While $100 might not seem like a whole lot of cash, when utilized through strategic investments, it can serve as the perfect springboard for your financial aspirations. In this guide, you will learn how to invest $100 in 4 different ways, along with the pros and cons of those methods as well as what to consider before you start investing.
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What kind of investor are you?
Before you decide how to invest that $100, evaluate what kind of investor you are.
First and foremost, ask yourself: what’s my investment goal? Are you saving for something specific in the short term, like a down payment on a house, or is your focus more on the long term, such as retirement savings? This matters because your investment strategy will differ depending on your timeline.
Another important consideration is to evaluate your risk tolerance. Investing always comes with some degree of risk, and how you allocate your assets will depend on how comfortable you are with taking chances.
Finally, you’ll want to think about how much time and effort you’re willing to put into your investments. Are you a hands-on, active investor, or do you prefer a more passive strategy? Both methods can be effective, but if you’re new to investing, we recommend you start with a more passive approach and consider seeking out the guidance of a financial advisor.
Before proceeding further
Best ways to invest $100
Congratulations, you have an extra $100 burning a hole in your pocket, but before you splurge that money on something you don’t really need, why not seize this opportunity to kickstart your investment journey?
Depending on how you want to invest, $100 is plenty to get started with, and putting that money to work now could pay off big time down the line.
After all, the key to setting yourself up for success in the world of investing is simply to get started, no matter how much money you have to invest right off the bat.
This is our pick for the four best ways to invest $100:
- Buying fractional shares;
- Index investing;
- Robo-advisors;
- Individual retirement accounts (IRAs).
Let’s now take a closer look at these methods.
1. Buying fractional shares
In this section: How to invest $100 in stocks?
Investment type: Long-term growth
Risk Level: Varies
Broker to consider: Regulated, secure platform eToro.
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Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
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0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.
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Copy top-performing traders in real time, automatically.
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eToro USA is registered with FINRA for securities trading.
Over several decades, disciplined investing in the stock market is generally the most effective approach to building long-term wealth. Although returns may vary year-to-year, consistently reinvesting your profits will lead to compound gains, causing your original investment to grow even more over time.
One approach to getting into the market with limited capital involves buying fractional shares. As their name suggests, a fractional share is a portion of stock smaller than the whole share. Fractional shares allow you to invest by the dollar amount and are a low-cost way of diversifying your portfolio by investing in companies that otherwise might be out of reach.
Then, once you know which stocks you’re interested in buying, you can shop for an investing platform. Most online brokerages, such as eToro or Interactive Brokers, offer fractional shares as well as commission-free trading, meaning you will not pay transaction fees associated with purchasing or selling your partial shares.
Dividend Investing
Pros and cons of investing in the stock market
Pros
- Grow with the economy;
- Stay ahead of inflation;
- High liquidity;
- Low barrier of entry;
- Income from price appreciation as well as dividend payments;
- Online brokers make access to the stock market easy and inexpensive.
Cons
- Risky;
- Generating profits generally takes decades;
- Volatility;
- Putting together a well-diversified portfolio can be highly time-consuming, requiring constant research, news tracking, and adjustment.
Note
2. Index investing
In this section: How to invest $100 in index funds such as the S&P 500?
Investment type: Long-term growth
Risk Level: Varies
Broker to consider: Regulated, industry-leading low-cost trading platform Interactive Brokers.
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Index investing is a passive investing strategy in which investors purchase exchange-traded funds (ETFs) or mutual funds that track major market indexes and hold them over a long time. This technique aims to match, not beat, the performance of the market benchmark.
Passive management is the opposite of active management, in which a fund’s manager selects the securities to include in a portfolio in an attempt to beat the market. As a result, passively-managed funds tend to charge lower fees to investors than actively managed funds, such as the S&P 500.
The three most widely tracked indexes in the US are:
- The S&P 500;
- Dow Jones Industrial Average;
- Nasdaq Composite.
