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Investing on a Low Income
Four ways to begin investing when your budget is tight

Investing is one of the most powerful ways to build wealth and provide for a more comfortable retirement. However, when you don’t make a great deal of money, the barriers to getting started can seem insurmountable. This doesn’t have to be the case. Here are four ways you can begin investing even when your paycheck is small.

401(k)

If your company offers a 401(k) retirement plan, contributing to it is one of the easiest ways to get started investing — even if you don’t have much money to spare. Some companies will even match your 401(k) contribution up to a certain amount. For example, say your company offers 50 percent matching up to 6 percent of your income. If you make $30,000 a year and contribute just 1 percent of your income ($300), that 50 percent match would net you an additional $150 in free money each year. And if possible, you’d want to eventually contribute 6 percent of your income to take full advantage of the company match.

Investing apps

Even if you’re only able to set aside a few dollars each month, you can take advantage of numerous investing apps that will help you invest and grow those funds. Eric Rosenberg of The Balance recommends the Acorns app as a good way to get started. After you connect it to your debit or credit card, Acorn automatically rounds up each amount you spend and invests the difference in low-cost exchange-traded funds. For example, if you spend $3.50 on coffee, Acorn will round that up to $4 and invest the extra 50 cents. An added bonus: Acorn only requires an initial investment of $5 to get started.

If you’re looking to invest in individual stocks, Rosenberg suggests the Robinhood app. With this online-only service, you can start investing even if you only have a few dollars to spare. No minimum balance is required and you can make stock trades free of charge, unlike most brokerages.

Roboadvisors

Roboadvisors are a helpful online tool that use artificial intelligence to help you effectively invest small amounts of money, primarily in low-cost EFTs. Writing for Money Under 30, personal finance blogger Kevin Mercadante identifies three roboadvisors that are especially well-suited for low-income investors. Wealthfront requires a $500 minimum balance to start and M1 Finance requires $100. If you have even less to start with, there’s Betterment, which asks for no minimum balance at all. All three of these tools charge low fees, meaning your money will go further.

Dividend reinvestment plans

Dividend reinvestment plans, or DRIPs, can be an effective way to invest small amounts of money in individual stocks. With these plans, when your stock pays a dividend, that amount can be automatically reinvested. According to NerdWallet writer Andrea Coombes, DRIPs are offered through both companies and brokerages. Opting for a company DRIP can often involve lower or no fees, and you can often invest sums as small as $10 to $50 or buy fractions of more expensive shares. However, if you wish to invest with multiple companies, these accounts can become hard to track if you’re not going through a brokerage.

Can you scrape together $20, $5 or even $1? If so, you can take advantage of these tools and begin investing now — and take your first steps toward greater financial independence and security.



Diversification and asset allocation strategies do not assure profit or protect against loss. Past performance is no guarantee of future results. Investment involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including loss of principle.

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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.


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Disclaimer - All content contained in this newsletter is for informational purposes only and should not be relied upon to make any financial, accounting, tax, legal or other related decisions. Each person must consider his or her objectives, risk tolerances and level of comfort when making financial decisions and should consult a competent professional advisor prior to making any such decisions. Any opinions expressed through the content in this newsletter are the opinions of the particular author only.


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