One of the biggest obstacles to weaning people off the siren song of the debt economy and getting them to think about investing and getting on the right side of capitalism for a change is the idea that you need a lot of money to start investing. Most people don’t think of themselves as investors because they don’t have a lot of money. It’s the classic chicken and egg dilemma.
When I started my path to learning how to invest, I had just $700 to start with and was still paying off a small mountain of student loans, a mortgage and credit card debt. I made a lot of mistakes along the way but kept at it and eventually that effort paid off in a big way. Today you’re lucky; technology has provided some interesting, easy and fun ways to start saving.
Big Investment Houses, Small Investor Programs
Many people are put off by the minimum investments necessary to buy into a mutual fund, which can range anywhere from $1,000 to $10,000. Some investment houses offer starter investment programs where you can contribute as little as $100 a month. If you call the customer support number and speak to a representative they can tell you if they have a new investor program and what it takes to get started.
The efficiency of electronic transactions has fueled the rise of discount brokers like Scottrade and Etrade, which both offer accounts with no activity or maintenance fees. At Scottrade you can get started for as little as $500 and you can select to have dividends automatically reinvested at no cost. While you may not have the minimum investment for many mutual funds, you can still buy index ETFs, most of which do not have a minimum investment. Sharebuilder has no set-up fees or minimum balance and online trades are currently $6.95. The best part of getting started with a discount broker is having access to real-time quotes and its investment learning library.
Acorns is an iPhone app (Android coming soon) that’s linked to a debit or checking account. When you buy something Acorns will ask if you want to invest the change or you can set it up to invest automatically. Instead of an item costing $39.77, Acorns will round the amount up to $40 and invest the change in one of several funds they offer. It makes keeping tabs on your balance a bit easier since you’re always working in whole numbers. Those small deposits may not seem like much, but think about how many times you use your debit card in a week. Over time the savings really add up.
Direct Investment and DRIPS
A few companies have set themselves up to sell stock directly to the public and, if they pay a dividend, those are automatically reinvested. A surprising number of companies offer direct investment programs including 3M, Abbott Laboratories, BankCorp South and even Pep Boys. Sometimes the direct investment program is run by the company itself, sometimes it’s handled through a transfer agent. Direct investment programs let you get started investing with a small amount of money and add to it every month.
Even if you don’t have a lot of money, it’s still possible to start getting yourself on the right side of capitalism. Instead of constantly paying interest to support a lifestyle of debt, you can start investing small amounts of money and let corporations start paying rent for your money. Even $100 a month adds up to $1,200 a year. For some of you that’s your coffee bill for a month or about what you’re paying for cable. Whatever you can start putting away will be the biggest favor the younger you can do for the older you.