Can I Start Investing With $100?
Yes, you can absolutely start investing with $100. There’s nothing wrong with starting small. In fact, there is an advantage in starting your investing journey with just $100. With a small amount, you learn to command your money and teach it how to multiply in the most efficient and safest way possible. You learn a focus and discipline that is often hard to develop when starting with a large account.
To start investing with $100, you must understand that money has rules. Because of that, you must learn to navigate and take advantage of those rules here before you can command thousands or even millions. It’s also important to know that the size is not important because they all follow the same rules. You can call them basic laws. As you begin to understand these basic laws and practice them with what you have, more money will find its way to you.
$100 Is Not A Lot Of Money
Now, we know $100 is not a lot of money. Especially as we see inflation on the rise and with it the cost of goods and services. $100 just isn’t as powerful as it used to be. But, some of the wealthiest people to ever walk the face of the Earth started investing with very little money too.
Here’s a secret about investing most people don’t know:
How much you start investing with doesn’t really matter; It’s the getting started that counts.
Best Way To Start Investing From Scratch
Now that we’ve tenderized your mind and allowed these ideas to marinate a bit, here are some of the ways I’d invest $100 if I had to start all over again.
1. As An Investor, Who Are You and Where Are You?
To start, the first step is to know what type of person you are.
- Person A earns a good amount of money and $100 is an easily disposable amount of money
- Person B has an expense to income ratio that makes $100 an uncomfortable amount to invest without a guaranteed return
Let me just say that losing money is never easy, no matter how much money you earn. However, to have success as an investor, the skill we need to conquer initially is fear. How do you conquer fear of loss when it comes to money? You need to accept the potential for loss, this is big, and then fix your mind upon the potential for gain.
Second, both person A and person B need to realize that monetary return is NOT the only goal when you start investing. Read that again! Even when you lose money, you may receive returns that far outweigh the value of that $100.
Third, you must understand that knowledge is the great equalizer, not capital. Your mind is what enables you to take that $100 and multiply it.
Knowledge is the great equalizer, not capitalTweet
Education Is The First Investment
So, the best way to start investing is in education. The more you know, the stronger that $100 becomes. Yes, that same $100 you plan to invest can increase in value outside of its physical utility.
How can I grow $100 fast? Learn how to grow it. How do you lose $100 fast? Refuse to learn.
2. Start Investing In Cashflow
Cash flow is a major component to the wealth building formula. The greater your ability to earn, the faster you can grow your money. If you don’t believe you can monetize your current knowledge or gifts, a fraction of that $100 should be used to develop a new skill.
Those who already have a monetizable skill, use a portion of that $100 to scale your ability to generate cash flow. For example, if you have knowledge of athletics or fitness, you could invest a percentage of that $100 to purchase a piece of workout equipment and start training clients when you’re not at work. If you have an accounting background, charge friends and family a small fee to help them budget their finances.
The key here is, establish cashflow for future investment. For Person B, this is a particularly important step.
3. Choose An Investment Vehicle (stocks, real estate, crypto, etc)
How can I double my money? Investments. There are many investment vehicles, some with exponential growth and others with linear growth.
Investing In Exponential vs Linear Growth
An example of a vehicle that allows for exponential growth is the stock market. Governed by emotion and speculation, prices fluctuate by the minute. With the right education and experience, one can achieve fast growth in the financial markets. Just the same, financial losses are just as easy to achieve if you lack the right education and experience.
An example of a vehicle that offers linear growth is a government bond or interest bearing account.
Before I continue, let me be very frank, savings accounts at a traditional bank does not offer exponential or linear growth. At the current national average, around 0.4%, every day that goes by the value of the money in the account is actually decreasing. Do you remember when I said that the value of your $100 can change with knowledge? This is a key example. Inflation, on average, is about 2-3% every year. This means that the value of your money decreases by 2-3% each year. If your bank is paying you 0.4% and dollar value decreases by 2%, that means your money is worth 1.6% less at the end of each year.
Hence my original statement, a traditional bank savings account does not qualify as an investment vehicle for growth. If you buy a government bond or open an interest bearing account, like BlockFi, then you’d want to make sure you’re getting at least 2% on your money.
How Do Beginners Start Investing In Stocks?
Here’s the easiest way to invest in stocks as a beginner: buy what you know, ignore what you don’t. Whatever product you’re using to read this article has a parent company, and that company is most likely publicly traded on the stock market. Fortunately, the best part about investing in 2021 is that you can buy fractional shares of almost anything. So, even though Apple stock costs more than $100, you can still use your iPhone to buy a dollar amount that you can afford.
Another Golden Rule For Investing In Stocks
Here’s a rule for finding stocks to buy: Only buy what you can explain to a 10 year old in 2 minutes or less why you own it. If you can’t explain why you own a stock to a child, then you shouldn’t own it.
If you had been using Amazon prior to 2009 and decided to buy their stock, then you’d be rich. Amazon was listed on the stock market in 1997. If you waited 10 years before investing in it, you still would have earned 3200% on your money. $50 invested in Amazon in 2009 would be worth about $1600 today.
Trust your knowledge. Use what you got.
If you can’t explain why you own a stock to a child, then you shouldn’t own itTweet
Remember this, stocks are not a lottery ticket. This isn’t the blog where you get a stock pick to buy for $100 and you’re a millionaire in a month. And you shouldn’t want it that way because lottery winners never become wealthy. In fact, according to a 2017 CNBC article, lottery winners declare bankruptcy within 3-5 years. They got rich without the wealth mindset.
Is Robinhood Safe?
Yes, it is safe to start investing on Robinhood because they are SIPC insured. This means your money is backed up to $250,00 cash. That is the same insurance as you’d find on TdAmeritrade and other major brokerages.
If you’re going to begin investing that $100 (or what’s left of it after getting some education), then Robinhood may be a good place to start. I find it extremely helpful having both TdAmeritrade and Robinhood. TdAmeritrade (and its trading platform called ThinkorSwim) has a wealth of information and tools that make trading and investing much easier. Combine that platform information with the easy execution of Robinhood’s interface, you can become a very skilled small account investor.
Start Investing In Fractional Shares
Buying fractional shares is a relatively new feature that many brokerages support has changed the game of investing forever. Today, low capital-novice investors can begin to invest and trade in all companies. Before, the average man/woman could not invest in companies like Amazon because, at $3000 a share, most could only afford a fraction. With fractional shares, they can have that and continue to build slowly up to a full share if that’s their desire. When you own fractional shares, as the company’s stock price rises so does the value of your equity. This is the best practice for fractional shares. As you add more money and build your position(s) over time, you’ll own more equity, witness the power of money and see the movement of price action.
Non-Stock Options To Start Investing
An increasingly popular space with a bold mission and boundless possibilities. Of course we all know Bitcoin, the King of Crypto. With Bitcoin and the 4000+ cryptocurrencies out there, you can also purchase whole or fractional amounts.
You can start investing in crypto by researching coins to find a few that you’re interested in building equity in. This, however, is much more difficult than stocks because 99% of cryptocurrencies don’t provide any immediate value to us. Most of the things we interact with daily, like our phones and food, have publicly traded companies that we can own equity in through stocks. Cryptocurrency isn’t at a point where we are knowingly interacting with it, that makes it hard to attribute value outside of what we read online. With that said, the research component becomes even more important in the selection process. If you don’t have the time to research, then buying fractions of the major coins may be the best option.
Growing your money fast in crypto is actually very possible. The volatility inherent in the market is a clear and accepted characteristic. A lot of money is made in the crypto space…but a much larger magnitude of money is also lost when new investors try to trade crypto. Anyone interested in earning money here through trading should do extensive research before venturing out on their own. It may also be beneficial to find a trading strategy that works in that space.
High Yield Interest Bearing Accounts
As I said before, savings accounts at traditional banks are paying less than half of 1%, which is far below the average inflation rate year over year. This represents a near 2% loss on your money compounding every year it sits at the bank. At the same time, banks leverage your money to earn high returns. That’s not exactly a fair trade-off. Here are 2 options with no fees and no monthly deposit requirement. Start investing in assets that earn you more than 2% on your money each year to allow your nest egg to grow over time.
This company allows you to earn interest on your cryptocurrency. The yield on their interest accounts can go as high as 8.6%. Even better, you don’t have to have already owned crypto when you open an account. When you go through the signup process, you can actually deposit US dollars and have it converted to crypto to start earning interest right away. As your account gets paid interest each month, your balance increases and you then get paid interest on the new balance so the growth compounds.
Worthy Bonds (worthy.capital)
This company allows investors to buy bonds that yield 5% interest. These bonds also help fuel local American businesses when you buy. So, you can earn money and help your community. An attractive quality of these bonds are that you can start with as little as $10 and earn interest on your money forever. At 5%, that protects at least 2% growth of your money even against the drag of inflation.
The Bottom Line
If you only have $100 to start investing right now, you’ll want to figure out what your end goal is. Who are you and who do you want to become? Do you want riches or wealth? Then, you’ll want to align your investments with that goal. You’ll also need to generate more cash flow to continue investing beyond just $100 when you decide on what investment vehicle you want to use. Your strategy will probably depend on a few different factors, which may include:
If you need easy access to your money
How much risk you want to take
Your investment timeline
How much research you want to do
If you’re looking for wealth, starting with education is key. You only need a portion of that $100 to purchase a course, unless you can find the information you need for free (using youtube, blogs, etc).
Are you person A or B? Once you decide to invest this money, don’t look to see profits tomorrow. Get rid of those emotions that limit your abilities like fear and greed. Then, decide what vehicle you’re comfortable using to carry out your end goal. Real wealth is built through investing in equity, learning to trade through buying and selling, and slowly building a nest egg with compounding interest.
There are many ways to invest $100. The reality is, the dollar amount that you start with doesn’t matter. The same way you build from $100 is the same way you build from $1000 or even $10,000. Develop the mindset required and make small steps that align with your goal. When it comes to building wealth, you just have to start somewhere. Investing that $100 is the first step to building the life you really want.