Believe it or not, it’s possible to invest with as little as $100. Because of the giant leaps in technology and accessibility, investing is now more democratized than ever. That means that people who traditionally weren’t able to be a part of the market are now active players. The old days of saddling up to a broker’s desk and handing over a portion of your earnings in fees are over.
The way it used to be
There once was a time when investing activities were unable to happen unless you were working in person with a money manager. You would have to go to a brick and mortar banking location and speak with someone who would then manage your money for you. They would execute trades on your behalf, balance your portfolio, and make suggestions to stay on course. There was so much mystery involved in the process that a regular person could never go it alone. What were you going to do, call the NYSE and put in your order?
There’s certainly something to be said for working with professionals, especially a fiduciary financial planner. Expert advice should always be welcome, but the function of investing certainly needed to be updated. Also, the catch with money managers is that most of them have minimum investments and charge hefty fees for their specialized services. This is a major roadblock for lots of people on the path to wealth.
The way it is today
Today, there are myriad options for individual investors. Deciding which way to invest is a personal decision and depends on your comfort with risk, and your ability and willingness to spend time learning about the stock market. Of course, the old fashioned money managers still exist and you can meet with one and let them handle your finances. You can also use a roboadvisor that will provide automated, algorithm-driven financial planning services with little to no human supervision.
Free investing apps like Public allow you to choose your own stocks and ETFs and invest exactly how you want to and when you want to.
Something that’s relatively new to the investing world, for IRL managers and roboadvisors alike, is fractional investing. Fractional investing means that you buy small slices of a share. For stocks like Alphabet, Google’s parent company, ($1,300+ per share at the time of publication) or Amazon ($1,900+ per share at the time of publication), that means more investors can get in on the action.
Fractional investing is a big part of Public, which offers the opportunity to buy slices of shares so that you may invest in any company regardless of your budget.
If a share of XYZ company is trading at $100, you’re able to buy a slice of it with any amount you choose, let’s say $10. You now own 10% of a share of XYZ company. When the stock price rises and you decide to sell, you’ll incrementally see earnings based on your percentage of ownership.
Fractional investing is key for investors who are just starting out. You can build a strong portfolio over time without sacrificing your day-to-day lifestyle—and you won’t miss out on the upswings in the market.
Before you start investing at all, make sure to have your finances in order. Monitor your incoming and outgoing cash, making tweaks to your unnecessary spending if needed (that’s a budget). It’s a good idea to have some savings in place for when the unexpected strikes.
Starting a mini-emergency fund of around $500 to $1,500 is the first step in establishing a fully stocked emergency fund. This smaller goal will bolster your confidence and go a long way in protecting you from life’s little problems. Because you have this safety net in place, a flat tire won’t cause you to whip out your credit card and go into debt. It’s not just peace of mind, it’s good business.
Your big emergency fund will cover you for three to eight months. To determine your goal amount for your big emergency fund, multiply your fixed expenses by whichever amount of months makes you comfortable. It could take time to get that amount of money stocked away, commitment is key.
The best place to stash both of these accounts is in a high-yield account that allows your money to earn interest—but it doesn’t stop there, eventually, the interest will compound. Compound interest is a magical thing. That’s when the interest you’ve earned on your money starts earning interest itself and then that new interest also starts earning interest and it goes on and on. Welcome to the world of your money making money for you.
Next up, make a debt payoff plan to take care of any outstanding balances you carry each month. Though it may seem counterintuitive to invest while you’re paying off debts, you can’t deny the benefits of investing early. As with most things of a financial nature, it’s highly a personal decision. There is a rule of thumb to follow when deciding to pay down your debt or invest and it’s easy to understand: If you stand to earn more from your investments than you’re paying in interest, invest. If you stand to pay more in interest than you could earn from investing, focus on your debts.
How to choose your stocks
Setting your investment objectives is a key part of investing and what will ultimately define your strategy. An investor whose objective is long-term growth over decades will have a different strategy than one who wishes to cash out their accounts in 10 years. Define your objectives and work your strategy—or strategies!—out.
When you’re choosing what stocks to buy, take a look at your lifestyle. Many new investors are most comfortable going with what they know. Are you majorly into technology and cars? If so, you might enjoy identifying companies in that space to invest in. Public’s stocks and ETFs are organized into Themes that align with how you experience the world. Self-driving cars, green energy, and female-led companies are just a few of the portfolio options.
You could also follow what other people invest in using Public. Public makes the stock market social, which means you can follow other investors and understand why they are investing in or selling stocks. This is designed to give you a completely new experience in investing. Talk about your money, share what you’ve learned, and learn from others. You can follow people with professional expertise in different industries (think healthcare, retail, or advertising). This gives you a more diverse view of sector-specific perspectives that can help you better understand how businesses work in worlds you aren’t familiar with.
Be an active investor
You don’t need to flip stocks and day trade to be considered an active investor. Engaging with your companies by keeping up with the latest headlines and following them on social media counts. When you’re up to date with your holdings you’ll be making better-informed decisions. What if a company you own shares in makes a holistic change that you don’t agree with? That might signal that it’s time for you to sell, and you’d never know if you weren’t following the news.
Use the tools available to you
You don’t have to sit around and wait for your annual meeting with your money manager anymore. Platforms like Public make you a part of the process the entire time—and it’s all free. Invest with what your budget allows into the companies that interest you and keep an eye on them in the app. Share what you learn with your friends and keep tabs on what investors like you are doing with their shares.
The bottom line
You don’t need a small fortune to become an investor. In fact, you can be an investor with as little as $100. Understanding your financial situation, setting goals, and optimizing over time as your financial literacy and economic situation strengthens are ultimately what will make you successful in the market.