Want to Invest Small Amounts of Money? Here are Some Options

If you would like to invest but do not have a whole lot of money to start out with, there are still plenty of options for you to choose from. There are ways for a beginner to invest small amounts of money. You will be surprised at all the options, ranging from direct investing to putting money toward mutual funds.

One way to get started is by buying stock directly without going through a broker. You can spend amounts as low as $25 for one stock. You could also check into Direct Purchase Plans (DPPs). They often charge low fees, and some have enrollment programs in which you can have a fixed amount deducted from your bank account each month. This is obviously an easy way for you to invest small amounts of money. However, you need to be careful as companies are usually forbidden by law to advertise their Direct Purchase Plans outright.

Savings accounts and CDs

Opening a savings account with interest is another great investment option. You can shop around and compare banks to find the best interest rates. Some banks allow investors to open up and manage savings accounts online! See what your own bank offers first, though, and then do some shopping and comparison. Usually, money market accounts have the best rates for those who wish to invest small amounts of money.

Opening a CD is another great option. Sometimes, a certificate of deposit will earn a lot more interest than a savings account. However, CDs usually require a minimum of $1,000 to open, so that may be over your budget. You also need to keep in mind that there can be penalties for withdrawing the money early.

There are also CD ladders that can be purchased with different terms. Some CD ladders do not even have minimums, which is good news if you cannot afford the $1,000 accounts. Different terms can be purchased so that your investment can mature every few months or year. If you do not need the money after a few months, you can allow it to be rolled back into the most long-term option. Needless to say, this can be a great, safe, (almost) risk-free way to invest small amounts of money. At the same time, you need to realize that it will not make you a multi-millionaire.

Warnings

Every type of investment carries some risk, although some are much less risky than others.
If you decide to open up a savings or CD account, you need to understand that you will only receive single digit interest every year. For this reason, you need to do a lot of shopping and comparison in order to ensure that you get the highest interest rate.
Make sure you understand the procedure for withdrawals and the penalties for early withdrawals.

You need to understand the risk factors involved with any type of investment venture. Even if you only plan to invest small amounts of money, you need to consider how much you are willing to risk. Savings accounts and CDs do not carry much risk; however, you may not accumulate much money with these options. Buying stock directly or enrolling in a DPP does carry some risk, but you may end up profiting more in the long run.