Everyone in your life is telling you that you need to begin investing. But it’s hard to get started when you don’t have a lot of money.

It sometimes seems like the system is stacked against you. Many mutual funds require an initial investment of thousands of dollars, and they take a percentage of your money on top of that.

In addition, investing in individual stocks can be hard if share prices are high and commissions from brokerage firms take several dollars away from every trade.

How to Get Started Investing with Small Amounts

Are there ways to get started investing without a large sum of cash to begin with? The short answer is yes. There are many options out there for people who want to start small and build a portfolio and get on the path to long-term savings.

In fact, many of the best innovations in the financial space in recent years have been a boon to young people with who don’t have much initial savings. Let’s examine some of the best options out there for people who want to invest small amounts of money.

1. High-Yield Online Savings Account

If you are just getting started on the path to saving money, one of the first places you’ll want to look is the bank, which will pay interest on any money you deposit in a savings account. However, don’t just go to the first bank you see on the corner. Your local bank is most likely paying very low interest rates, or is insisting on large deposits before you can earn any meaningful return.

Fortunately, you don’t have to put your money in your neighborhood bank or even a brick-and-mortar bank anywhere. There are many online-only banks that offer high-yield savings accounts. They compete with each other by offering higher-than-average interest rates.

Moreover, many online banks will let you deposit funds with no minimum balance requirements and no fees. Some even offer free checking.

Ally Bank is one bank that has consistently offered higher interest rates with no requirements. In addition, large financial institutions including Barclays, Goldman Sachs, and Mitsubishi Financial Group have recently spun off internet-only banking options with rates that beat most brick-and-mortar institutions.

With online-only banks, you will usually not have access to branches or ATMs, and withdrawals may be limited. Thus, it might make sense to have a traditional bank as your primary bank and use an online bank for long-term savings.

You may be able to earn even more money if you place funds in a certificate of deposit, or CD. With a CD, you can get a higher interest rate if you agree not to withdraw your money before a certain time. Many online banks offer CDs with terms as long as five years (or as short as a few months.)

Interest rates in general are a still low by historical standards, so you won’t get rich putting money in savings accounts or CDs alone. But it’s an easy way to earn a little bit of extra passive income, and might make it easier to eventually start investing in stocks, mutual funds and exchange-traded funds (ETFs).

2. Commission-Free Funds and ETFs

One of the tricky things about buying stocks, exchange-traded funds, mutual funds and other securities is that brokerage companies usually charge you to buy and sell stocks. Even with online discount brokerage firms, commissions run between $4.95 and $10 per trade — sometimes more — depending on the company.

This means that it’s far more cost effective to buy 2,000 shares of stock at a time than to make many purchases of two or three shares. And that’s tough for someone who may only have small amounts of money to invest at any given time.

The good news is that most discount brokerage firms now have a large roster of mutual funds and ETFs that you can trade without a commission. Companies including Fidelity, Charles Schwab, eTrade and others allow you to buy as little as one share of a mutual fund or ETF without any transaction charge.

Fidelity, for example, charges no commission on trades involving most iShares ETFs, and has commission-free mutual funds of its own. Etrade offers access to more than 250 ETFs and 4,400 mutual funds with no additional charge. Charles Schwab offers commission-free ETFs from 15 different companies.

3. Low-Cost Mutual Funds and ETFs

Once you’ve found funds and ETFs that trade with no commission, it’s time to find ones that also have very low expense ratios. (This is the amount of money the mutual fund companies take to manage the funds.)

These mutual fund fees often take 1% to 2% of your money or more, thus cutting into your overall earning power.

Fortunately, competition has forced mutual fund companies to offer products with very low expenses, and some have no fees at all.

Index funds are one popular low-cost option. These funds are designed to track the performance of a specific index, such as the S&P 500, and are managed with a very hands-off approach. As a result, fund companies are able to keep expenses quite low.

Vanguard pioneered low-cost index funds, and its Total Stock Market ETF [NYSE: VTI] has an expense ratio of just 0.04%. Meanwhile, there were headlines last year when Fidelity began selling four of its own index funds with no expense ratio at all.

One key thing to note about mutual funds is that many funds require a minimum contribution of several thousand dollars before you can invest. However, many of the new low-cost ETFs and mutual funds do not have account minimums, so it’s possible to get started with relatively limited amounts of money.

4. A 401k Plan

If you have an employer-sponsored retirement plan such as a 401k or 403b, you are permitted to direct any percentage of your salary into an account and invest it in a selection of mutual funds. Many employers will match contributions up to a certain percentage, so it makes sense to try to contribute enough to get the full match. (The employer match usually tops out at something like 5% of your salary.)

However, if you have a low salary and not a lot of money to invest, you can start by contributing as little as 1% of your salary from each pay period. Surely, you can part with 1% of your money to begin saving for the future, right?

