With these best investment ideas for small investors, it’s still possible to invest with little money.
In this article:
- Low-Cost Investment Ideas
- Emergency Fund
- Contribute to Your 401(k)
- Set Up a Self-Directed IRA
- Certificate of Deposit
- Rental Property
- Small Business Investment Ideas
Money Investment Ideas That Won’t Break the Bank
Low-Cost Investment Ideas
A lot of investment ideas seem geared toward people who have hundreds of thousands or even millions of dollars to invest, but you don’t need that much money for good investment ideas.
Looking for the best investment ideas for beginners? Wondering how best to invest $1,000, $5,000, or another moderate amount of money? Want to invest but not sure where to start? Then, check out this list of the best investment ideas for small investors.
Before you start looking at the best investment ideas, you should make sure that you have some rainy day funds. If you face an emergency and you have to liquidate your investments, you may face penalties or other costs. An emergency fund helps you avoid that.
Conventional wisdom says that you should have three to six months worth of living expenses in your emergency fund, but depending on your situation, you may want more or less than that amount.
For instance, if you know that you have a steady flow of income, you may just want to have enough money for an emergency car or home repair in your cash savings account. Then, you may want to embrace alternative investment ideas with the rest of your funds.
Contribute to Your 401(k)
If you have a 401(k) through your employer, you should contribute at least up to the matching amount. Most employers match a certain portion of your 401(k) contributions.
For instance, they may match 100% of your contributions up to 1% of your income, and then, they may match 50% of your contributions up to 2% of your income. Note these are just sample numbers. Talk with your human resources rep to learn about the employer match at your workplace.
As an added bonus, as of 2019, 401(k) contributions up to $19,000 per year are tax-deductible meaning that you don’t face any income tax on money you contribute to your 401(k). If you are over the age of 50, you can contribute up to $25,000 per year in catch-up contributions.
However, in most cases, these contributions flow out of your paycheck so naturally that you don’t even notice them. So if you have extra money to invest, you are free to explore other ideas.
Set Up a Self-Directed IRA
If you’re part of the gig economy, if you run your own business, or if you fit into a range of other popular categories, you may not have an employer or a 401(k).
In these situations, you can consider opening an Independent Retirement Account (IRA). Even if you or your spouse has an employer who offers a 401(k), you can still invest in an IRA as long as you meet a few criteria.
IRA contributions are also tax-deductible, and the IRS lets you make contributions up to April of the following year. As a result, if you are filling out your 2018 tax return in February or March of 2019 and you realize that you need a few extra deductions, you can make a contribution to your IRA at that time. Then you can claim the income deduction on your 2018 return.
There are some advantages of a self-directed IRA. For instance, you can pick and choose the stocks and bonds you want to invest in, and you can also opt to put your money into real assets such as precious metals like gold and silver.
Normally, buying precious metals directly doesn’t offer you any tax benefits. But when it’s packaged into an IRA, you can claim the income tax deduction mentioned above.
RELATED: 9 Best Investments For Retirement
Certificate of Deposit
Certificates of deposit (CD) are also great investment ideas. You can buy CDs at most banks or online sites. They have varying maturity dates from 90 days to several years. With a traditional CD, you see the interest rate upfront so you know how much you are going to earn.
However, if you cash out the CD before the maturity date, you face a penalty that can cut into your earnings as well as into the principal investment. Because of that, you should always ensure that you are ready to have your funds tied up before you buy a CD.
If you’re looking for $50,000 investment ideas, you may want to think about buying a rental property. In fact, some rental properties can even be $10,000-investment ideas.
As long as you can obtain a mortgage for the property, you usually only need to pay for 3% to 20% of the property upfront. With a $200,000 property, that’s a $6,000 to $40,000 investment.
Then, you can collect rent on the property which can be one of the most effective passive investment ideas.
To safeguard your cash, make sure you crunch the numbers carefully before you start. You need the rent to cover the mortgage payment, routine repairs, bills, property taxes, and any other ancillary expenses. Once the mortgage is paid off, your bills diminish significantly and you can enjoy a higher monthly payout.
Small Business Investment Ideas
Whether you’re looking for $2,000-investment ideas or $30,000-investment ideas, you may want to consider launching a small business or investing in your existing business.
To explain, imagine you cut lawns for a living. Currently, you cut five lawns per day, using a push mower. However, if you buy a ride-on mower, you can double your client load.
Based on your calculations, the extra income covers the cost of your investment within six months, and after that, you just get to enjoy the benefits of a doubled client load. Spending money on purchases like that can be a great way to boost your return on investment (ROI) and increase the amount of money flowing into your budget.
When it comes to investment, it is important to cover all your bases to not let your hard-earned money go to waste. Look for experts who can help you find the best investment ideas for your money and make sound decisions.
Do you have any other low-cost investment ideas aside from the ones listed above? Let’s talk about them in the comments section below.
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