We all have to start investing somewhere. So if you are starting with a $50 investment, the best thing you can do is get that money working for you.
It used to be that only investing $50 gave you a small number of choices. However, access to different types of investments has expanded for small investors.
This means anyone can invest and get a decent return.
Ways to Invest $50
This list is not meant to be comprehensive but informative. For example, you could invest your 50 dollars in lottery tickets, but your returns probably will not be too good.
These are some of the best ways to invest $50.
Savings accounts have historically gotten terrible interest rates, and if you go down to your local bank, they still do.
With online savings accounts now available, the interest rates have gotten up to something that feels respectable.
The main reason to put your 50 dollars in a savings account is to have it ready to place with new money to invest in something larger.
Worthy Bonds is another very safe investment where you can withdraw at any time and have your money ready for more significant investments.
Instead of a savings account, your money is invested in loans to small and medium-sized businesses. These loans are secured by some form of physical property (mostly the businesses inventory).
If the business were not to pay the loan, Worthy would seize the property, sell it, and get your investment back. You will get a nice 5% return in all Worthy Bonds.
Betterment is a robo-advisor. This means that you get the personalized recommendations that you could get with a financial advisor, but computer algorithms make all the recommendations.
These algorithms adjust the investment strategy according to your demographics (age, years to retirement, etc.) and a series of questions that you answer upon starting your account.
If you are looking for a hands-off approach to investing for higher returns, Betterment is excellent, and they do not have a minimum to get started.
Exchange-Traded Funds (ETFs) are a large number of securities that can be invested in all at once under a single name. Put simply, it’s like buying one stock but investing in thousands of stocks.
This approach allows you to diversify your investments with only a small initial investment.
Ally Invest offers zero trading fees for ETF purchases. That way, your entire $50 goes toward investing and not fees, and they have excellent tools and tips for doing your research on which ETF you want to purchase.
Shares of Stock
When you are only investing $50 into the stock market, you want to stick with reputable companies and not chase after penny stocks or long shots.
The good news is that many stocks are from trustworthy companies that average in the $5-$50 range. You will need to research investing in stocks and find companies that you feel comfortable with.
One app that is good for this is Robinhood. They only recommend reliable companies, and all stock trades are free.
A certificate of deposit (CD) is a form of deposit account offered by banks. They are insured just like a savings account, but you have to leave your money in place for a specific amount of time, usually a set number of years.
For most people, you are better off going with a high-interest savings account because you can access the money at any time. You can check the latest rates on CDs to see if this is the best option for your $50 investment.
Retirement accounts are designed to let you invest small amounts of money and grow your retirement funds over time.
The most significant advantage of retirement accounts is that your investments grow without having to pay taxes. You will have to pay taxes sometime, but when it depends on the type of account.
The most popular retirement accounts include:
- 401(k) (employer account)
- 403(b) (employer account)
- Roth IRA (personal account)
- IRA (personal account)
- SEP IRA (small business owners)
Bonds are a form of debt that you purchase and receive a return on your money. They can be bought from both businesses and governments.
The most stable bonds tend to be government bonds, but you will get a lower return. You can also diversify your bond investing by purchasing bond focused ETFs. Once again, you can do all this through Ally Invest.
As a Christian, I always consider charity a major part of my investing. While giving to causes you believe in does not typically return a financial gain, it always provides you with an amazing return on your investment.
Giving to others puts your finances in the proper perspective and can lead to relationships that help you both personally and financially. I can tell you from experience that giving to charity is one of the best investments you can make.
If you want to learn more about charity, then you can read these bible verses on giving for how my family approaches charity.
What to Consider
Anyone starting with an investment of $50 needs to consider their investment strategy. Before you invest, you should consider:
Whenever you are investing, you need to keep in mind how soon you are going to need the money.
If you will need it soon, then a short term investment like a savings account is probably your best bet. If you do not need the money for five or more years, then diversified stock investments will get the best return.
Risk tolerance goes hand in hand with when you will need the money. If you have a long time before you need the money, you can take more risks and get to experience higher returns.
If you need the money in the next year or so, then lower risk investments that are also liquid will be your best option.
Each of the above two considerations plays into how involved you want to be.
If you are very risk-averse, I suggest going with a hands-off investment like Betterment, where you do not have to be very involved in investing.
Also, if you have a high-risk tolerance, I would suggest having a portion of your investments in passive options because your willingness to take the risk can also mean big losses.
Make sure you are not paying unnecessary fees that take money away from your investments.
Final Thoughts on Investing 50 Dollars
Investing with small amounts of money is an essential step in your financial future.
Whether you are starting with $50 or have more than $20k to invest, what matters is that you keep investing consistently over a long period of time.
Make sure your investments are on a timeline of at least five years before shuffling them or go with hands-off options like robo-advisors and mutual funds that will handle the changes for you.
No matter what you do, be proud that you have taken an awesome step in your financial future. If you keep at it, your $50 investment will grow into a $200,000 investment or even more!