Investments Worth Making With $50 or Less
Having an extra $50 in your pocket can be a blessing or a curse, depending on how you use it.
You could do something fun and treat yourself out to a nice dinner, blow it on a lottery ticket in the hope of getting more money, or find many other ways to enjoy the extra cash. The spending possibilities are endless. There's nothing wrong with enjoying spending money — it's one reason why people work so hard to earn it.
But saving or investing it so you'll have it for a rainy day may be the smartest move, even if it's only $50. Putting $50 a month away in savings will at least get you in the habit of being a saver.
No matter how you've come upon that $50 — by working a few hours, not buying lunch out for a week, or getting rid of cable TV — there are plenty of ways to invest it for long-term savings. And I'm not talking about stock tips from your cubicle buddy that may not pan out. While some of these ideas are risky, my aim with this article is to highlight investments that can be started for $50 and can continue with regular deposits at least once a month. (See also: Investing 101: 5 Essential Steps)
If you don't have one, this is the best place to start. Although interest rates are low, depositing money regularly into a savings account will get you on the right path to becoming a lifelong saver and not a spender. Search for a savings account with a low minimum deposit, no fees, and the highest yield you can find, and start putting money there. Use a free online savings calculator to determine how much you'll gain after a few years and regular deposits of $50 a month.
Buying exchange-traded funds, or ETFs, is a way to buy stocks without all of the costs of mutual funds, says Mike Sena, a certified financial planner in Canton, Ga. Most mutual funds have an initial minimum purchase requirement of typically $2,500 or more, and investing $50 at a time can be unworkable, Sena says. Most every discount brokerage, such as E*Trade and TD Ameritrade, have generous lists of commission-free ETFs that he recommends investing in until the investment reaches several thousand dollars.
An ETF is traded on stock exchanges and trades throughout the day. While most brokers charge a small fee of less than $10 to trade them, there are plenty of ETFs without trading fees, though Forbes warns investors may not be getting the best performing ETFs from brokers that don't charge fees.
Sena recommends that for $50 a month, investments should be scattered among different types of companies, from a large company ETF one month to a small one the next, and an international one and other types of ETFs in other months. Such investments should only be made after making sure you have an adequate emergency fund and little or no consumer debt, he says.
Joining a company's Direct Investment Plan, or DRIP, is a low-cost way to invest in an individual stock on a regular basis without having to go through a broker. Most DRIPs don't charge fees for ongoing investments. Some require high minimum initial purchases, such as $500, so look for plans with low minimums to start and that allow $50 purchases. You may have to save up for awhile to get to the initial purchase requirement.
Instead of putting your money in some big bank or company and not knowing where your money is going, loan money to your peers through Lending Club and avoid putting your money in a nameless, faceless bank. Alan Moore, a financial planner in Shorewood, Wis., recommends it as a great way to start investing partly because the initial investment can be made for $25. Loan returns range from 5.73% to 9.90%, which is much better than a savings bond, CD, or other savings account method. The loans can be risky, so it's a good idea to diversify with small loans to a variety of borrowers instead of loaning most of your investment with one person.
I promised to stay away from wacky investments, but SellaBand is so intriguing that it may be worth $50 just for bragging rights. The site helps you find a hot, new artist to invest in. Initially an investment will get you free downloads, signed T-shirts, backstage passes, and other band swag. It's up to the band if you'll ever share in sales revenue. You may not get rich, but it's fun to say "I'm with the band" and really mean it.