By Meredith Picray, University of North Florida
For a young adult, getting started investing on a tight budget might seem like an intimidating task. Is it possible to get started as an investor with just $100? Of course it is. You just have to know where to look.
As a 20-year old student, I am just beginning my own investing journey. Did I want to look into stocks and invest in whatever was the current fad? Perhaps I should consider something long-term such as a 401(k) or an individual retirement account. Where to start? What to look for?
What to Look For
The first thing I learned on my journey was the importance of diversification; lowering your risk by spreading your money across various investments. If you choose the stock market as a way to invest, it is not the greatest idea to put all of your money into one stock that could drop in value at any moment.
Where to Start
A good place to start is to find a mutual fund that has a low minimum investment required. Mutual funds pool investors' money and invest it according to that group's level of risk tolerance, favorite industry sector or various other types of criteria.
There are many such funds that would fit into a young adult's budget.
• Search the Internet
A quick search on Yahoo! yielded over 200 funds with a minimum starting investment requirement of under $250. That shows how just a little research can get even the smallest investor started in the stock market. Unfortunately, many of these funds are not as established or as well known as others, so you should check their past performance carefully and ask more experienced investors for opinions to judge their worth.
• Invest in your employer
Always research the investment options at your current place of business because there could be some great opportunities right under your nose! As a part-time employee at Starbucks Coffee, I am offered stock options and a 401(k) plan. Many companies offer these benefits after a mere 90 days of employment with the company.
• Not working? Try a part-time job
For a college student or a young adult starting out, a part-time job could be a great way to get extra money and to start investing. Employee benefit plans allow you to start investing without dealing a huge blow to your bank account. For example, Starbucks allows its employees to invest up to five percent of their paychecks into stock options and the company matches the invested amount.
• Set up direct deposits to an IRA
Not being able to “see” a portion of your paycheck that is automatically placed into your account makes it easy to start investing in an IRA. Check with your local bank to see what investments they offer. Bank officials can explain the long-term benefits of opening an Individual Retirement Account or IRA.
Something For Everyone
So, as you can see, it is entirely possible to start investing on a budget of just $100. You just have to decide whether you want to see immediate results or if you are interested in something with more long-term benefits. There is something out there for every type of investor. All you have to do is decide what's right for you!