A common myth about investing is that a big bank account is required just to get started. In reality, the process of building a solid portfolio can begin with a few thousand—or even a few hundred—dollars. Here's how to start small by investing with little money.
Whether your student loans are being forgiven, you received a gift, or earned some extra cash this month, using $1.000 or even $100 to start your investment journey is possible now more than ever.
Thanks to investment products like fractional shares, investment funds like ETFs, or derivatives like CFDs, people can enter the market for dollars and cents — and quickly build a diverse portfolio with little money. There is quite a bit you should know before you dive in. If you want to invest with little money right away, here is a quick guide.
Invest with Little Money - Quick Guide
- Find an investment platform - The first step is to sign up for a low-cost investment platform. CAPEX WebTrader and CAPEX.com app allow you to trade and invest with little money. Once you have done that, you need an investment strategy.
- Select your investments – With us, you can choose from over 2,100 CFDs on shares, indices, funds, commodities, currencies, and cryptocurrencies, or 5,000 shares and ETFs with ownership.
- Take your position – Create an account with us to start investing from as low as $100.
5 Ways to Start Investing with Little Money
Whether you’re planning to invest a little or quite a lot, in safe bets or high-risk gambles, these are some of the most popular ways to get started.
Invest in the stock market
Stock market investing is a long-term process that could help you manage your finances. Investing in the stock market can seem daunting, especially when you are just starting, as it may appear too complex or risky. A careful understanding can help you start investing with little money.
Among the two top reasons to invest in the stock market is the possibility of getting higher returns on your investment and developing financial discipline. For instance, when compared with basic saving instruments such as fixed deposits, investing in stocks has resulted in a higher rate of return in the last decade. Periodic investments with little money inculcate a habit of financial discipline, encouraging you to save money and invest it carefully.
When starting out, it’s a good idea to put your money into low-risk stocks, that is to say, stocks that move relatively little (have low volatility) and are part of a large index such as the USA 30, DAX 40, or US Tech 100, while you get acquainted with the whole process. Alternatively, you may choose to invest in an exchange-traded fund (ETF).
ETFs are baskets of investments that include dozens, hundreds, or even thousands of various assets, like stocks, bonds, currencies, commodities, or even an entire market.
In buying a share of an ETF, you’re instantly gaining access to shares of a wide range of companies, offering easy and quick portfolio diversification, which makes them a viable choice for investments with little money.
Active investing (aka “online trading”) is not for the faint of heart. It takes grit and determination. It takes understanding the different market forces at play. This isn't something a stock advisor would recommend for amateurs. But, if learned and learned well, it is a way where you can quickly invest a little money.
CFDs, or 'contracts for difference’, allow you to speculate on whether an asset’s price will move up or down – without having to own the asset.
Leverage in CFD trading enables you to get full market exposure for a small initial deposit, known as margin. In other words, you can invest with little money, usually a few percentages of the cost of the position as a margin, to gain exposure to the full value of the trade.
It’s important to remember that potential profits and losses will be magnified, as they will be calculated on the full size of your position – not just the margin.
Invest in the commodity market
Commodities are often overlooked as a component of an investment portfolio on a small budget, with many financial advisors recommending only allocations of stocks and bonds (or funds holding those two asset classes). But some experts argue that investors need further diversification in their portfolios to help reduce risk.
And that’s where commodities investing comes in. Commodities, such as precious metals, oil, agricultural products, and more, move based on their own highly specific industry conditions. That can make them attractive when you’re looking to invest with little money and diversify your portfolio.
There are several ways to invest in commodities with little money, which are raw materials that are either used directly, such as food or indirectly to produce another product. Oil is a commodity that’s used in the production of many different goods and services. Airlines spend an enormous amount of money on fuel for their planes and the price of oil can have a big impact on an airline’s profitability.
You can invest in commodities in several different ways including by purchasing physical goods, such as gold, or by purchasing ETFs that track specific commodity indexes. You can also buy stocks of commodity-related businesses such as oil and gas producers (oil stocks) or miners of precious metals (gold stocks). Commodities can be quite volatile, so be sure to understand the risks you’re taking before making an investment.
You can also invest in commodities with little money by using futures contracts, which is an agreements to buy or sell a commodity at a specific price and date. You can make a lot of money through futures contracts if you’re right about the underlying commodity price, but you can lose a lot too. Be sure to understand the risks involved so you can avoid, or at least be aware of, the potential for a margin call and other events that can impact the success of your trade.
