Some brokers allow you to invest in fractions of a share.
- Commission-free investing: Some brokers don’t charge fixed transaction fees.
It is important to choose a broker where you don’t pay high, fixed transaction fees. When you pay at least $2 in costs for each transaction, it becomes very difficult to achieve a good return on a small investment.
With a small investment, you need to keep in mind that you can only apply limited diversification. Stocks can easily cost $10+. If you’re trading with an amount of $50, you may only be able to buy one or two shares each month.
Are you curious about which brokers you can use for a small investment? In the overview below, you can see my favorite brokers where you can invest with a small deposit:
| Brokers | Benefits | Register |
|---|---|---|
 | Buy without commissions. Your capital is at risk. Other fees may apply. | |
 | Speculate with CFD's on increasing & decreasing prices of ! 82% of retail CFD accounts lose money. | |
 | Benefit from low fees, an innovative platform & high security! | |
 | Speculate on price increases and decreases of with a free demo! |
Buy crypto with a small investment
If you want to invest with a small amount of money, you can also choose to invest in cryptocurrencies. With cryptocurrencies, you can achieve a high return even with a small budget: sometimes crypto coins can multiply in value several times in a short period.
However, remember that investments in cryptocurrencies are very risky and you can lose your entire investment. You can invest in crypto with one of these crypto exchanges:
| Brokers | Information | Register |
|---|---|---|
 | Speculate in popular crypto products with eToro! Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more | |
 | Speculate on increasing & decreasing crypto prices with the CFD provider Plus500 using a demo account. 82% of retail CFD accounts lose money. |
Tracking an index fund
If you want to achieve solid diversification with a small investment, you can choose to follow an index fund or ETF. An index fund follows a basket of stocks. Some funds, for example, follow the stocks listed in the AEX, while others follow technological stocks.
It is wise to look for funds with low monthly costs. This will leave more room to achieve a positive return. Research well where the fund invests. In general, a fund that invests in a broad selection of stocks can provide the most stable return. In our ETF section, we are happy to help you get started with your first investment in an index fund.
Active Speculation on Markets
You can also actively speculate on the market with a small amount of money, which is also known as day trading. You use derivatives for this purpose. With a derivative, you can speculate on both rising and falling prices. In addition, you can also use leverage with a derivative, which allows you to open a large investment position with a small amount.
Would you like to try this way of trading? You can do so with a free demo::
Invest Your Spare Change
There are also apps available nowadays that can help you invest with small amounts of money. These apps round up every expense you make. For example, when you spend $12.50 on lunch, $0.50 is automatically invested in a fund. However, it is important to research whether the application you are using offers attractive terms for investing with small amounts.
Tracking Signal Providers
You can also choose to follow a so-called signal provider. A signal provider is a person or robot that recommends investments. When you follow the provider, his or her investments are automatically opened within your account. Just like with an investment fund, you can also follow a signal provider with smaller amounts of money.
Of course, it is important to research the signal provider thoroughly before following him or her. Examine whether the provider has been in business for a while and whether he or she handles risks well.
Lending small amounts of money
There are also platforms where you can lend money to other parties. These platforms are also called online peer-to-peer (P2P) platforms. At many of these platforms, you can lend money starting from $25.
However, there is a risk of losing your money when the party you lend the money to goes bankrupt. Lending money to parties is therefore certainly not without risk and may not be the best option for the investor with a limited budget.
Repaying debts
We cannot end this section without emphasizing the importance of paying off your debts first. There are plenty of examples of people who start investing a small amount while still having an open credit card debt. Loans often have a high interest rate.
When you pay 15% interest per year on a debt, it is always smarter to pay off that debt first. That way, you immediately gain a return of 15%. Never borrow money to invest. With investing, there is always a risk of losing a significant portion of your investment, and borrowed money must be repaid.!
How much can you earn from investing with a small amount?
That’s a good question! Unfortunately, nobody knows the answer with certainty; investing in the stock market is always risky.
However, over the past 30 years, the stock market has actually always delivered solid results. If you have the time, the chances of a positive result are therefore high. Professional investors often assume an expected average annual return between 6 and 8 percent.
Do you want to calculate how much return you could earn in your personal situation? With the tool below, you can instantly test how your wealth could grow:
The investment will be worth!Growth of the investment over time: Investing balance in year |
If you would start one year later with investing you would have less than if you would start today. |
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What should you watch out for when investing with a small budget?
When investing with a small amount, it is especially important to be sharp. Making the wrong decision can cause you to lose a large sum of money more quickly. In this part of the article, we’ll look at what to watch out for when investing with a small amount.
Watch out for costs
Every investor should monitor the costs, but investors with a small budget should pay EXTRA attention to them. When you have a choice between a broker that charges $2 or $6 in transaction costs, your budget plays an important role:
- When you invest $100, you pay 2 or 6 percent in transaction fees
- When you invest €$0,000, you pay 0.02 or 0.06 percent in transaction fees
The average return on stock investments is between 6 and 8 percent. This means that you should be extra careful with a small investment, or you will only boost your broker’s profits.
Diversification is always important
Some investors put all their money into one specific investment product right away. If this company then performs poorly, you can lose your entire investment.
