Whether you’re a college kid reading this, or a 28 year old in a mediocre career, maybe a millionaire, or even just a 10 year old kid, (in which case, kudos to you kid for reading up on finance so early in your life, you’re way ahead of the game.) I bet $1,000 sounds a hell of a lot better than $20.
(I probably should have chosen another word besides hell for the 10-year-old reading this.) Look kid, it’s probably best if you read something like the Penny Hoarder, I don’t really hold back here. Unless you’re a bad kid already, in which case I’m happy to have you here to learn.
So, you want to trade that extra $20 you have laying around for $1,000 huh?
I wish it was as easy as snapping my fingers. But unfortunately, everything in life takes either hard work, patience, or rich parents (kidding on that last one, but they do help). Investing early with only a little money definitely falls under the patience category.
It takes approximately 3 ½ years to turn 20 dollars a month invested into 1,000 dollars. Which may seem like an outrageous amount of time, but if you think about it, 20 dollars a month is only around .66 cents a day. So, your .66 cents a day will end up being about 888 dollars in 3 ½ years if you do nothing with it.
But the coolest part of it is, if you make a 9% (which is lower than the S&P average, so if invested in a good ETF, you can expect to replicate this) return on that money, then you will have $1,000 by the time that 3 ½ years is up. Which amounts to $112 without doing ANY work. Pretty Sweet gig if you ask me.
So a lot of people will tell you to save your measly $20. Don’t invest with it, investing is for rich people. But the truth of the matter is, they have no idea what they are talking about.
Even just $20 a month is worth investing, and if anything, it can help you get your feet wet. So as you make more money over time you will know exactly what to do with it.
So, let’s get right into what you came here for.
How do you invest only 20 dollars into the stock market?
Well, I hope if you are trying to find an answer to this question than that means you are debt free and have a nice and comfortable savings account. If you don’t, then you may want to start with the article How to Budget Your Way To Famous Millionaire Status where I talk about how to make sure that you’re ready for investing.
Now, on the other hand, you newbies who are ready to be the next Warren Buffet with just $20. Before getting into it, let me mention that with just a small amount of money available to invest, you should primarily be focused on retirement account investing, as you can save money on taxes by investing this way. I will get more into that later.
You firstly have to recognize that the largest barrier to entry in investing is that a lot of high performing, quality stocks are expensive. They can run anywhere from $50 to $1,000. (darn you Amazon you expensive monster). Even ETF’s can be quite expensive at around $150-$250 a share.
They are tough for a college kid or low-income individual to afford and that can really hold you back. (If you are confused about what ETF’s are then you need to read 5 Places To Set and Forget Your Money, I simplify a lot of these confusing investment terms for ya.)
So, how do you get around this?
The way I see it, you have three viable options. Well, besides robbing a bank for the money you need to invest. In which case, best of luck to you on that one…
(I am in no way endorsing the act of bank robbery just in case that is misleading… 😉 )
So, your remaining options are,
1. You can open an account with a broker that has no minimum deposit requirements and start transferring 20 dollars a month to your account.
This, in my opinion, is the worst option, (if you truly only have 20 dollars) and the reason I say this is because the money will have to accumulate over time until it is enough to purchase whatever ETF or stock you choose, and we want to make sure you are getting your money in the stock market as soon as possible so that it has time to grow.
I personally use Charles Schwab for my Roth IRA (since I am able to deposit larger amounts every month rather than only $20) and I have enjoyed using them so far. (Don’t worry if you are like “wtf is an IRA“, Look no further than a blog near you (this blog). I have published that article The Complete Guide To ETF’s that Every Investor Needs.
The top options I recommend when just starting if you want to use this method would be Robinhood (if you sign up at Robinhood with this link we can both receive a free stock worth up to $200.) or M1 Finance.
M1 Finance requires a larger initial deposit fee, but if you have the 500 dollars needed, once you make the first deposit you can invest smaller amounts as often as you would like.
If you truly only have twenty dollars or less, Robinhood is the better bet of these two.
2. The second way I recommend investing only $20 at a time is by using Stash.
The differences are minimal but M1 Finance allows you to automatically rebalance your portfolio with just one click, which sold me.
The reason I recommend Stash is that it allows you to buy fractional shares of ETF’s or Individual companies you may be interested in. Unlike other brokerages which only allow you to buy total shares of ETF’s or companies, you can afford. Stash is better for the interested investor as it allows the user to make their own choices for what to invest in.
