What's the best way to invest small amounts of money?

Question

I'd like to have some type of investment that I can just drop in 5 or 10 bucks every once in awhile online, without getting any fees while the amount is smaller. Should I use a savings account, some type of stock purchase, etc? How do I get the best return while it grows, and what if I need to withdraw for an emergency or special occasion. I'm self employed so I don't have a 401k or anything like that.

Any advice?

Answer 1

take advantage of your bank's bill pay option; set up a scheduled payment to a brokerage account every month and set up in that account an auto-buy feature into a ROTH IRA that is invested in an Index 500 Fund.  This is the method most-widely used in all those books and seminars.  If you're in your 20's now and save $200/month every month until then and it is invested in the INDEX FUND, by your 60's you should have around $2million, and not have to worry about working at McDonalds.

Also, taking money out for a special occassion shouldn't factor in to this.  You should have ANOTHER account for that.  This is the account you never want to touch.

Answer 2

There are various ways to invest depending upon your preference. If you have in your mind high returns you have to take more risk. In forex you have an opportunity which is un matched. It gives great returns for a price that is risk. You can make good money with commodity fuutres and shares too. Market is showing signs of revival.

Answer 3

savings account YES, for that amount of money.

EDIT- i agree with marco above, however, ONLY use a local branch back like a credit union or bank of america, wells fargo, US bank, and mnay others.

Answer 4

Here is a conservative, low-risk plan when you have practically nothing:

(and this is all predicated by saying, do your research and find out what banks in your area have the best rates for all the things mentioned below)

Open up a savings account today with $50.

Keep dropping $5 to $10 into savings.

When you get to $100 or $200, drop that into a 6mos to 1yr Certificate of Deposit (CD) at your bank, while still adding that $5 to $10 to your savings account.

Keep doing that and when the CD matures and you have over a combined $1000, you should be able to open a minimum balance Money Market account at your bank.

Keep adding to the Money Market account, while simultaneously maintaining CDs.

When you have over $3000 to $5000, talk to someone (do your research) about opening an Individual Retirement Account (IRA), which you will need for your future since you are self employed.

Keep it going, don't stop... keep adding to the savings, money market, CD's, and yearly contribution to the IRA.

Once those basic instruments are in place, then start thinking about doing some side trading of individual stocks and funds.

It's like working out... you won't get those ripped abs by making excuses for not going to the gym (you have to make the time to go every day, every second day, whatever).

So, just like making the time to workout, you must forcifully budget your income to "pay yourself first" by adding to the savings.

Working out and saving money both take supreme discipline.

It is a challenge to your maturity level and your ability to maintain goals.

Keep saving, don't stop.  And don't go buy something idiotic with it like a new car, when the car you have is just fine.

Within a couple years you can be in a very good position.

Good luck !

Answer 5

You're better off saving up at least a few hundred dollars first.  I use an online stock trader and it's about $12 per month for their fee (which includes 5 or 6 "trades" per month).  I just have an amount taken out of my savings account every 2 weeks and I've been able to nickel & dime my way into an amount that I wouldn't have been able to save on my own (due to lack of self discipline!).  Whatever you do - remember that ANY STOCK IS A RISK so only throw in the money that you can lose and still pay your bills!

Answer 6

Vita Nelson suggests investing in dividend reinvestment plans (DRIPs).  It applies discipline to your investing.  Watch the video at the link below.  You can spend very little without paying any commisions to a broker.

Answer 7

If you're putting in those tiny amounts I'd really suggest you just go with an high yield savings account, like those provided by emigrantdirect.com or hsbc.com to drop in your nickles and dimes.  Then, once you have a substantial amount (at least $1000, preferably more) built up there, transfer it to a brokerage account if you want to buy something like a mutual fund.  Small amounts are worthless to move around and try to buy into stuff.  You'll just lose your shirt in commissions and/or fees, and waste a lot of time doing it.