Learn to Invest Early. Start Investing with $1,000 or even Less
How to Invest. Learning How to Invest. Beginning Investing with Little Money. Retirement. 401k. IRA.
One of the most major mistakes today is not investing. People believe they don’t have enough money or make any number of excuses but with the advent of the discount brokerage and many low fee options like Vanguard anyone can invest reasonably. Start with whatever you can and either get a Vanguard account or if you have a different discount brokerage you can use one of their many ETFs which are types of funds which trade on the stock market you can buy with any brokerage.
The power of the stock market and learning how to invest correctly comes from the magical power of compounding If you’re 30 and only invest a mere $1,000 and return the 7% or so the market has earned since 1946 then after 35 years your $1,000 will be $10,677
Now think about if you added $1,000 a year and begun when you are 30 then you’ll have $148,913.
Retirement 401k or IRA
If you have a company that provides a retirement plan and matches a portion you should at the very least contribute to the max amount they will match. First of all a 401k is pre-tax money so it’s taken out before taxes and then the match is a free return so even if they will only match $500, or $1000 it is a huge deal.
Ask your company about their retirement plan even if you don’t have very much money. Why? Because you can have a small amount like $10 per paycheck taken out instead of a huge chunk. See now even though you only had $500 or $1000 when you started we’ve found you a way to invest and save more for your retirement and that’s key.
Every dollar saved today is many dollars later when invested. That is the power of compounding and the investing process. That is why you must learn how to invest and save.
You don’t need to be a genius to invest and have proper finance you just need to use sound judgement.
Remember when I said that 401k is pre-tax? If you contributed $100 and were in the 25% tax bracket you would only receive $75 less per month while contributing $100. More free money just from being smart.
IRA or Roth IRA Retirement
So you don’t have a 401k, and you still only have $1,000 to start to invest with but you can still have the benefits of a retirement account we listed above. You can open with your traditional discount broker a Roth IRA or IRA. A traditional IRA is like the retirement account and will come out pre-tax while a Roth IRA will be taxed but not taxed when you withdraw. Traditional Retirements or IRAs are taxed when you are older and withdraw and in theory have a lower tax rate.
This concludes our run down of investing with little money. We suggest you continue to our article on How to Invest, and then When to Invest to get an idea of how to properly invest with index funds which will be the best way to diversify yourself with a little amount of money.
Direct Stock Purchase Plans
Unfortunately we all don’t have company retirement plans and one of the cheapest way to invest is through the Direct Stock Purchase Plans. This can also be teamed with a Dividend Reinvestment plan and allows you to bypass brokers and their commissions.
Admittedly it is more difficult to valuate a company and insure you are not overpaying and to properly diversify but there are many major corporations like Coca-Cola and Pepsi and Johnson and Johnson and Johnson that are sound and not horrifically expensive. The danger lies in the fact that if you don’t know how to valuate securities then it will be difficult to know when not to purchase.
Nowadays discount brokerages are available to people with even the least amount of money and will very small fees and allow you to buy index funds.