Invest in the cryptocurrency market
There is no longer a requirement to risk large sums of money when you invest in crypto. The prices of cryptocurrencies, even the most established ones, are much more volatile than the prices of other assets like stocks. The prices of cryptocurrencies in the future could also be affected by regulatory changes, with the worst-case possibility that cryptocurrency becomes illegal and therefore worthless.
Many investors are nonetheless attracted to the potential upside of the crypto market, although it requires a small budget to build a portfolio. If you decide to invest, it's important to carefully research any digital coin before buying it. Pay attention to transaction fees when making crypto purchases because these fees can vary widely among currencies.
The cryptocurrency space is evolving rapidly, so it's also important to pay attention to new developments that may affect your crypto holdings.
Invest in the foreign exchange market
Investing in currency involves buying the currency of one country while selling that of another. This is done through the foreign exchange market, or “forex.” FX is suitable for those who want to invest little money, due to features like "leverage" and "lot".
Stocks and mutual funds are traded on a centralized exchange, such as the Nasdaq or New York Stock Exchange (NYSE). Forex is not. Instead, it’s traded through the foreign exchange market, which is managed by banks and other financial institutions. All trades take place electronically and trading can be done 24 hours a day, 7 days a week.
Forex trading can be done through a CFD and forex broker like CAPEX.com which requires only 100 USD to get started.
Invest in the bond market
Most of us are used to borrowing money in some capacity, whether it's mortgaging our homes or bumming a few bucks off a friend. Similarly, companies, municipalities, and the federal government borrow money, too. How? By issuing bonds.
There are two ways to make money by investing in bonds. The first is to hold those bonds until their maturity date and collect interest payments on them. Bond interest is usually paid twice a year. The second way to profit from bonds is to sell them at a price that's higher than you initially paid.
Bonds tend to offer a fairly reliable cash flow, which makes them a good option for investments with little money. A well-diversified bond portfolio can provide predictable returns, with less volatility than equities and a better yield than money market funds.
Recommendations by Investment Amount
Before the specifics, a few general points are worth underlining. No matter your net worth, it’s essential to minimize your investment fees.
That’s especially the case when you’re investing on a budget because fixed fees will take a more significant chunk of your savings. A $100 annual fee on a $1 million account is trivial, but a $100 fee on a $5,000 account is a hefty financial hit. Carefully choose the costs associated with where you invest your money, especially if you’re investing with little money.
You’ll also need to weigh likely returns on your investments against the level of risk you’re comfortable with taking, and that’s appropriate to your age. In general, your portfolio should become steadily less risky as you approach retirement.
How to Invest 100 USD
It may seem like a small amount to work with, but even $100 can go farther than you might think in starting an investment portfolio.
If you prefer to play it safe, use it to buy short-term Treasury bills, which can be purchased directly from the government. Another way to gain exposure in bonds would be to invest in a bond ETF that exclusively holds bonds in its portfolio. These funds are convenient since they are usually low-cost and contain a broad base of diversified bonds so you don't need to do your research to identify specific issues. keep in mind that these are “secondary market” transactions and are not appropriate for an investor who wishes to hold a bond until maturity.
The growth potential is limited, but the risks is smaller com. It’s a way to earn a little on your money until your nest egg grows to the point where other options are available.
For those who are comfortable with a little more risk, many choices are available, even for small investors, that promise greater returns than bonds. One is a dividend reinvestment plan. You buy shares of stock, and your dividends are automatically used to purchase additional shares or even fractional shares. This is a popular choice for small investors because the shares are purchased at a discount without paying a sales commission to a broker. Buying a single share of a company’s stock will get you started.
Cryptocurrency is a highly speculative area of the market, and many investors have decided to put their money elsewhere. For beginners who want to get crypto exposure, however, the best advice is to start investing with little money only use money that they can afford to lose.
In theory, it takes only a few dollars to invest in altcoins. There are a lot of cheap cryptocurrencies to invest in today, most priced under $1 after the 2022 crypto crash. However, when investing with little money, 1,000 USD or less, it may be wise to research the cryptocurrencies with the best potential to explode this year.