Pros and cons of investing in index funds and ETFs
Pros
- Low cost;
- Ready-diversified;
- High liquidity;
- No active management;
- Stable long-term returns;
- Reduced volatility.
Cons
- Follow the index even in poor market conditions;
- Lack of exposure to mid-and small-cap companies;
- No short-term gains;
- Dividend yields may be lower than owning a high-yielding dividend stock or group of stocks.
Note
3. Robo-advisors
In this section: How to invest $100 through a robo-advisor?
Investment type: Long-term growth
Risk Level: Varies
Broker to consider: Regulated, industry-leading low-cost trading platform Interactive Brokers.
Best Platform for Worldwide Stock Trading & Investing
-
Highly trusted multi-asset broker with clients in over 200 countries
-
Trade on 150 markets globally from a single platform (stocks, ETFs, futures, currencies, crypto & more)
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Low commissions starting at $0 with no platform fees or account minimums
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Easily fund your account and trade assets in 26 currencies
-
IBKR pays up to 4.58% interest on cash balances of $10k or more
If you prefer a fully automated approach, a robo-advisor could be just what the doctor ordered. These nifty platforms use algorithms to leverage your financial information to craft a personalized (typically passive) investment strategy, taking into account factors like your age, family size, income, and risk appetite.
Then, once you’re onboard, the robo-advisor handles all the heavy lifting, from selecting and managing investments to executing trades and providing regular updates on your portfolio’s performance.
The recommended portfolios are often composed of ETFs rather than individual stocks or mutual funds and range from more conservative to aggressive investment options, depending on your risk appetite. Some robo-advisors even allow you to fine-tune your investments by applying environmental, social, or governance (ESG) criteria. So not only can you rely on the convenience of automated investing, but you can also feel good about investing in companies that align with your values.
Ultimately, for just a measly $100, you can get a well-diversified portfolio fully managed for you. So sit back, relax, and let the robo-advisor work its magic!
Micro-investing platforms
Pros and cons of robo-advisors
Pros
- Portfolios are managed and rebalanced automatically using algorithms, taking the manual work out of investing;
- Available 24/7 and typically much cheaper than traditional financial advisors;
- No prior investing experience is needed;
- Use an index investing strategy;
- Easily accessible for investors with low capital.
Cons
- Lack of personalized attention compared to human advisors;
- May not be suitable for complex financial needs or unique goals;
- Limited ability to account for certain market conditions or events that a human advisor might be able to anticipate.
4. Individual retirement accounts (IRAs)
In this section: How to invest $100 in IRAs?
Investment type: Long-term growth and retirement
Risk Level: Low
Consider investing your extra $100 towards retirement. For this, an IRA can be an excellent option, particularly if your employer doesn’t offer retirement plans or if you want different investment offerings than those provided by your workplace and can turn even small amounts of money into a sizable nest egg over time.
Why opt for an IRA? The short answer: taxes. After all, a traditional IRA offers benefits similar to a 401(k), reducing income taxes by cutting taxable income each year of contribution while growing your investment tax-free until retirement distributions. A Roth IRA offers tax-free growth like a traditional IRA, but with a twist: contributions don’t lower taxable income, but distributions during retirement are 100% tax-free.
Pros and cons of IRAs
Pros
- There is no minimum contribution for opening an IRA;
- Assets in IRAs grow tax-free or tax-deferred;
- An easy way to save for retirement over the long term;
- Offer various investment options, including bonds, stocks, ETFs, and mutual funds, allowing for a diversified portfolio.
Cons
- IRAs have strict annual contribution limits;
- Early withdrawals from traditional IRAs before age 59½ may result in a 10% penalty and taxes on the withdrawn amount;
- Traditional IRAs carry mandatory withdrawals, starting when you reach age 72.
Remember to take advantage of employer-sponsored retirement options
How to safely invest $100 — things to consider
Although you may be eager to start investing your $100, you should first evaluate your overall financial position and ensure that you have fulfilled the following:
- High-interest debt is dealt with: Prioritize repaying any high-interest debt, such as credit card debt or payday loans, before you embark on your investment journey. Keep in mind that the average credit card interest rate is 27.80% (in 2023), which is considerably higher than the average annual stock market return, and can consequently cancel out any gains you may make investing in stocks. Low-interest debts like mortgages or auto loans, on the other hand, do not need to be repaid before you start investing;
- You have an emergency fund set up: Create an emergency fund to cover unforeseen expenses, such as medical bills, car repairs, or job loss, before you start investing. A general guideline for most individuals is to set aside six months’ worth of living expenses in a deposit account like a savings or money market account, where the principal is not at risk. It is worth noting that having this money readily available will also help you avoid dipping into your portfolio, using high-interest credit cards, or resorting to loans.
Then, as you begin your investment journey, make sure to:
- Diversify: To spread your risk and protect yourself from significant losses, distribute your investments across different financial instruments, industries, and categories. Moreover, a diversified asset allocation is vital in determining whether you will achieve your financial objective. For instance, if your portfolio does not carry enough risk, your investments may not generate a sufficient return to reach your goal;
- Spread out your investments: After investing the $100, keep investing. We suggest adopting a dollar-cost averaging (DCA) strategy, which involves dividing the total investment amount into regular purchases over a specific period (e.g., investing $100 monthly in an index fund regardless of market fluctuations). By spreading out your investments in this manner, you can minimize the impact of price volatility and reduce the average cost per share;
- Stay wary of fraud: Scams are getting increasingly sophisticated. Moreover, con artists are often highly articulate, charming, and knowledgeable, with credible websites, testimonials, and documents that are difficult to distinguish from genuine ones. However, the old adage holds true in this case: if something sounds too good to be true, it probably is. Therefore, ensure you thoroughly understand the investment before entrusting someone with your funds. Begin by searching for the company’s financial statements on the Securities and Exchange Commission’s (SEC’s) EDGAR filing system. You can also refer to the Financial Conduct Authority’s (FCA) list of warning signs here and the SEC’s list of questions to ask about your investments to ensure their legitimacy here.
Highly Rated Stock Trading & Investing Platform
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Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
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0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.
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Copy top-performing traders in real time, automatically.
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eToro USA is registered with FINRA for securities trading.
Conclusion
$100 is all it takes to kickstart your wealth-building journey. Besides, starting off small like that can actually cultivate positive investing habits that’ll come in handy when you’re gunning for those big-time financial goals down the road.
So, if you can keep your cool, stay focused, and adopt a long-term approach, your original investment of a hundred bucks will balloon into a nest egg ten times its size. And before you know it, you’ll be diving headfirst into the world of investing, looking up tips on how to invest $500, $5k, $10k, $30k and heck, maybe soon even $100k.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about how to invest $100
How to invest $100?
Consider investing your $100 in a diversified portfolio of stocks and index funds. You can either use an online broker to do it yourself or try out a robo-advisor that’ll invest for you according to your needs and risk tolerance. You can put in the $100 as a lump sum, after which you can keep adding onto your investment by dollar-cost averaging. However, make sure to settle any high-interest debt before you make the plunge into investing.
How to invest $100 in the S&P 500 index?
You can invest $100 in the S&P 500 by buying shares of a mutual fund or exchange-traded fund that follows the index.
Where to invest $100 right now?
Where you invest your $100 will depend on a few things, like how old you are, your investment time horizon, how much risk you’re willing to take, and what you hope to get out of it. But generally speaking, a diversified investment portfolio that comprises multiple asset classes with varying levels of risk is recommended. That way, if one investment takes a hit, you’ve got others to help you weather the storm.
Is $100 enough as an investment?
While $100 might not be a sizeable sum, it can be enough to get you started and help you learn the grips of investing.
Highly Rated Stock Trading & Investing Platform
-
Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
-
0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.
-
Copy top-performing traders in real time, automatically.
-
eToro USA is registered with FINRA for securities trading.
