Dollars & Sense: How to invest even if you’ve only got $100
Issue #34
By Amy Westervelt
Published: December 1st, 2007 | 10:56am
Having lived from paycheck to paycheck for several years, slowly whittling away at a mountain of debt, the idea of saving money, much less investing it, was relatively foreign to me until I started writing about the stock market a few years ago. Watching penny stocks suddenly mature and grow and make people a whole lot of money, I realized that the old adage “you’ve got to spend money to make money” wasn’t as dumb as I’d thought. After doing some research for the inaugural Venus Zine finance column, I discovered even more ways to make money grow.
Direct investments
Some companies allow you to buy stock directly through them, cutting out the middleman and sometimes minimum stock purchases. Bill DeShurko, author of The Naked Truth About Your Money, warns, however, that just because you’re not dealing with a broker doesn’t mean you won’t have to pay fees — always check the costs. Several large companies, including Target and American Express sell stock directly to investors. Visit wallstreet.com/directlist.html for a list of other companies that do.
401(k)/403(b)
In many cases, your company has already decided for you whether your retirement plan is a 401(k) or 403(b). Should you have to choose, the primary difference is that money from a 401(k) can only be rolled over into another account when you leave the company, while a 403(b) can be rolled over into an IRA (individual retirement account) at any time. It’s tough to see money flow out of your paycheck each month, but if your employer offers to match money you set aside for retirement, take it!
Diversified portfolios
Stacy Francis, president of Francis Financial Inc. and founder of Savvy Ladies, suggests opening a brokerage account and putting your first $100 in a broadly diversified ETF (Exchange Traded Fund) that represents the entire stock market, such as the Vanguard Total Stock Market. She recommends continuing to invest as much as you can every month after that but warns that ETF broker fees can range from $9 to more than $50. For those interested in investing in socially or environmentally responsible companies, there are also ETFs available that focus on these categories (visit socialfunds.com for more details). To invest in an ETF, open an account with the broker of your choice (Visit vanguard.com or barclaysglobal.com for a socially responsible fund), and tell your broker how much you want to invest. Each time you put more money into your brokerage account, you’ll need to tell your broker how much of it to invest in the ETF.
Lifestyle funds
Lifestyle funds combine stocks, bonds, and cash, making them suitable for investors in different age groups and with different levels of risk tolerance. Available at mutual fund companies such as T. Rowe Price, lifestyle funds allow investors to add as little as $100 a month and offer aggressive stock investing for the young and risk-tolerant and more conservative investing for those closer to retirement. As with the ETF investments, several brokers offer lifestyle funds — to invest in one, open an account with the broker, describe your risk tolerance, and ask her to suggest a fund. For T. Rowe Price, visit troweprice.com. To find another broker, visit investopedia.com and include lifestyle funds in your search.
Savings bonds
Just because you’re young doesn’t mean you’re dying to lose money in the stock market, and if you’ve scrimped together $100 to invest, chances are you’re not in a rush to lose it. Series I U.S. Savings Bonds grow at a rate of about 6% to 7% per year, are tax-deferred, and will grow in value for up to 30 years, reaching six to eight times their face value.
UPromise.com
This is a great site if you’re saving for college, for yourself or you children. Here’s how it works: If you’re planning to buy something online, go to Upromise.com first and see if the retailer is one of their partners. If it is, connect to their site through Upromise and you’ll get a percentage credit for all purchases, ranging from 3% to 5%. You can direct that rebate to a College 529 plan, which is a college savings fund that grows tax free. Withdrawals from College 529 plans are also tax free when actually spent on a college education.
Go for Broke on Wall Street
The basic rule when investing in the stock market is not to invest anything you can’t afford to lose. To invest in the stock market you can either open an account with a brokerage firm like UBS or Schwab, or go with an online trading site like Etrade. When you find a stock you like, make the investment online or call a broker. Make sure to set a floor so that if the stock gets down to below your comfort zone, your shares will sell automatically. This may mean you miss out on a big cash prize if the stock skyrockets after a dip, but it could save you from losing your shirt. I can’t stress enough how important it is to know the market, competitors, and industry of the company you’re investing in.
Comments
Please login to be able to comment on this article.
more