Toward the top of the risk continuum, day trading is a speculative investment strategy that can start from $1,000 or even less. Day trading can turn into a lucrative career (as long as you do it properly). But it can be challenging for novices—especially those who don't have a well-planned strategy. And be aware that even the most seasoned day traders can hit rough patches and experience losses.
Day trading means buying and selling a batch of securities within a day, or even within seconds (scalping). It has nothing to do with investing in the traditional sense. It is exploiting the inevitable up-and-down price movements that occur during a trading session. Day trading is most common in the stock markets, on the foreign exchange (forex) where currencies are traded, and also on the futures markets where gold, silver, oil, or natural gas are traded for hedging or speculation.
How to Invest 1,000 USD
This investment level allows access to additional options, including funds.
A reliable option for starting to invest with 1,000 USD is exchange-traded funds (ETFs). Increasingly gaining popularity, the goal of an index fund is to at least match the performance of the index like the USA 500, USA 30 (see Dow Jones forecast and price predictions), or the US Tech 100 (see Nasdaq-100 forecast and price predictions). Once you buy a unit of the ETF, you hold a part of the 500, 30 or 100 stocks in the US stock indices mentioned above in the same weightage that the index holds them.
It also gives you broad exposure to a number of asset classes or niched exposure to different sectors or investment themes. These are called “passive” products, which are typically much lower in cost than mutual funds and give you the same risk or return profile as the index.
With that $1,000, you also could consider purchasing individual stock shares, which come with higher risk but can generate higher returns. One common way to invest $1,000 in stocks is by adopting a buy-and-hold strategy, where you hold stocks or other securities for a long time instead of engaging in frequent buying and selling (a.k.a. stock trading).
That’s important because investors who consistently trade in and out of the market on a daily, weekly or monthly basis tend to miss out on opportunities for strong annual returns. Holding individual stocks that pay dividends is a smart strategy.
How to Invest 5,000-10,000 USD
The possibilities become broader at the 5,000-10,000 USD level, including more options for investing in real estate. While $10,000 isn’t enough to purchase property or even to make a down payment, it’s enough to get a stake in real estate in several other ways.
The first is to invest in a real estate investment trust (REIT). This is a corporation that owns a group of properties or mortgages that produce a continuous stream of income. As a REIT investor, you’re entitled to a share of the income generated by the underlying properties. REITs are required by law to pay 90% of their income to investors as dividends annually. REITs can be traded or nontraded, with the latter carrying much higher upfront fees.
How to start investing with little money?
You cannot buy or sell directly on the stock market, commodity market, or forex market. For this, you have to go through brokers like CAPEX.com who are authorized and allow you to invest with little money using their platform. The process is simple:
To begin investing with little money, you have to open a Trade Account or Invest Account. A trading account is where you actually “trade on margin” or place buy or sell orders without owning the underlying asset. An invest account is where to actually buy shares of stocks or funds upfront, based on the full value of the asset, and hold until you want to sell. To open an account, you need to provide Know Your Customer (KYC) documentation that includes verification via government-authorized identity cards. CAPEX.com has an online KYC process that allows you to open an account in a couple of minutes by submitting your verification details digitally. The final step is funding your account. Review available payment methods in your country before you proceed. You can start trading and investing with little money, starting from as low as 100 USD.
What to consider before you begin investing
Before you begin investing with little money, be sure you’ve taken care of more immediate financial needs like paying off high-interest debt and building up an emergency fund, as per experts' recommendations.
If you’ve got that covered, it can feel nerve-wracking to consider beginning to put cash in an investment account instead of your savings account. One strategy for overcoming fears about investing is to focus on your goals.
First, consider why you are investing. Whether your reason is college, a home, retirement, a medical procedure, a trip, or something else, why you want to invest affects what type of financial product is the best match for your timeline and goals.
Why you want to invest also informs how much risk you're willing to take. Even investments with little money always involve risk. It's normal for markets to go up and down, and you need to understand that before you start investing. If you need the money for something in the next five years, for example, a strategy that involves less risk is more appropriate.
But if you have a very long investment timeline, you could take on more risk, with the thought that it will pay off eventually.
Before you start investing with little money, you should consider using the educational resources we offer like CAPEX Academy or a demo trading account. CAPEX Academy has lots of free trading courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a better trader or make more informed investment decisions.
Our demo account is a suitable place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how trading and investing work – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading.