Disclosure: This post may contain affiliate links. We may receive a commission when you click on them, but this is at no extra cost to you. Read our privacy policy for more information.
Maybe you want to buy some income-producing assets or speculative investments, but you don’t have much money. No problem. You can start with whatever you have; just see the list of low-cost investments below.
Or maybe you have $5,000 or more to invest, but you don’t want to put it all in one place. After all, if you put $500 into ten different investments, that diversification can protect you from a drop in value of any one of them.
Whether you only want to invest $500 at a time or that’s all you have to invest, you might be surprised by the variety of options you have, starting with…
Table of Contents
1. Real Estate
There are ways to buy buy rental real estate with no money down, which fits our “$500 or less” criterion.
But unless you have a few thousand dollars for unexpected repairs and other surprises, buying real estate directly using none of your own money is probably risky, or at least stressful.
Fortunately there are some easier ways to invest in real estate with $500 or less. For example, the online platform Fundrise lets you invest in a portfolio of investment properties for just $500. There portfolios had an average return of over 11% in 2017.
I plan to invest in Fundrise. Having invested in rental properties and fixer-uppers directly, I can tell you that I’m looking forward to avoiding all of the hassle and stress this time.
You can also invest in real estate investment trusts (REITs) that are publicly traded.
There are many brokerage accounts you can open with $500 or less, and the ever-growing list of REITs includes funds that invest in everything from self storage units to industrial properties to basic mortgage loans.
2. Precious Metals
Your $500 won’t go very far buying gold, since the price is currently over $1,200 per ounce. But if it’s gold you want, you can still buy 1/10 ounce bars.
At less than $17 per ounce, you can buy almost 30 ounces of silver after the typical premium. That buyers premium is higher for silver than gold (as a percentage), so expect to pay at least a dollar per-ounce over the spot price.
That means the price may have to rise 6% or more before you break even, so this is not a great short-term investment.
I’ve found Kitco to be one of the most reliable and affordable places to buy precious metals, but there are many other good suppliers. In addition to gold and silver, Kitco also sells platinum, palladium, and rhodium.
Local coin shops are usually more expensive for precious metals, but not always, and buying at those means you get your coins or bars right away.
If you have almost nothing to invest, you can invest your time in coin roll hunting.
You just buy rolls of dimes, quarters, and half-dollars to search them for coins minted before 1965, which are 90% silver.
3. Cryptocurrencies
With BItcoin around $7,000 as this is written, you might think you can’t invest with just $500. But at brokers like CoinBase you can buy fractional amounts. Of course, Bitcoin was over $19,000 recently, so this is a pretty speculative investment.
Ideally you want to get in early when investing in cryptocurrencies. Fortune magazine says $100 invested in Bitcoin in July of 2010 (at 6 cents) would be worth over $28 million by of December 2017 (but only $12 million at today’s price).
So which currency is the next Bitcoin? Nobody can predict that with any certainty, but Wikipedia has details on about 50 cryptocurrencies, and says there are over 1,300 of them as of early 2018. Try one of those.
4. High Yield Savings and Checking Accounts
I just opened an eOne Savings account with Salem Five bank. It earns 1.85% APY, which is 185 times better than 0.01%, the most common rate for savings accounts.
It’s still not exciting, but it’s safe, and you can do better, especially if you don’t have much to invest.
For example, one list of high-yield accounts has nine options that top 3% APY, with the best paying 6%.
These accounts are great for investors who are starting small and like the safety of FDIC-insured accounts, but they do have limits and special requirements.
For example, the One American Bank Kasasa Cash checking account pays 3.5% interest on balances up to $10,000.
But to get that rate you have to login online at least once per month, opt-in for e-statements instead of paper, and make 12 debit card purchases of $5 or more each month.
The latter requirement requires tracking your use of the card, and your rate drops to 0.01% for the month if you say, make only 11 debit card purchases.
But once you build your account up to $10,000, you’ll be making $350 per year in interest versus the $100 you would make at a 1% online bank, or the $1 you would make at the many banks which pay 0.01%.
Minimum to open an account? Just $50.
It costs nothing to open a Mango Prepaid Mastercard account and you can put money in an associated savings account that pays 6% APY on up to $5,000.
It’s a bit more complicated than other options (direct deposit is required, and it takes time to get your money out), but where else can you get an FDIC-insured 6% savings account?
5. Bank CDs
A look at a list of the best bank CDs is not very inspiring. Even tying up your money for 5 years doesn’t get you to a 3% rate (2.8% is the highest at the moment).
On the other hand, CDs are safe investments, and even those with one-year terms usually pay better than regular savings accounts.
