The Best Ways to Invest $50, $500, or $5000
Investing isn't just for your dad and the super rich folks down the block. Anyone can — and should — put a portion of those hard-earned dollars to work. The prospect of reaping additional profits by committing capital to stocks, bonds, mutual funds, real estate, and more might seem sort of scary. But it's an exercise everyone can benefit from — people with slim pockets included. It's all about weighing potential gains with potential risk, and then zeroing in on an investment vehicle that caters to you.
Read on for our investment guide for the newbies and dabblers. Whether you've got $50, $500, or $5,000 to spare, there's a wealth-growing opportunity waiting for you.
Fifty smackers won't make you rich. But that doesn't mean you can't transform a $50 bill into an opportunity to build up your wealth. Often the key to growing small sums is getting creative, so now's the time to channel your inner artist.
Why not flip furniture on Craigslist? Think about it: There's a deluge of couches, end tables, stools, and vintage tea carts on the buy-and-sell site. Often, when it comes to furniture listings, one of four things is the case: The seller doesn't know what the item is worth; the seller is moving and just needs to get rid of things quickly; the seller can't take a good photo of a coffee table for the life of him; or the furniture piece needs just a little TLC to realize its potential worth. Here's where you swoop in to remedy the situation.
If the seller undersold you a sofa, it's not your duty to inform him that he could have made an arm and a leg rather than $25. Seize this as an opportunity to resell the item you got a steal for at a better price. If the seller has a nice wooden chair, but posted a dim-lit, fuzzy photo of it positioned in the middle of a messy living room overrun with cats, you've just scored yourself a chance to buy the chair and market it in a way that reflects its true worth.
Another option for folks with $50 to invest: Build up your savings account. It's not sexy. But if you're able to sock away $50 every once in a blue moon, you'll eventually have a nice little safety net. What's more, you'll be on your way to building up enough money to do some more progressive investing (think bonds and stocks). After all, you've got to have a little to make a little. But you certainly don't need a lot to grow your pot.
A $500 investment gives you a little bit more flexibility. While it's hard to grow that amount quickly and substantially — ahem, unless you've perfected your poker face — there are lots of ways to make $500 work for you without risking big losses on the betting machines.
In fact, you won't wager any losses if you invest in a certificate of deposit. Popularly known as a CD, this special type of deposit account offers a higher rate of interest than a standard savings account. The catch is that you can only deposit money into it for a specified length of time. During that time — six months, 18 months, two years, etc. — your fixed investment generates interest, which you can cash out, along with your original $500, when your CD reaches maturity.
A CD is a safe investment — an ideal option for folks amenable to slow growth and low risk. Unlike a savings account, a CD can help prevent you from burning through your hard-earned dollars (but if you're in a jam, you can easily access it for a small penalty). And unlike stocks and many other forms of investment, CDs come with federal deposit insurance, so there's zero risk of losing your money. National rates for a one-year CD currently hover around 1.25% at the moment. Not great, but be sure to shop around.
Another great option is hooking up with an online financial advisor. They're truly all the rage. You can open an account with Betterment, for example, even if you have no money. (The company recommends a monthly deposit of $100, which is just enough to waive the $3 fee per month for accounts less than $10,000). Dubbed "the easiest investment site you'll ever use" by Slate, Betterment is just one of several robo-advisors offering services that were at one time a privilege of the uber-rich. (Thanks, Internet.) Some of these companies will even make the trades for you, suggest ways to minimize your taxes, and rebalance your accounts. There's more risk involved in investing with an online financial advisor, but there's also more opportunity for gains.
One of the biggest misconceptions about investing is that you need a lot of money to jump in the game. Not so. By sinking $5,000, a relatively modest sum, into a quality mutual fund, you'll gain access to a stock portfolio that's diversified and professionally managed. Another benefit: Investors in mutual funds can cash in their shares at any time, giving you more flexibility should you endure some sort of financial emergency.
Sure, there's risk involved. Some of the investments in your portfolio will falter. But others are bound to flourish. Some years will be losers. During others, your earnings might grow by 8%. Bottom line: If you choose a mutual fund that's high-performing, there's ample opportunity to grow your investment into a bigger sum. You've just got to come to terms with that fact that every year won't be a good one. And so, notably, the $5,000 you invest shouldn't be money that you're hoping to spend next year. Rather, view this investment as your pot of gold for sometime down the road.
If you're wary of risk, consider investing, say, $3,000 in mutual funds. Then pour the remainder into bonds. Bonds won't bring home the big returns, but they'll give you reliable ones, providing you with a solid footing on which to weather the uncertainty of an investment in stocks.
Rome wasn't built in a day, and neither were most sizeable portfolios. Even a modest start is a good start — and a big step forward toward financial security.
How have you invested a windfall?