Investing in the stock market is one of the smartest financial decisions you can make. Not only can you generate wealth and increase your net worth, but you can also build up a healthy nest egg for retirement.
However, investing can be costly. Individual stocks can cost hundreds or thousands of dollars per share, and most experts recommend buying at least a dozen different stocks to create a diverse portfolio. If you can’t afford to shell out thousands of dollars, investing can seem overwhelming.
The good news is that there are ways to start investing without spending an arm and a leg. Even if you only have $ 100 (or less) to invest, these three options make it easy for you to start making money on the stock market.
1. Contribute to your 401 (k)
Contributing to your 401 (k) workplace is one of the easiest ways to get started on the stock market. Many employers automatically enroll new workers in the 401 (k) plan, so you may already have access to this type of account, even if you haven’t contributed anything yet.
With a 401 (k), you usually have a handful of investment options to choose from, taking the guesswork out of how to invest your money. You can also invest as much or as little as you want. You can choose to make a one-time investment now or set up automatic contributions to invest a fixed amount on a schedule of your choice.
If you don’t have access to a 401 (k) through your employer, investing in an IRA is another great option. IRAs are similar to 401 (k) s in many ways and also allow you to invest on a budget.
2. Invest in index ETFs
An ETF, or exchange-traded fund, is an investment that consists of dozens or even hundreds of stocks. The fund also tracks a particular stock market index, such as the S&P 500 or the Dow Jones Industrial Average. In other words, the ETF consists of the same stocks as the index it tracks.
Index ETFs can be a smart option for investors who want more control over their portfolios, but still prefer a low-maintenance investment. There are countless index ETFs to choose from, ranging from broad market funds like the S&P 500 ETFs to niche funds that track particular sectors. You don’t have to worry about buying individual stocks with ETFs, but because you have so many options, you can always create a personalized investment portfolio.
ETFs are also an affordable choice. Because each fund contains many different stocks, you can have an instantly diversified portfolio with just one ETF. From there, all you need to do is invest as much as you can and watch your savings grow.
3. Buy fractional shares
If you are keen on investing in individual stocks but cannot afford to buy full stocks, fractional stocks are your best bet. When you buy a fraction of a share, you are only investing in a small part of a full share, for a fraction of the price.
Suppose, for example, that you want to invest in Amazon. Currently, the stock is trading at just over $ 3,400 per share. With fractional shares, you can buy a portion of an Amazon share for as little as $ 1.
The best part about fractional stocks is that you can invest in a wide variety of stocks for next to nothing. Rather than spending thousands of dollars to build a diverse portfolio, you can invest up to 100 stocks for $ 100.
Of course, the less stocks you own, the less money you can expect to make from an individual stock. However, fractional stocks are a fantastic way to start building a portfolio. And when you have money to invest, it’s easy to put that money into more stocks to grow your investments.
No matter how much you can afford to invest, the stock market is one of the best ways to make money over time. By taking advantage of these affordable options, you can start investing and start building wealth.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.