If you think rates are going higher (I do), stick with CDs terms of no more than a year or two, and look at the penalty for early redemption.
For example, I might risk a two-year CD if the penalty is three-month’s interest, but not if it’s a loss of six-month’s interest. With the smaller penalty I figure the return might still be okay even with the penalty, if I cash in a two-year CD after a year.
Watch for no-penalty CDs. They’re not common, but Ally has been offering them lately. With no penalty (after the first six days), these are effectively savings accounts, yet they often pay a higher rate than any regular savings account.
When Ally recently offered a 1.75% no-penalty CD I closed my 1.5% no-penalty CD to open their higher-rate one. Now I may close that to put the money in a 1.85% savings account.
At the time I opened that 1.75% no-penalty CD the best I could have received with a regular 1 year CD was 2.05%, or just 0.3% more for the risk of tying up my money.
With interest rates rising I want to see at least a difference of at least 0.5% to risk the commitment.
6. Peer-to-Peer Loans
The first time I invested in Lending Club loans I made about 7% annually over several years. Recently I invested again, but my return has been closer to 2%. I must have picked the wrong loans this time.
Still, the concept of peer-to-peer lending is great from an investor’s perspective. With notes (each one is a portion of a loan) typically priced at $25, you can diversify into 20 loans for just $500.
That means a default or two isn’t going to hurt you too much, especially if you’re getting 12% or even 18% or more on the good loans.
Lending Club now requires a $1,000 minimum to open an account. Prosper lets you open an account with just $25, but you should probably wait until you have at least $500 (or even more) before investing, so you can properly diversify.
7. Mutual Funds
Picking stocks is speculative unless you have the time and motivation to really research them. So it makes sense to invest in a basket of stocks through a mutual fund. And fortunately many mutual funds let you get started with $500 or less.
For example, go to the Morningstar Fund Screener and enter “$500” in the field that says “Minimum initial purchase less than or equal to.”
Add to the screening criteria only no-load funds (no fee to buy or sell), and an expense ratio to 1% or less (more efficient funds), and you still get 200 results.
You can further screen according to the type of fund you want, whether that means investing in stocks from around the world, bonds, stocks of mining companies, or whatever.
The most common way to buy mutual funds is through a brokerage account. Some offer a range of funds with no commission. Otherwise look for a discount broker that charges less than $10 per transaction.
You can also buy mutual funds without a broker. This is usually done by opening an account directly with a fund family.
For example, American Century Investments has no minimum to open an account, and offers more than 80 mutual funds.
8. DRIPs
DRIPInvestor.com explains that dividend reinvestment plans, known as “DRIPs,” let you start small (sometimes with one share of a stock) and have dividends automatically reinvested in fractional shares of a stock, usually with no fees or commissions.
In addition, the hundreds of companies that offer these plans usually let you directly invest small amounts at a time in fractional shares, again with no commissions.
That’s especially nice when you’re starting small and want to buy a high-priced stock.
This can be done through a broker, but there are also ways to get started without a broker.
It can cost as much as $60 to get a DRIP account set up, but once you have a plan in place some companies let you make additional investments of as little as $10 per month, with no additional fees or expenses.
DirectInvesting.com has a list of no-fee DRIPs, which will give you an idea of the wide range of publicly traded companies offering DRIPs.
9. Robo-Advisor Investments
Robo-advisors usually come in the form of apps for your phone. These programs let you invest small amounts (no minimum for some) in various exchange-traded funds and other stock market investments.
The key feature is that they invest the money for you automatically, according to your investment goals.
Betterment is perhaps the best-known of the the robo-advisor services. They have no minimum to open an account, and there are no trading fees. You connect the account to your bank account for funding and/or transferring money in and out.
Their pricing is simple; an annual fee of 0.25% of the average account balance, taken directly from your account monthly (and prorated if you don’t have a balance for part of the month).
So, for example, if you have $500 invested through betterment, the fee for the month would be about 10 cents.
Investopedia has information on other robo-advisors.
10. Debt Repayment
If you have have $500 or less to invest and you have any debt, stop right there! It makes no sense to put money in a 1% bank account or even a real estate fund promising a 10% return if you have a credit card balance on which you’re paying 18%.
Often the best “investment” you can make if you’re starting small, is to pay down any debt that you have.
Even paying extra on a 5% mortgage makes more sense that putting the money in a 2% bank CD (as long as you also have sufficient savings for emergencies).
If you save $100 in interest by paying off a car loan early, you’re $100 further ahead, the same as if you made $100. Unless you have an investment that yields a return higher than the interest rate on what you owe, invest first in paying down those debts.
If you know of some good investments that can be made with $500 or less, please share them with us below … and keep on frugaling!
