When it comes to investment options that require little money to get started, there are several options depending on the level of risk you are comfortable with. From basic deposit and retirement accounts to fractional stock purchases and crowdfunding, there are small investment options for all risk categories. If you want to have a financially healthy future—even if you only have a few hundred to a few thousand dollars to invest—consider these 11 top small investment ideas.
1. Open Savings Accounts and Certificates of Deposit (CDs)
While savings accounts are not what people tend to think of first when they think of investing, these well-known accounts are among the simplest forms of investing. They give you returns in the form of interest and are an easily accessible and useful small investment opportunity.
- Savings accounts: There are different kinds of savings accounts you can open, depending on your needs. Money market and high-yield savings accounts both give you a higher rate of interest than a standard savings account, but you will usually have to keep a minimum balance in either to avoid paying a fee.
Set your savings on autopilot! One of the easiest ways to grow your savings is to automate deposits to your savings account. There are a number of ways this can be accomplished, but the most common ways are to have a set amount directly deposited from a paycheck or an automated deposit pulled from your checking account.
- CDs: A CD offers you a longer-term guarantee of interest but requires commitment for months or years to avoid potential penalties. Interest rates on CDs are generally higher than on a standard savings account. To optimize your access to funds deposited in CDs, you may want to consider a CD ladder, which involves opening a series of CDs with varying maturity dates.
2. Start Your Own Business
Starting your own business can be an expensive proposition, depending on what you wish to do. However, there are a number of entrepreneurial opportunities or microenterprises that require very little initial investment.
If you have a skill such as carpentry, repair work, or cooking, you can start a business on the side and make some money in the process. If you need more inspiration, check out our list of the cheapest, easiest, and most profitable business ideas for beginners.
Be prepared. Investing your own money in your small business is a fairly simple process, but it can cause headaches down the road if you don’t take the right steps from the beginning. Check out our guide to putting personal money into a business. Also, to ensure your accounts are in order and things don’t get messy between your business and personal finances, see our roundup of the best small business checking accounts.
3. Get Individual Retirement Account (IRA) Plans
IRAs are a great way to invest in your future and offer significant tax advantages. If you’re considering this small investment idea, there are a few different IRA options available.
- Traditional IRA: A traditional IRA allows you to contribute pretax dollars (up to $7,000 annually for individuals under age 50 or up to $8,000 annually for individuals 50 years of age or older) toward investments that can grow tax-deferred until you begin drawing on the account after age 59½. When you draw funds from your traditional IRA, the funds drawn are considered taxable income.
- ROTH IRA: This is similar to a traditional IRA but is funded with after-tax dollars (contributions to a ROTH IRA are not tax-deductible). A ROTH IRA has the same contribution limits as a traditional IRA—up to $7,000 annually for individuals under age 50 or up to $8,000 annually for individuals 50 years of age or older. You are eligible to withdraw funds without penalty after age 59 1⁄2; however, unlike a traditional IRA, funds drawn from a ROTH IRA are not considered taxable income.
- SEP IRA: A simplified employee pension (SEP) IRA is a retirement plan for businesses with five or fewer employees. If you are a sole proprietor or own a very small business, it is a way for you to put money away for retirement through tax-deferred investments similar to a traditional IRA. While the annual maximum contribution is $69,000 (for 2024), there is no minimum contribution requirement for a SEP IRA plan. Many investment platforms offer low- or no-minimum balance requirements.
4. Open Employer Sponsored 401(k) or Solo 401(k) Plans
If you are employed and your employer offers a 401(k), this is an excellent opportunity to invest. Many employers offer a percentage match for any funds that you contribute to your 401(k); this employer match is essentially free money invested for your retirement. Additionally, 401(k) contributions are pretax and reduce your taxable income, and you choose the level of risk you are comfortable with when choosing how your funds are invested.
Solo 401(k) plans are designed as a way for single-employee businesses to save for retirement, unlike SEP IRA plans that can be used if you have a few employees. Solo 401(k) plans will have administrative costs involved, such as annual fees and administrative charges, depending on the provider, but they are another option for providing tax-deferred retirement savings. See our article on how to set up a Solo 401(k) if you need guidance.
If you’re looking for a solo 401(k) provider, ShareBuilder 401k is a great choice. It offers low-cost retirement plans, making it easy and affordable for businesses of all sizes to open an account.
5. Invest in Exchange-traded Funds (ETFs)
An ETF is a collection of securities (similar to a mutual fund) that are traded on an exchange like a stock. These funds are traded by traditional and online brokers. You can invest in ETFs through most online platforms—like Robinhood—and most don’t charge commissions or trading fees.
Several ETFs are available, and most are geared to track specific industries, commodities, or investment strategies. The diversification of ETFs makes them an enticing and simple investment vehicle. In most cases, you can get started in ETFs for as little as $50.
6. Invest in Mutual Funds
Mutual funds are an investment vehicle in which multiple investors pool their money to purchase a collection of stocks, bonds, and other securities. They are managed by a professional fund manager and allow you to diversify your investment in a way that you wouldn’t be able to if you were purchasing individual stocks. If you’re invested in a 401(k), then you’ve likely already invested in a mutual fund, which is a common means of retirement investment.
