Best Ways to Invest Small Amounts of Money

The key, as all experts agree, is the focus on the consistency of making regular investments, rather than focusing on the amount invested at any one time.

At the moment you may not have the amount of money necessary to invest in the high-end stock market or the minimum dollar amount required for a managed mutual funds portfolio account with companies like TD Ameritrade or Vanguard.

The great news is that you can get there by following good saving habits and setting aside a little bit of money either on a daily or monthly basis.

While this may seem like additional work up front, setting aside a small sum daily, can help in developing momentum and building the understanding that small amounts can add up over time.

We scoured the web, and we brought back the top three advice that all experts out there have in common to investing a small number of dollars and growing your financial stability over time.

If you are looking to get an early start towards financial stability our article on investing in your 20’s may be helpful to read first – regardless of your actual age.

1.    Reduce Credit Card Debt

Bar none the most common advice from all financial experts to growing wealth over time is to reduce credit card debt first. The reason behind this advice is that interest rates on credit cards can range from 13.12% to as high as 22.99% for some cash back credit cards. 

The interest rate you’re paying on your credit cards is typically higher than what you would earn with your investment in either stocks or mutual fund accounts. Compounding interest works both ways in your favor as well as against it. By holding onto your credit card debt, you are increasing your cost over time.

If your only choice is to invest or pay down credit card debt, then choose to pay down the credit card debt first. As the cost of debt reduces over time the money saved can be set aside for future investments and financial growth.

2.    401(k) and IRA Accounts

Investing in a 401(k) plan is a smart strategy – assuming you do not carry a significant credit card debt or can pay down your credit card debt and still have some additional money from your regular income.

If you are among those employees who work for a company that matches your monthly contributions then this you have an easy way to make regular deposits in your growth vehicle while doubling your principal amount in each instance and reduce your annual tax liability all the same time.

An alternative, to the company offered 401(k), is the traditional or Roth IRA account. Both types of accounts can be set up through a brokerage firm, large investment companies like Fidelity, banks, and even through online services such as E-Trade or Ally.   

Learn more about the differences between 401(k) vs. IRA account to decide which is the best option for you.

3.    Dividend reinvestment plan’s(DRIP) or Direct stock purchase plans(DSPP)

 DRIPs are an easy way to get started with a low dollar amount and grow the value of the investment over a more extended period. These plans allow an investor to purchase a fractional amount of particular company’s share, typically less than $50 at a time, and issued dividends are automatically reinvested to gain additional shares within the company. Over time this can lead to a significant increase in the value of the investment.

One of the additional benefits is the reduced cost associated with the investment. Because many of these types of plans are offered through the company directly, or through a third-party working with the company there are no additional fees that you would have to pay to middlemen such as a broker.

The downside, however, is that because these types of plans are offered to the company directly, they require additional research on the side of the investor. If you are unsure about which companies to choose then, it may be advisable to hire a financial expert to work with you to set a plan in place. If possible see if you can hire a trustworthy financial expert that is willing to be paid by the hour.

Another catch is that even though you don’t get the dividends issued by the company directly to your bank account, this still counts as earned income and will have to be reported to the IRS in your annual income tax return.

DSPP, direct stock purchase plans, are related to DRIP investments regarding the mechanism – stocks can be purchased directly from a particular company in fractional amounts with small minimal incremental investments over time.

Learn more:  Investopedia – DRIP & Investopedia – DSPP

Start small and keep investing 

Remember the key according to all financial experts is regular investments over time. Start small and keep going and pretty soon you will have accumulated habits and assets that will keep you and your family financially stable over your lifetime.


Tim Schmidt


Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He started this website to share his expertise in using his Self-Directed IRA. Most recently he's been advising individuals to diversify into precious metals ahead of a certain recession. He invested with Goldco.