How to invest when you have no money to invest with

The old adage that the rich get richer is not just a platitude. People who have expendable income have more space to take risks and more abilities to invest their money and let it grow. But one of the major conversations missing in the fight to close the wealth gap is that anyone can invest, and not just in newer conventions like bitcoin.

You can start investing if you have an understanding of basic investment types, figure out the amount of time and energy you can devote, and come up with a number you feel comfortable devoting to this investment on an ongoing basis; yes, you can start with $10. If you have only a small amount of money to invest, there are a few safe ways to start now, in order of risk, leave that cash alone, and let it build your wealth for tomorrow.

High Yield Savings

This is the safest way to start growing your wealth immediately. This type of account can be accessed like any bank account, but the difference is that the bank is acting as an investment fund. Your interest rate is dependent on the general rate of inflation rather than an individual company or fund, and it grows faster than traditional savings or checking, which tend to have lower interest rates. Many banks offer free upstart on high yield savings accounts and you can start with as much of an investment as you want. Consider opening an account with $20 and funneling $10 directly from each paycheck. If you have an emergency, it’s there, but the more you put into the account, the faster you grow over time.

Roth IRAs

Consider this your tax savings vehicle. A Roth is very similar to a high yield savings, in that you can channel money into this account little by little, and watch it grow based on a set of investments and interest rates. This account is not taxed, and there’s a max of what you can put into it within the year. If you are just starting out, and that maximum ceiling doesn’t worry you, this may be a great choice for a first time investment.

Exchange-Traded Funds

Remember those Now That’s What I Call Music CDs? You’d get the greatest hits from the top musicians of the year, with less of a chance of songs to skip than if you’d buy the individual albums from each of those bands. That’s a great way to think about ETFs. Exchange-traded funds are a composite of related stocks you can invest in, with the power of the group making the investment less risky than putting your money into one individual stock. With a little research you can open a free brokerage account, like TD Ameritrade, Fidelity or ETrade, and buy individual shares of common ETFs. Your growth is equal to the rate of return of the market, which makes this a good choice for someone who wants to set-it-and-forget-it.

Mutual Funds

If you’re not a regular observer of the market, it’s not advisable for you to pick your own stocks, and taking on the services of a mutual fund advisor can be costly, which makes this a wild card pick for people who are new to investing. But in the interest of understanding all of your options, think of mutual funds like custom ETFs. An advisor might pick a few stocks they watch carefully and feel confident will grow, and create a group you can buy shares of. Because these may be more dependent on market trends, the growth can be faster, but also more volatile and really does depend on keeping a watchful eye. This choice might have better returns, but requires more money to get here.

Direct Stock Investments

This is what most people imagine when they think of getting into the stock market: people on a trading floor screaming “buy 10 shares of poodles!” Dollar bills flying everywhere. Maybe a monocle is involved. But for newbies, it’s not advisable to put all of your money into individual company stocks if you want long term growth and have little cash to invest. Your capital is wholly dependent on not just the performance of the company, but public confidence in that company and the people leading it. Imagine losing your whole investment because a CEO tweets a bad joke?

Commodities

The idea of commodities sounds pretty straight-forward: of course putting money behind resources we need everyday sounds like a good idea. However, this can be the most volatile type of investment. Investing in individual commodities is extremely risky as multiple factors can create a roller coaster effect on your shares. Rather than buying a barrel of oil (where are you putting that in your house!?) or gold bullion (somewhat easier to hide in your home…) if you are very interested in commodities, consider looking at ETFs that deal with multiple producers of areas like wheat production or base metals.