Is $100 Enough to Start Investing? 5 Easy Ways to Start

Compound interest can grow small amounts

On the surface it may seem that investing just $100 won't ultimately make a dent in wealth creation, but that is simply not true thanks to compound interest. For example, if you invested $100 and left it alone for 40 years, that $100 would turn into $2,172 assuming an 8% return.

Now, that is just a one time investment of $100. If you consistently invested $100 every month for 40 years at 8% interest, you would have $310,867. The point here is that small amounts can grow into large amounts overtime so don't discredit investing any amount of money no matter how small.

Build the habit and invest more when you can

Investing is a marathon and not a sprint. Arguably the number one factor that allows people to build wealth is simply being consistent with their investing. Even if you can only invest a very small amount right now, it is so important to build the habit of investing.

As many people's income rise, so does their lifesyle leaving them no room to invest. If you are already in the habit of investing, it will be easy to invest more as your income goes up which will only help accelerate your wealth.

Buying fractional shares of stocks is a great way to invest if you have a small budget. As the name implies, you can buy a fractional share of a stock and own just a piece of it if you can't afford the whole share. For example, lets say a stock was $200. You could buy a fraction of the stock for $50.

Fortunately, there are many discount brokers, such as Webull, that offer fractional investing. The only downside to buying fractional shares is that you could be exposed to higher risk if you only own a few stocks. If you do decide to buy fractional shares, it is important to be diversified to lower your risk.

As noted above, choosing and buying individual stocks can be challenging and risky. This is where a stock index fund comes in. A stock index fund allows you to buy a small piece of each company that is held within the index. For example, you could buy an index that tracks the S&P 500 which contains the 500 largest publicly traded companies in the US.

When you buy into this fund, you are buying a piece of the 500 largest publicly traded companies in the US. This is a great way to diversify your stocks and can help build a foundation to your investments as index funds are considered to be a solid investment over the long term.

Using a robo advisor requires the least amount of effort of any option on our list. Essentially, a robo advisor is a digital financial advisor that uses advanced algorithms to build and manage an investing portfolio for you. When you first sign up for a robo advisor, you will be asked a series of questions related to your investing goals and risk tolerance.

Based upon this information, the robo advisor will choose your investments for you. All you have to do is deposit money into your account and the robo advisor will take care of the rest. Using a robo advisor is a great hands off approach to investing. If this sounds like a good fit, you can check out our picks for the top robo advisors to learn more.

As the name implies, a micro investing app helps you consistently invest small sums of money, which is perfect if you have a small budget. One of the most popular micro investing apps is Acorns thanks to their round ups feature. Essentially, every time you make a purchase, Acorns will "round up" to the nearest dollar and invest the difference into a diversified portfolio for you.

For example, lets say you bought a coffee for $4.50. Acorns would round up to $5 and invest the $0.50 difference. Using a micro investing app is a great way to consistently invest small amounts of money automatically.

Finally, you could open an IRA. An IRA, or individual retirement account, is specifically designed to help you save for retirement. The two most popular are the Roth and Traditional IRA. Opening an IRA is a great place to start investing small amounts for your retirement.

We should note that an IRA is an account and not an investment. After you have opened an IRA, you still need to choose the investments that go into it. The good news is that most robo advisors and investing apps offer an IRA if you want a hands off approach. If you want a hands on approach, you can also open an IRA through an online broker.