Investing may seem like a game reserved for the wealthy, but the truth is, you don’t need thousands of dollars to get started. In fact, with just $100, you can begin your journey toward financial freedom. In this guide, we’ll explore how you can wisely invest a small amount of money and watch it grow over time.
Why Start Investing with $100?
Many people hesitate to invest because they think they need a large sum of money to begin. However, even small investments can yield significant returns over time, thanks to the power of compound interest. Investing just $100 can be a great way to dip your toes into the world of finance, build good money habits, and start growing your wealth.
Note: The following context is based on my research and experience over the past years, which means it could work a lot differently for you, based on your knowledge of investing, and of course, luck.
1. High-Yield Savings Accounts and Certificates of Deposit (CDs)
If you’re new to investing and want a virtually risk-free option, a high-yield savings account or a certificate of deposit (CD) can be a great starting point. These accounts offer interest rates higher than traditional savings accounts, allowing your money to grow steadily over time.
Best for: Beginners who want a safe way to grow their money.
Risk level: Low.
Potential returns: Around 3–5% annually.
2. Investing in Index Funds and ETFs
Exchange-Traded Funds (ETFs) and index funds are excellent choices for beginners because they offer diversification at a low cost. Platforms like Vanguard, Fidelity, and Schwab allow you to invest in ETFs with as little as $100.
Best for: Those looking for long-term, low-maintenance investments.
Risk level: Moderate.
Potential returns: 7–10% annually over the long term.
3. Fractional Shares in Stocks
Thanks to modern brokerage apps like Robinhood, M1 Finance, and Public, you can now buy fractional shares of stocks. This means you can invest in major companies like Apple, Tesla, or Amazon with as little as $1.
Best for: Investors interested in specific companies but who don’t have a lot of capital.
Risk level: Moderate to high.
Potential returns: Varies based on market performance.
4. Cryptocurrency and Digital Assets
If you’re comfortable with higher risk, you can allocate a portion of your $100 toward cryptocurrencies like Bitcoin or Ethereum. Apps like Coinbase and Binance allow you to start investing with a small amount.
Best for: Risk-tolerant investors looking for high-growth opportunities.
Risk level: High.
Potential returns: Highly volatile, with potential for high gains or losses.
5. Robo-Advisors for Automated Investing
Robo-advisors like Betterment and Wealthfront automatically manage your investments for you based on your risk tolerance and goals. With just $100, you can start investing in a diversified portfolio.
Best for: Those who prefer a hands-off approach.
Risk level: Low to moderate.
Potential returns: 5–8% annually.
6. Peer-to-Peer Lending
Platforms like LendingClub and Prosper allow you to lend small amounts of money to individuals or small businesses in exchange for interest payments. While riskier than traditional investments, this method can provide attractive returns.
Best for: Investors looking for alternative income streams.
Risk level: Moderate.
Potential returns: 5–12% annually.
7. Investing in Yourself
Sometimes, the best investment isn’t in the stock market—it’s in your skills and knowledge. Consider using your $100 to take an online course, buy books on investing, or develop a skill that can increase your earning potential.
Best for: Those looking to improve their financial literacy and career prospects.
Risk level: None.
Potential returns: Unlimited, based on career growth and opportunities.
Final Thoughts
Starting with just $100 may not make you rich overnight, but it’s a crucial step toward building wealth. The key to successful investing is consistency. Continue to add to your investments over time and let compound interest work its magic. I suggest investing in yourself first and gaining the required knowledge for investing. Whatever your option is, the most important thing is to start today. Happy investing!