Invest Small, Think Big: Strategies For Meaningful Returns

Investing is an intimidating concept for many, but it needn't be. Even with a small amount of money, you can start building a solid investment portfolio. The key is to start somewhere, even if it's just your spare change.

There are several investment vehicles that can help your money grow, from employer-sponsored retirement plans to individual retirement accounts (IRAs), fractional shares of stock, index funds, and exchange-traded funds (ETFs).

It's also important to remember that investing doesn't have to be complicated. You can automate your investments and turn saving into a habit by regularly setting aside a certain amount.

- Utilise savings apps that round up your purchases to the nearest dollar and save the change.

- Take advantage of retirement plans, such as 401(k)s, which often come with employer-matching contributions.

- Consider investing in fractional shares of stock, allowing you to buy a fraction of a share of a company for a lower price.

- Look into investing in index funds and ETFs, which track certain indexes like the S&P 500, and provide diversification at a lower cost.

- If you're risk-averse, consider savings bonds or treasury securities, which offer maturities ranging from 30 days to 30 years.

- Invest in certificates of deposit (CDs), a low-risk option with fixed rates, although they often come with low rates of return.

- Explore real estate crowdfunding, where you can team up with other investors to pool money and purchase real estate, becoming a partial owner.

- Open a high-yield savings account, which offers higher interest rates than traditional savings accounts.

- Peer-to-peer lending allows you to lend money to others, although it carries the risk of the borrower defaulting.

- Invest in gold and other precious metals, which can provide a good payoff but don't offer dividends.

Remember, investing always carries varying degrees of risk, so it's important to do your research and consult a financial professional before making any investment decisions.

Invest spare change with apps

Investing your spare change with apps is a great way to start building your investment portfolio, even if you have a small amount of money. These apps are designed to make investing more accessible by removing the account minimums required by some robo-advisors.

Acorns

Acorns is a popular app that allows you to invest your spare change. It offers a 'Round-Ups' feature, which rounds up your purchases to the nearest dollar and invests the difference. Acorns has no minimum account balance and charges a flat monthly fee of $3 for its basic investment plan.

Stash

With Stash, you can start investing with as little as $0.01. It offers three subscription plans: Beginner ($1/month), Growth ($3/month), and Stash+ ($9/month), each with additional features. The Beginner plan includes a commission-free taxable brokerage account and an FDIC-insured debit account with stock rewards.

Chime

Chime is a mobile banking app that offers a spending account, a Visa Debit Card, and an optional high-yield savings account in one platform. It has a 'Round Ups' feature that rounds up purchases made with your Chime debit card and transfers the difference to your savings account. Chime also has a 'Save When I Get Paid' feature that allows you to automatically transfer a portion of your direct deposits to savings.

Qapital

Qapital is a mobile-first bank that combines behavioural psychology with technology to help you save and invest passively. After a 30-day free trial, Qapital offers three subscription plans ranging from $3 to $12 per month. It allows you to set savings goals and apply rules to automatically fund these goals from a linked checking account.

Robinhood

Robinhood is a micro-investing app designed for more experienced, active investors who prefer a self-directed approach. It offers a user-friendly interface for buying and selling stocks, ETFs, and cryptocurrencies with no commissions. Robinhood also provides access to fractional share investing with increments as low as $1.

Public

Public is a micro-investing app that is ideal for beginners. It offers low minimums, clear definitions of investing terms, and prohibitions on day trading to make investing more accessible. Public also provides fractional share investing and allows you to build multi-company portfolios with one click using its thematic investing feature.

These apps can be a great way to get started with investing, but it's important to consider your personal investment goals and evaluate the pros and cons of each platform. Additionally, remember that investing apps are just one tool, and you may want to include other personal finance products in your overall investment strategy as you become more comfortable.

Retirement accounts

Workplace Retirement Account

If your employer offers a workplace retirement account, this is a great place to start. You can choose to have a percentage of your gross income deducted from your payroll each month and put into this account. Many employers will even match your contributions up to a certain point, which is essentially free money. These accounts also typically offer tax advantages to incentivize investing for retirement.

Individual Retirement Account (IRA)

If your employer does not offer a workplace retirement plan, you can open an IRA. This is a tax-deferred account that allows you to save up to $7,000 per year before the age of 50 and $8,000 per year if you are 50 or older. Withdrawals from a Roth IRA are tax-free after the age of 59 1/2.

K)

A 401(k) is a type of retirement account that is often offered by employers. Contributions to a 401(k) are typically made through payroll deductions, and many employers will match a certain percentage of your contributions. It's important to contribute enough to your 401(k) to qualify for your employer's matching contribution. 401(k)s offer tax advantages, such as allowing you to contribute with pre-tax dollars or make tax-free withdrawals.

Robo-Advisors

Robo-advisors are online platforms that use algorithms to build and manage investment portfolios for you. They take the guesswork out of investing and are a great option for beginners. Some robo-advisors, like Betterment, offer retirement accounts such as Roth IRAs.

Other Retirement Accounts

There are also other types of retirement accounts available, such as a Health Savings Account (HSA) or a 529 plan. It's important to research the different options and choose the one that best fits your needs and financial situation.

Fractional shares

Several micro-investment apps, such as Robinhood, Public.com, and Acorns, offer fractional shares with no commissions or fees. You can open an account and start investing in the stock market right away, even if you only have a small amount to spare. This makes it easier to diversify your portfolio, as you can invest in multiple companies with a small amount of money.

High-yield savings accounts

• LendingClub Bank: 5.30% APY
• BrioDirect: 5.15% APY
• Bread Savings: 5.10% APY
• EverBank: 5.05% APY
• Bask Bank: 4.85% APY
• CIT Bank: 4.85% APY
• Popular Direct: 4.85% APY
• PNC Bank: 4.65% APY
• CIBC Bank USA: 4.61% APY
• UFB Direct: 4.57% APY

These accounts are federally insured for up to $250,000 and are a safe way to put your money while earning interest. While some high-yield savings accounts have a variable APY, you can consider a certificate of deposit (CD) for a guaranteed rate of return.

When choosing a high-yield savings account, look for competitive APYs, no monthly service fees, and easy access to your money.

Robo-advisors

Some popular robo-advisors include:

• Wealthfront: Charges a competitive annual advisory fee of 0.25% with no minimum balance requirement. Offers daily tax-loss harvesting and access to financial advisors.
• Betterment: Offers a basic digital service with a 0.25% annual fee and no minimum balance requirement. Also provides a premium service with access to live financial advisors for a 0.65% fee.
• SoFi Automated Investing: Charges no annual advisory fee and has a low account minimum of $1. Provides access to financial advisors.
• Vanguard Digital Advisor: Charges a low annual net advisory fee of no more than 0.20%. Utilizes Vanguard's ultra-inexpensive ETFs.
• M1 Finance: Combines self-directed brokerage features with pre-built portfolios and automated portfolio management. Offers a range of customizable portfolios and access to thousands of ETFs and stocks.
• Acorns: Ideal for those who struggle to save. Features a "round-up" feature that automatically invests spare change from linked debit and credit cards.
• Ellevest: Designed specifically for women investors, offering tailored investment portfolios and discounted access to financial advisors.

Frequently asked questions