How To Invest Even If You Have Little To Invest

Contrary to popular belief, you do not need a lot of money to begin investing it. For as little as $500, you can make investments that will maximize every dollar you have. 

Investing $500

There are excellent investments to be made for those with only $500 to invest. One of the best is exchange-traded funds (ETFs). ETFs are different from mutual funds in that they are actively traded and have smaller fees due to their passive management structure. They also have a lower frequency of taxable events. In short, in exchange for higher risk, they offer greater returns and lower fees than mutual funds.

Another great investment for $500 is a dividend reinvestment plan (DRIP). The way they work is that you buy as little as a single share of stock and automatically reinvest dividends into additional shares (or fractions of an additional share). This lets you buy additional stock without a commission, and you may also be able to buy this stock at a discount.

Investing $1,000

A good choice for a $1,000 investment is an index fund. You can look at an index as being a low-fee mutual fund tied to a particular market index, such as the Dow Jones Industrial Average or the S&P 500. These funds generally perform well, as they are designed to at the very least match the market. They also give you exposure to a wider variety of asset classes.

Another good investment for $1,000 is an individual stock that traditionally pays a dividend. Like with a DRIP, you can reinvest the dividend into more shares. Or you can receive cash, which can provide you with a small but steady income stream.

Investing $3,000

For those with $3,000 to invest, you have a number of different options. If you are looking for a safe investment, consider certificates of deposits (CDs) or short-term U.S. Treasury Bills. While these types of investment provide limited returns, they are pretty much risk-free.

Those who are willing to take greater risks should consider peer-to-peer lending. This allows you to fund loans just like a bank. Then, as the borrowers repay the loans, you receive interest. Modest risk loans provide a return of around 5-8% per year, while higher risk loans can provide returns of 30% or more.

Investing $5,000

With $5,000 to invest, you should consider investing in real estate. Even though you cannot typically buy an actual piece of property for this kind of money, there are two options available to you.

A real estate investment trust (REIT) is kind of like a real estate mutual fund. The fund owns a selection of properties or mortgages, and as an investor in the fund, you receive a share of the income these properties generate.

You can also invest in real estate through a crowdfunding platform. These platforms let you make debt and equity investments in property. Yields from debt investments can range from 8-12% per year, while equity investments can produce even higher yields.