Young investors, often teenagers or those in their early 20s, usually don’t have a lot of money to put into…
Young investors, often teenagers or those in their early 20s, usually don’t have a lot of money to put into the market.
It might seem like it’s not worthwhile to begin investing, since it’s tough to get any traction with a small amount of money. But all investors have to start somewhere.
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For those with only $100 to invest, what’s the best way to begin?
— Growth potential beats perfect timing.
— Invest or build emergency fund?
— Apps for small-dollar investing.
— Diversification or concentration?
— Developing an investor’s mindset.
Growth Potential Beats Perfect Timing
Investors who are starting out should keep their focus on the long term.
“The most important mindset is to go into this with a commitment to long-term investing, so that short-term market fluctuations won’t cause you to panic-sell and lose part of your investment,” says Kelley Long, financial wellness coach at Financial Bliss in Tucson, Arizona.
“Also work to overcome the need to get this perfectly right and just start,” she adds. “One of the simplest ways to get investing wrong is to not do it at all or wait for the right time.”
Over the long term, she says, what the market did in the days and months after you begin investing will matter less and less, while your money compounds with earnings and growth over time.
Invest or Build Emergency Fund?
For teen investors, an emergency fund may not be a crucial step. But for young adults, or even older adults just getting started, it’s worth considering an emergency fund before putting money into the market.
That requires some patience for would-be investors who are eager to get started.
“For adults, think of an emergency fund as your financial airbag,” says Joshua Mangoubi, chief investment officer at Considerate Capital in Chicago.
“The rule of thumb is six months of living costs, but I like a two-year cushion for peace of mind,” he says. “You never know when layoffs or medical surprises will pop up. Once that safety net is in place, funnel surplus cash into long-term investments.”
For kids, Mangoubi adds, the airbag lesson matters too, but on a smaller scale.
“Stashing birthday money or allowance in a savings account teaches patience, while buying a single share of a favorite company sparks curiosity about investing,” he says.
Either path builds good habits, so Mangoubi suggests that parents can choose the right mix to make sure their child understands the roles of saving and investing.
Long has a slightly different point of view.
“Some financial planners and coaches will tell you to be debt-free before investing, but I think it’s OK to do a balance of both, as long as you have a debt payoff plan in place that you’re sticking with,” she says.
“That means you’re not still accumulating debt and that you’re spending less than you make, with the extra going toward a mix of investing and debt payments,” she adds.
Apps for Small-Dollar Investing
Fortunately for new investors, with just a few dollars and the right app, it’s easier than ever to begin building momentum.
“There’s never been a better time for small-dollar investors,” says Jordan Gilberti, founder of Sage Wealth Group in New York.
Custodians, including Fidelity, Charles Schwab, Robinhood and SoFi, offer fractional shares through their apps, making it easy to invest in stocks or exchange-traded funds.
“Many of these platforms also have zero trading fees and no account minimums, making them ideal for beginners,” Gilberti adds.
Automation tools, such as recurring deposits and robo-advisory services, can also help new investors stay consistent without needing to become an expert from the beginning.
“It’s all about lowering the barriers and making investing as accessible as possible,” Gilberti says.
Diversification or Concentration?
This is another area where there are two schools of thought.
Some planners recommend diversifying even with a small amount of money, but that could mean buying shares in a single ETF with a mix of growth, value and dividend-paying stocks all in one. Investors can also find balanced ETFs, which offer a diversified portfolio using a mix of stocks and bonds.
“The less you’re investing, the more important diversification will be, so looking to ETFs or index funds that cover a broad amount of companies will be the simplest and most cost-effective way to achieve that,” Long says.
She suggests taking the opportunity to buy fractional shares in index funds, as long as the investor’s chosen fund has no account minimums.
However, some planners say that for young investors, it’s OK to buy shares in companies that intrigue them, as a way of learning how the market works.
“If your portfolio is under $1,000, two or three great businesses you understand can teach priceless lessons,” Mangoubi says. “Once you’re investing four figures and beyond, broaden out with index funds or additional stocks to smooth the ride. Early on, the priority is excitement and engagement; later, it’s balance.”
Developing an Investor’s Mindset
Starting small doesn’t necessarily mean starting slowly.
The key is sticking with investing, by making regular contributions, even if they’re modest, says Michael Hart, founder of Open Book Financial Planning in East Windsor, New Jersey.
By investing on a regular basis, your money will, over time, grow through compounding, which helps smooth market ups and downs. This steady approach, known as dollar-cost averaging, takes the pressure off trying to pick the perfect moment to time the market, and instead focuses on building wealth gradually over time.
“True investing is akin to the tortoise in the classic fable: It may seem slow and uneventful, but it’s this steady and persistent pace that often leads to success,” Hart says.
“By focusing on long-term goals and maintaining a consistent investment schedule, individuals can build substantial wealth over time,” he adds. “This approach reduces the temptation to react to short-term market fluctuations and fosters a mindset geared toward enduring financial growth.”
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Can I Start Investing With $100? originally appeared on usnews.com
Update 05/19/25: This story was published at an earlier date and has been updated with new information.