The performance of a mutual fund is determined by the performance of the individual assets that the fund is composed of. As the value of the mutual fund assets increases, so does the value of your investment. Conversely, if the assets of the mutual fund decline in value, the value of your investment will be reduced as well.
7. Buy Partial Shares of Stocks
Conventional investing requires a significant amount of money, given that many stocks have a very high price. But fractional share brokerages, including sites like Robinhood, allow you to buy partial shares of individual stocks or fractional shares of ETFs or indexes, giving you access to investing with lower levels of cash.
As a small investment opportunity, these fractional share services often run on low or zero commission. Since investors can buy partial shares with very small amounts of money, standard commissions would quickly eat up their investments. The rise of zero-commission trading has also led to larger brokerages changing or eliminating their commissions.
Invest personal funds in stocks. Ideally, any stock purchases should be made with disposable personal income since stock prices are not guaranteed to continually increase in value. Given the risk of volatility, it’s not a good idea to tie business funds in the stock market.
8. Invest Your Spare Change
For investors who want to put small amounts of their personal funds into the market, Acorns offers you the ability to invest your spare change. When you make a purchase with your credit or debit card, Acorns rounds up your purchase to the nearest dollar and puts the change into an investment account. You can put money into a standard investment portfolio, a retirement account, or even an investment account for your kids.
One of the problems with this small investment opportunity is that it can take a long time and a lot of work for your investments to grow into something significant. With automated investment, it is surprising how quickly your accounts grow, and all the while, you may not even notice the money leaving your checking account because it gets taken out in such small amounts.
9. Crowdfund Someone Else’s Business
While there is always a risk of losing money when investing in another’s business venture, both equity and debt crowdfunding can offer an opportunity for small-level investment in a new venture that you think has potential. Your investment can be made in return for either an ownership stake or your principal investment being returned over time plus interest.
Platforms like Kickstarter and Indiegogo are popular for researching potential business investment options. Peer-to-peer lending (where you lend money to another individual through a third-party platform) may also be a viable option to pursue. Just like investing in the stock market, the potential risk of loss means that personal funds, not business funds, should be used if you choose to invest in crowdfunding.
Do your research! Before jumping into a crowdfunding investment, take some time to research both the platform and the campaign you are interested in supporting. Crowdfunding does not offer a surefire return, so due diligence is important.
10. Pay Off Debt
Whether personal or business, paying off existing debt will help improve your overall net wealth. If you have debt, you are likely paying a higher rate of interest than you would be able to earn on investments or savings.
Putting additional money toward that debt will not only pay it down but will also cost you less in monthly interest payments; you will free up income that can be used to invest in opportunities that will provide you with financial gains. For example, if you have a monthly loan payment of $100 on a personal loan, paying that loan off—while it will be a larger upfront cost—will result in you having an additional $100 per month to invest.
Which debt should you pay off? There are multiple schools of thought when it comes to determining which debts to pay off first. Some people choose the debt with the lowest balance, while others go with the one with the highest interest rate. Neither of these methods is wrong. Any debts that are paid off will increase the amount of income you have to invest in other opportunities (or to put toward the repayment of other debts).
11. Reinvest in Your Business
In addition to paying off debt, look at low-cost ways to improve your business’ efficiency and performance. While investing in your business will cost money on the front end, the increase in productivity will hopefully yield additional revenue and profit. Investing in marketing, research and development, and upgraded software or equipment for your business can go a long way toward business growth.
What to Consider When Choosing an Investment Opportunity
When selecting the right small investment opportunities for you, there are a few things you should consider.
- Financial goals: What are you trying to achieve with your investment? Having a financial goal in mind will help you determine which small investment ideas will help you reach that goal.
- Level of risk: How much risk are you willing to take? Some investment opportunities have very little risk, such as deposit accounts. Other investments are more volatile, like mutual funds and ETFs that rely on market performance. Understanding your own risk tolerance will help you decide which opportunities are best for you.
- Level of involvement (Active vs Passive): How involved do you want to be in the investment strategy? Active investments require you to take actions to aid in the trajectory of your investment. Investing in stocks is often considered an active investment, as you buy, sell, and trade as you desire. A passive investor will typically choose diversified mutual funds or ETFs that are managed by someone else.
- Tax impact: Income derived from investments in the form of interest, dividends, and capital gains is generally taxable. You can avoid additional tax burdens by investing in retirement accounts, such as an IRA and 401(k).
Frequently Asked Questions (FAQs)
Some of the best investments that can be made with a small amount of money include interest-bearing deposit accounts, retirement account contributions (including 401(k)s and IRAs), crowdfunding pledges, ETFs, and mutual funds.
The easiest ways to start investing with a small amount of money include contributing to a 401(k), depositing funds into an interest-earning bank account (a checking, savings, CD, or money market account), and using an app to purchase fractional shares of stocks.
The simplest form of investment is an interest-earning bank account. Whether it be an interest-bearing checking account, a savings account, or a CD, these accounts allow you to deposit virtually any amount of money, and they pay a return in the form of interest without any effort on your part.
Bottom Line
There are several options available to individuals and business owners for low-cost investments. Some of these are designed to help save for retirement, whereas others offer ways to improve financial diversification.