I enjoy attempting to beat the returns of the S&P 500 and choose to invest in an array of individual companies I believe have the potential to outperform.
This is why I initially chose Stash. But, you must also remember this method comes with greater risk. As you choose your own stocks, you are basically implying that you have a better idea of what stocks will outperform others. Stock market investing this way without first researching the companies you are buying into is just glorified gambling.
So please, do your own research and choose companies that are either strongly recommended by many financial experts for good reason, or companies that you have a strong belief in and have good opportunity for growth (I will talk more about the process of valuing stocks in future blog posts, so sign up for our email list if you’re interested and be on the lookout for that).
With Stash, it only takes 5 dollars to buy into any company or ETF available on the platform. Stash also offers a retirement investment account as well and it would be wise to use this over just the basic option to ensure you are saving as much money as possible on taxes.
3. Your next option is going to be an app called Acorns.
Now Acorns is an amazing app when it comes to beginner investing. It helps to simplify the process of investing so much anyone (yeah, even you total newbies who hate finance but just want to adult for once) can understand it.
This app allows you to start investing with as little as 5 dollars and has many ways you can grow that account balance over time.
This is a great place to start investing that $20 dollars you have saved up and you can even set a monthly transfer of 20 dollars to keep the momentum going.
Acorns works by taking the money you invest and buying fractional shares of different ETF’s. This allows you to be able to buy fractional shares of expensive companies.
Some handy features with Acorns are that they have different portfolios that match different goals and expectations. (I always recommend aggressive, go big or go home am I right?)
But you should base your portfolio off the goals you have in mind and the time in which you expect to have your money invested. Acorns makes the process easy by choosing for your based off of your given information. (you can always change your portfolio if you please)
Not only do they have this option, but another AMAZING feature they offer is also the ability to use roundups. What this essentially means is that when you link your bank account to Acorns you have the option to turn roundups on so that every purchase you make will be rounded up to the nearest dollar.
The spare change is then invested into your Acorns account. This is an amazing feature because this can really allow money to accumulate in your investment account without you noticing. When I was using roundups I was averaging about 20-30 dollars a month just from roundups. So this is a feature you should really consider using, most of the time you never even notice the money is gone.
Acorns costs a dollar a month and they also offer retirement accounts called Acorns Later which should primarily be your focus until you have more money to invest because retirement accounts have tax benefits you cannot receive in a normal taxable investment account.
OH. Acorns is also free for you broke college kids out there!!
(and only a dollar a month for anyone else. Definitely worth the money!)
Investing with only just $20, $50, or even $100 dollars may seem like a pretty boring and measly thing to do. But to be honest, we all have to start somewhere. I started with only $20 when I began investing.
Now I not only have thousands of dollars invested, but I also get paid dividends often that I use to reinvest and continue to grow my account balance.
It’s important to remember that you may only have 20 dollars now, but eventually, you will have more. You need to try your best to take every little bit extra you get and add it in with that 20 dollars every month. Or maybe you can look for other ways to grow your investment amount like saving your change, or my favorite, using a cash-back debit card and credit card to get cash-back and investing that as well.
This adds an extra 120 dollars or more to my investment account every year. Just for buying things I already used. (Stay tuned for more about this, I plan on talking more about how to get the most out of everyday spending with Cashback in my article next week.)
I think the most frustrating thing to me when I first started was people telling me it was silly to only invest 20 dollars at a time. Don’t let this discourage you the way it did me. Keep going and keep investing more and more, and over time, you will be in a way better place than if you had just held off until you had a big fancy career and a killer salary.
Another thing to look out for is costs when you’re investing. You have to be sure that however you are investing you’re making sure you are spending as little as possible on fees. John actually wrote an article that goes more into detail about this, you can check it out at 5 concealed costs that destroy your investment returns.
The hardest part of investing isn’t saving up the money to do it, it’s accepting the fact that you already have enough and getting started now. All it takes is $5. Let the momentum push you and before you know it you’ll have hundreds even thousands invested, and you’ll be darn happy you do. 😀
Until the Next One,
After growing up in a poor household, Noah set out to learn as much about finance and personal development as possible so he could live a better life. He worked his way up from an online Virtual Assistant to now the CEO of an Austin based Media company in just a single year. He continues to learn the best ways to save his money, invest it, and achieve things he never thought possible, and loves teaching others how to do the same!
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