Let’s say you earn $50,000 in gross pay per year, or $1,923 every two weeks. If you contribute 1% of your salary, that’s $19.20 every pay period. It’s not a lot, but it’s enough to get you started. Ideally, you’ll want ramp up your contributions as you begin to earn more. (In 2019, you are allowed to contribute up to $19,000 into an employer-sponsored retirement plan.)

What’s nice about a 401(k) is that your contributions are deducted from your taxable income, which lowers the amount of income you pay taxes on. That gives you a strong incentive to save.

And money is taken directly from your paycheck, so you’ll never be tempted to spend it instead.

5. Stash

Stash is an app that allows you to invest small amounts of money, even letting you buy fractional shares of stocks and ETFs.

The app allows you to invest as little as $5 in a selection of stocks and custom ETFs. If you don’t have enough money to buy a full share of a company or ETF, Stash will let you buy a partial share. This is not something offered by most brokerage companies.

Moreover, there are no commissions on trades. Rather, you spend $1 a month for unlimited trades. Once your balance grows above $5,000, you are charged just 0.25%.

Stash is great for people who only have a few bucks to spare at one time. If you are just starting out and have only a little bit of money to set aside, even the cost of a single full share of stock can seem daunting. The Stash app allows for automatic investments, so you can set up regular contributions and watch your portfolio grow little by little over time.

Stash offers investment in stocks and in its own custom ETFs. The ETFs have 58 different “themes” based on investor preferences, sectors and industries, and geographies. Its “Stocks Worldwide” ETF, for example, is a basket of stocks designed for broad global stock diversification. The “Defending America” ETF focuses on defense contractors and aerospace companies.

One word of caution about Stash is that while the $1 monthly fee seems low, it can be high on a percentage basis if you are investing small amounts infrequently. Consider: If you make just one $5 contribution per month, that $1 fee is one-sixth, or 16%, of your total monthly outlay. Thus, is it most cost-effective to invest more on a monthly basis if you can.

Learn more in our Stash Invest review.

6. Acorns

Acorns is an app that allows you to invest simply by contributing your spare change to a portfolio of stocks, bonds and ETFs. It allows you to get started for $1 a month (it’s free for college students) and you have the ability to invest in fractional shares.

Using the app, you can link your bank account. With every purchase you make, the total is rounded up. The difference is then deposited into your Acorns account.

So for example, if you spend $2.75 on a coffee, the total is rounded up to $3. Then 25 cents is invested through Acorns.

Acorns works with most debit cards linked to a checking account, but will not work with credit cards. The company also has its own debit card and checking account, known as Acorn Spend. Acorn Spend is among the 12 online checking accounts we named as best.  

With Acord Spend, dozens of partner companies will also contribute to your account if you spend money with them. Partner companies include Nike, Walmart, Macy’s, Barnes & Noble, Airbnb, Lyft, and Stitch Fix.

Once your “roundups” are deposited, your investments will be placed in a portfolio that is created by Acorns based on your age, investing goals and preferences. Most portfolios consist of ETFs with broad holdings designed to mirror the performance of major indices. Acorns offers access to more than 7,000 stocks and bonds.  

Like Stash, the Acorns app allows you to purchase fractional shares of ETFs, so you can invest very small amounts of money.

Acorns has three pricing tiers. For $1 per month, you can invest your change from purchases and get automatic reinvestment of dividends. For $2 per month, you can have an Acorns individual retirement account. A $3 per month service includes the Acorn Spend checking account.

College students can access the $1 per month tier for free.

7. Betterment

Robo advisors are some of the newest entries in the investing space, and Betterment has grown to be one of the most widely used.

Betterment has no minimum balance to get started, and it charges a low 0.25% annual fee, making it one of the lowest cost robo-advisor options.

Robo-advisors use artificial intelligence to fund an optimal stock and bond portfolio for you. They  manage the accounts in an attempt to maximize returns while reducing tax liability.

When you get started with Betterment, you provide the company with your pre-tax income, your age and your investing goals, and they will create a portfolio of stocks and bonds. These portfolios are largely made up of low-cost index-based ETFs, such as the Vanguard Total Stock Index ETF. So whatever you invest will not be wasted on high fund management fees.

Portfolios will be managed through technology that automatically rebalances your portfolio, reinvests dividends and engages in tax-loss harvesting. You can read more in our full Betterment review.

8. Robinhood

Robinhood is an app that allows you to buy and sell shares of stocks and ETFs. You can trade options and even cryptocurrencies, all with no commission fees. It offers a deliberately bare-bones platform but delivers on a promise to allow people to invest for free.

There is no minimum account balance requirement with Robinhood, though you will need $2,000 to open a margin account.

The universe of available investments with Robinhood is somewhat lacking, as investors are limited to purchasing stocks or about 2,000 ETFs. There is no ability to invest in bonds or mutual funds.

