Smart Ways To Make Cheap Investments: A Guide

There are a variety of options for those looking to make cheap investments. For those looking to invest in stocks, a good option is to buy fractional shares of stock, which allows investors to buy a small portion of a company's stock for a lower price. Another option is to invest in index funds and ETFs, which allow investors to diversify their investments by tracking certain indexes, such as the S&P 500. For those looking for a more stable investment, certificates of deposit (CDs) are a good option, as they offer a fixed interest rate with little to no risk. For those looking to invest in real estate, REITs, or real estate investment trusts, are a good option, as they allow investors to receive dividends without having to manage the property themselves. Finally, for those looking for a more hands-off approach, robo-advisors can be a good option, as they automatically create and manage an investment portfolio for the investor.

High-yield savings accounts

With fewer overhead costs, you can typically earn much higher interest rates at online banks than you would at a traditional bank. Plus, you'll likely have easy access to the money by quickly transferring it to your primary bank or maybe even via an ATM.

While high-yield savings accounts are considered safe investments, you do run the risk of losing purchasing power over time due to inflation if rates are too low.

You can browse lists of the best high-yield savings accounts to find the top rates. Alternatively, you can turn to your local bank or credit union, though you may not get the best rate.

If you're new to saving and investing, a good rule of thumb is to keep three to six months' worth of living expenses in an account like this before allocating more toward other investments.

Workplace retirement accounts

Many employers will even match your contributions, either dollar-for-dollar or by offering 50% of what you put in, up to a certain amount. Retirement accounts also typically offer tax advantages to incentivise you to invest for your future.

If your employer does not provide a workplace retirement account, you can open an individual retirement account (IRA). With an IRA, you can save up to $7,000 per year before the age of 50 and $8,000 per year if you are 50 or older.

If you are employed and your goal is to save for retirement, a workplace retirement account is a great option.

Index funds and ETFs

Index funds are a type of mutual fund with lower fund management fees and less volatility than actively managed funds. They are more cost-effective and are well-suited for young investors with long investment timelines. You can purchase index funds directly from fund providers or through an online broker.

ETFs are similar to mutual funds but are traded on major stock exchanges, and shares can be bought and sold throughout the trading day. They are ideal for investors with long time horizons and are a good option for those who don't have enough money to meet the minimum investment requirements for mutual funds. ETFs can be purchased through brokerages and robo-advisors, which use ETFs to construct client portfolios.

Both index funds and ETFs are excellent options for those seeking to diversify their investments and reduce risk. They offer exposure to a wide range of assets and are suitable for investors with different financial goals and risk tolerances.

Dividend stock funds

ETFs (exchange-traded funds) are traded on major stock exchanges, and you can buy shares whenever the stock market is open. Mutual funds, on the other hand, price their shares once a day and are not as liquid as ETFs. ETFs are typically commission-free, while mutual funds may require a minimum purchase and charge a commission.

Dividend stocks can provide the fixed income of bonds, as well as the growth of individual stocks and stock funds. Dividends are often associated with stable, profitable companies. While share prices of some dividend stocks may not rise as high or quickly as growth-stage companies, they can be attractive to investors because of the dividends and stability they provide.

• Need income
• Can stay invested for longer periods
• Are looking for a more stable investment

Short-term Treasury ETFs

• Schwab Short-Term US Treasury ETF (SCHO): This ETF has an expense ratio of 0.03%, making it one of the cheapest options in the market. It has an effective duration of 1.88 years and an average maturity of 1.97 years. SCHO tracks the Bloomberg US Treasury 1-3 Year Index and has an AUM of $11.2 billion.
• SPDR Portfolio Short Term Treasury ETF (SPTS): SPTS is another low-cost ETF with an expense ratio of 0.03%. It offers exposure to US Treasuries with maturities between one and three years and tracks the Bloomberg 1-3 Year US Treasury Index. SPTS has an AUM of $5.6 billion.
• Vanguard Short-Term Treasury ETF (VGSH): VGSH is an index fund that tracks the Bloomberg US Treasury 1-3 Year Index and has an expense ratio of 0.04% for the ETF share class. It invests exclusively in short-term US Treasuries and has an average maturity of 1.86 years.
• IShares Short Treasury Bond ETF (SHV): SHV seeks to track the performance of an index composed of US Treasury bonds with remaining maturities of one year or less. It has an expense ratio of 0.15% and provides targeted access to a specific segment of the US Treasury market.

When considering short-term Treasury ETFs, it is important to look at the expense ratios, effective duration, average maturity, and the underlying index being tracked. These factors can impact the overall performance and risk profile of the investment.

Frequently asked questions