How to Invest Your First $100 to Create Wealth for Your Future

• Author: Bryan Miller
• Posted: 2024-07-21

Many people believe that they need thousands of dollars to begin investing. But in this era of economic uncertainty, this strategy is inaccessible or unrealistic for many households. Whether you are currently paying off debt or supporting your family, you do not need to put off investing. A look at five easy ways to invest with $100 or less can place you on the right path to building wealth for your financial future.

Set Up Your Emergency Fund

If you do not have anything in savings, it is best to begin with an emergency fund. This fund is a sum of money set aside for unexpected expenses. Although starting an emergency fund might not feel as exciting as trading stocks or purchasing shares, having a fund in place can help you feel more secure before venturing onto a volatile market. To start an emergency fund, set up a savings account that has an interest rate of at least 0.03% to 0.05%. By keeping funds in savings, you can avoid the temptation to sell future stocks out of fear if you face an unexpected life event.

Invest in Fractional Shares

Once you have your emergency fund underway, you can now begin investing in the stock market in the cheapest way possible. The traditional route is to hunt through the three major stock market indices for any company that allows you to purchase shares for under $100. If you find a company you like that costs more than that, however, you might be able to purchase a fraction of a share.

For example, suppose a company's stock costs $220 per share. Using $100, you can purchase nearly half of this stock with the following formula: (100/220) = .45 or 45% of the share. The great thing about this method is that a fractional share still appreciates at the same percentage as a complete share. So, if the company's stock increases 10% to $242 per share, your fraction will also increase from $100 to $110.

Consider Using Exchange-Traded Funds

Exchange-traded funds combine a variety of stocks and bonds into a lump fund. These ETFs then follow a specific index (such as NASDAQ) or sector (such as the energy industry). Ideally, performance of the ETF emulates performance of the index or industry that it follows.

Just as you can trade or sell a stock, you can also trade an existing ETF. For beginner investors, the ETF options is often more economical than mutual funds that require a minimum investment greater than $100. Investing in an ETF providers newcomers with broad exposure to the complete stock market as well as greater opportunities for solid diversification.

Choose a Robo-Advisor

Robo-advisors are financial platforms that allow you to create a portfolio of stocks or bonds. Since robo-advisor firms have low overhead costs, these companies often allow investors to open accounts for under $100. In addition to the low barrier to entry, robo-advisor companies also use algorithms to glean market information and provide some financial guidance on your account. For individuals new to investing, this extra security measure provides a great way to assess your risk tolerance and streamline your financial goals.

Another benefit of using a robo-advisor is that it requires minimal human interaction. This means that you do not need to set up in-person appointments or fill out complicated forms. Instead, these companies provide digital advice based on a blend of mathematical rules, data science, and real-time market or sector information. The robo-advisor is an ideal choice for busy individuals who wish to invest a small amount and then learn how investing works.

Find a High-Yield Account

If you have a few extra dollars each month but do not wish to invest in the stock market at this time, consider putting the money into a high-yield account. This type of account can earn interest at rates of around 0.6%. High-yield accounts are great options for people who feel comfortable with their emergency funds and want to boost the earnings potential of their spare cash outside of a regular savings account.

By choosing to invest your extra $100, you can increase your financial resources and cultivate wealth for the future. Instead of fearing you have too little to invest or spending your cash on consumer goods, you can use the power of markets to your advantage and create an outcome that improves your life for the better.