There’s not a lot of investment advice, but it may be a platform that works for you if you want to get started without a lot of cash. For what it’s worth, they are offering a free share of stock to anyone who makes a client referral.

9. WiseBanyan

WiseBanyan is among the 17 best free investing apps we named for 2019. It’s an investing platform that allows you to trade ETFs and receive financial advice for free. There is a mere $1 minimum balance to open an account. You can invest with as little as $10, with WiseBanyan allowing the purchase of fractional shares.

WiseBanyan makes its money from paid services, which are totally optional. You only need to pay for what you use, and it’s free to have a simple brokerage account to invest. The free service offers a limited number of investments, but the selection expands if you are willing to pay. Additional paid services include automatic account rebalancing and tax loss harvesting.

While WiseBanyan does not charge a management fee, there are expenses associated with the ETFs, which come from low-cost companies including Vanguard and iShares. A typical expense ratio is a about 0.12%, which is relatively low.

Note: Most of the truly “free” services apply only to taxable brokerage accounts. If you want to open an IRA with WiseBanyan, you’ll have to maintain a $25 balance and the company will charge a fee of 0.24%.

10. SoFi Invest

Like WiseBaynan, SoFi Invest (formerly known as SoFi Wealth) allows you to invest for free and get financial advice as well. You can get started for as little as $5 if you want to manage investments yourself.

SoFi gives you the option of investing on your own (they call this active investing) or it will build and manage a personalized investment portfolio based on your goals and preferences.

Allowing SoFi to manage your portfolio costs $100 or a recurring $20 monthly deposit.

SoFi will rebalance your portfolio for free (usually quarterly, and only if your allocations are more than 5% off target) and you can get one-on-one financial advice.

SoFi also has a banking product, SoFi Money, offering some of the most competitive interest rates available. The bank offers a 2.25% annual percentage yield with no fees and no minimum balances.

You can even withdraw money from any ATM, and the bank will refund any fees. Money deposited with SoFi is FDIC-insured up to $1.5 million. (Most banks are insured only up to $250,000.)

11. M1 Finance

M1 Finance is another relatively new entry in the robo-advisor space. It may be a good low-cost option for those who can’t invest a lot at one time.

M1 Finance allows you to open an account with no fees and no minimum investments. You can fund an account and begin investing money in “pies” of investments based on your financial goals. Each “slice” of the pie represents an individual stock or ETF. The M1 algorithm will automatically adjust your portfolio to your pre-determined allocations.

With M1, you’ll be able to invest in fractional shares of stocks and ETFs, so you don’t need to amass a large sum of money to get started. There are no commissions for any investments you make, though ETFs do have expense ratios, usually of 1% or less.

To learn more, read our M1 Finance review.

12. Peer-to-Peer Lending

Did you know it’s possible to make money by lending money to people who can’t or won’t use a traditional bank?

Online platforms now allow people to “invest” in the debt of others, and potentially earn a solid return.

Lending Club and Prosper are two “peer-to-peer” lending platforms, and they don’t require large amounts of money to get started. Depending on the company, it may be possible to get started with as little as $25.

These sites allow a person to select a portfolio of loans, with interest rates that vary depending on the creditworthiness of the borrower. Lending Club says it has historically generated earnings of between 3% and 8% per year. Prosper claims historical returns averaging 5.4% annually.

With LendingClub, you can get started by funding your account with as little as $1,000, and you can make loans of as little as $25.

Prosper lets you get started for as little as $25 per loan and there is no minimum account balance requirement.

Read more in our full article about how to make money with LendingClub.

13. Dividend Reinvestment Plans

Many companies distribute a part of their earnings to shareholders in the form of dividends. This means that if you invest in shares of stock, you’ll receive quarterly payments. Reinvesting these dividends by buying more shares can be a powerful way to increase your earnings.

The problem with dividends, however, is that that they often don’t amount to enough to buy a full share of stock. For example, let’s say you own 100 shares of Coca-Cola stock, which pays a quarterly dividend of 39 cents per share. This means you’ll get $39 each quarter. But a share of Coca-Cola sells for about $45. So how can you reinvest the dividends?

The answer is through a dividend reinvestment plan (DRIP). Many companies offer these plans and will automatically reinvest your dividends instead of issuing a payment. Best of all, they’ll give you fractional shares if the amount doesn’t cover the cost of a full share. (In the above example, an investor can end up with 0.86 shares from the $39 quarterly dividend.)

Many DRIPs are offered with no fees, and allow investors to buy shares directly and bypass the commissions offered by brokers.

Not all companies offer DRIPs; they tend to be limited to some of the larger, older blue chip companies. According to Directinvesting.com, there are 59 companies offering DRIP plans that accept investments as small as $10. These include big-name companies such as Coca-Cola, 3M, GE and Charles Schwab.

Have you gotten started with investing by using any of the services or accounts above? What other platforms do you recommend for people investing with small sums of money? Let us know in the comments section.