It is therefore wise to diversify your money well across different investment products. More diversification means less volatility, resulting in less fluctuation in your results. You can diversify your investments over, for example:
- Different investment products such as stocks and bonds
- Different regions such as America and Africa
- Different sectors such as retail and banking
- Over time: investing your money at different moments
You can diversify your investments by continuously investing in new companies. When you invest with a low transaction fee broker, you can open multiple small investment positions. Additionally, it is attractive for many people to invest in an index by using an ETF.
Patience & discipline
Patience and discipline may be even more important for the investor with a small budget. When you invest millions of dollars, there is a lot of action. This is not the case when you invest with a small stake of $ 100. Even a 100% return only results in $ 100 profit.
Therefore, it is important to keep the long-term vision in mind. By investing continuously with a small stake, you can build up a large fortune in the long term. Many small investments can grow into one big investment.
For most investors, it is advisable not to log in too often and check your positions. Try to eliminate your emotions as much as possible and make a plan. By patiently waiting and investing with discipline with a small budget, you achieve the best results in the long run.
Be careful with debts
Not investing is also a risk: by not investing, you are sure that your fortune is slowly dwindling. However, it is also important not to become too enthusiastic about investing. Some people invest while they still have significant outstanding debts. If you have debts with a high interest rate, it is better to pay them off first.
It is also important to set aside enough money. Only invest money that you can miss in the long term and make sure you can pay for fixed costs. Investing is not a certainty: it is therefore important to always set aside enough money.
Can you get rich by investing a small amount?
It is definitely worth investing with a small budget! To do this, you must understand the difference between being rich and becoming rich. You are probably not very rich yet, otherwise, you would not have ended up on this page. However, this does not mean that you cannot become rich in the future. The best way to get rich is by periodically setting aside a sum of money.
When you create a realistic plan, you know what to expect. Remember that you receive compound interest, so your money can grow exponentially in the long term. When you set aside $ 10 monthly for 40 years at a return of 7%, this amount grows to $ 24,855. If you do this with a small investment of $ 75, you even own $ 178,421. Investing with small amounts of money is definitely worth it!
How do you achieve the best results?
It is important to have a realistic view of the return you can achieve when investing. Experts often calculate with an annual return of 6 to 8 percent. Although this may not be very high, in the long term, it can help you build a large amount of wealth. This is because you also earn a return on your new investment. When you start with unrealistic expectations, you often take too many risks, which can lead to losing your entire investment.
It is advisable to invest periodically. This way, you avoid investing a large amount at the peak. By constantly investing a small amount, you invest in both favorable and less favorable moments.
It is also recommended not to keep track of your performance too much. Research has shown that people who keep a sharp eye on their portfolio often achieve worse investment results. This is the case because they are more likely to close positions in panic. The stock markets regularly go up and down, but in the long term, they move up. Therefore, it is a waste to close positions in blind panic.
Important when investing: a strategy
It is important to invest according to a strategy. Novice investors often go wrong because they have no system or do not follow the system. Therefore, decide for yourself in advance what you are going to do and why you are going to do it.
You can automate your investments with a small amount. You can do this by, for example, depositing a fixed amount monthly into your investment account. You can then invest this amount in an ETF, which allows you to track the market in one fell swoop.
You can also actively select stocks, which means you will have to use a strategy for selecting stocks. When choosing a strategy, you can choose to focus on news or chart analysis. In this article, we explain how you can do this.
More and more people are also using chart analysis. Within each chart, you can recognize fixed, recurring patterns. By studying these patterns, you can automatically buy at important levels by using orders. Do you want to learn how this works? Then read this course.
Frequently asked questions
You can invest in stocks with just a dollars. This is possible because brokers have significantly lowered their minimum deposits. You can also invest in fractional shares with many brokers: you then buy a small part of a share. This means, $50 or $100 is enough to buy your first share.
You won’t make a fortune in the short term with a small amount. However, by investing a small amount monthly, you can achieve a good return. On average, investors earn between 6 and 8 percent per year over a longer period. However, if you have ‘luck,’ you can of course achieve a much higher return. The risks are also higher, which means you can lose your entire investment.
By investing a small amount, you learn what it’s like to invest with real money. The principle of investing is exactly the same with a large amount, but keep in mind that it may feel different. Therefore, it’s wise to start with a small amount first. When you are completely comfortable with that amount, you can slowly increase the amount you invest.
Conclusion: Investing with a small amount
Investing with a small amount is definitely possible! You can, for example, invest monthly with an amount of 50, 100, or 200 dollar. For this, please note the following:
- Create a realistic plan focused on the long term
- Invest only with money you can really spare
- Diversify your investments across different securities
- Choose a broker with low transaction costs
- Start small: you can always increase your investment amount
Auteur
Over Alex Mostert
When I was 16, I secretly bought my first stock. Since that ‘proud moment’ I have been managing trading.info for over 10 years. It is my goal to educate people about financial freedom. After my studies business administration and psychology, I decided to put all my time in developing this website. Since I love to travel, I work from all over the world. Click here to read more about trading.info! Don’t hesitate to leave a comment under this article.
