Ways to Start Investing Without a Lot of Money

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Investing can be an intimidating topic. Unfortunately, many people think that they don’t have enough money to invest, so they simply do nothing.

The truth is, you don’t need to have a lot of money in order to get started with investing. Yes, there are some investments that will not be accessible or appropriate for you as a new investor, but there are still plenty of good options.

Don’t wait until you have more money to get started, or you’ll miss out on valuable opportunities.

In this article, we’ll look at nine options that allow you to start investing with even a small amount of money. In some cases, you can get started with just a few dollars.

1. Take Advantage of Free Stock Offers

If you’re interested in investing in stocks and ETFs, Robinhood and Webull are great ways to get started. Both investment apps have no account minimum and trades are free. The apps have been designed with new investors in mind, so they’re simple to use.

With no minimums and no fees, there is nothing that prevents you from starting right away. And, both allow you to get free stocks just for creating an account.

You can see more details about each in my article Robinhood vs. Stockpile vs. Webull.

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2. Your Employer-Sponsored Retirement Plan

Possibly the easiest way to get started with investing is to set up automatic contributions to a retirement plan made available through your employer, such as a 401(k) or 403(b). According to Census Bureau statistics, 79% of American workers have access to a 401(k) plan, but only 41% of those who have access actually contribute (source).

If a 401(k) or 403(b) is available to you, you can elect to contribute a specific percentage of your wages and it will be taken out automatically before each paycheck. Automated contributions are great because once it is set up, it will happen with no other action from you. You’re not going to forget to make the investment or decide to spend the money on something else.

Contributing to a 401(k) or 403(b) will also reduce your taxable income, so you’ll wind up paying less in taxes and keeping more of your money.

Another reason why this is an excellent option for new investors is that you don’t need a chunk of money to get started. You can fill out a form with your employer’s HR department and start contributing just a small percentage of your wages going forward, even if you currently have nothing set aside to invest.

Most employers will offer some sort of match, and it is recommended that you contribute enough to get the full match. For example, if your employer will match your contributions up to 5% of your wages, you should contribute at least 5%. Between your own contributions and the match, you’ll be contributing 10% of your pay to the retirement plan.

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3. IRAs

There are a few different types of Individual Retirement Accounts (IRAs), with the most popular being the Traditional IRA and the Roth IRA. Your contributions to a traditional IRA will reduce your taxable income (if you meet the qualifications). Your investments in a Traditional IRA will grow tax-free and you will be taxed when you take the money out of the IRA in your retirement.

Contributions to a Roth IRA will not reduce your taxable income now, but you will never be taxed on the growth, and you will not be taxed when you take the money out in your retirement.

The 2019 contribution limits of $6,000 (if you’re under 50) or $7,000 (if you’re 50 or over) apply to both Traditional and Roth IRAs. That is a total amount that you can contribute to either type of IRA, or a combination of both types.

While anyone can contribute to a Traditional IRA, contributions will not be tax-deductible if your income is over a certain limit. The limits below are based on modified adjusted gross income (MAGI):

  • Single individuals with income over $137,000 cannot make tax-deductible contributions.
  • Single individuals with income between $122,000 and $137,000 can make a partial contribution that is deductible.
  • Married couples filing jointly with income over $203,000 cannot make tax-deductible contributions.
  • Married couples filing jointly with income between $193,00 and $203,000 can make a partial contribution that is deductible.

There are also some income requirements that restrict who is eligible to contribute to a Roth IRA. The restrictions below are also based on modified adjusted gross income (MAGI):

  • Single individuals with income over $137,000 are not eligible.
  • Single individuals with income between $122,000 and $137,000 can contribute a reduced amount.
  • Married couples filing jointly with income over $203,000 are not eligible.
  • Married couples filing jointly with income between $193,00 and $203,000 can contribute a reduced amount.
  • Married couples filing separately are less likely to be able to contribute to a Roth IRA. See this page for details.

You can invest in many different things within an IRA. You could choose to open a Certificate of Deposit (CD) with a local bank or online bank within an IRA. You could open an IRA with Vanguard and invest in mutual funds or ETFs. You could also invest in individual stocks within an IRA.

Each institution will have its own guidelines related to minimums, but you don’t need much money to get started with an IRA. For example, you can open an IRA at Betterment with no minimum, so there is no excuse to not get started.

4. Robo Advisors

Regardless of whether you want to invest within an IRA or just a regular taxable account, using a robo advisor is a good option for just getting started. A robo advisor will ask you a series of questions about yourself and your goals (including things like your age, your level or risk tolerance, when you plan to retire, etc.) and will make investment decisions for you based on your own situation.

Using a robo advisor is a great choice if you’ve been putting off investing because you feel like you don’t know enough about how to invest your money. The robo advisor will do the work for you.

Another reason to consider a robo advisor is that you can get started without needing a lot of money to invest. Here are a few of the leading options:

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5. Real Estate Crowdfunding

Contrary to what you might think, you don’t need a lot of money to get started with real estate investing. There are a few different ways that you can invest in real estate with smaller amounts of money, and crowdfunding is one of the easiest options.

Many of the leading real estate crowdfunding platforms are only open to accredited investors, but there are also some options that are available to anyone (see my article Real Estate Crowdfunding for Non-Accredited Investors). Some types of alternative investments require larger sums of money to get started, but with real estate crowdfunding you can get started with as little as $5.

Some of the best options are:

  • Fundrise – Leading platform that allows you to invest in a portfolio of properties (minimum $500).
  • Groundfloor – Invest in individual rehab and renovation projects ($10 minimum).
  • Rich Uncles – Invest in your choice of two different REITs ($5 minimum).
  • American Homeowner P