Investing in the stock market is one of the smartest financial decisions you can make. Not only can you generate wealth and increase your net worth, but you can also build a healthy nest egg for retirement.
However, investing can be expensive. Individual stocks can cost hundreds or thousands of dollars per share, and most experts recommend buying at least a dozen or so different stocks to create a diverse portfolio. If you can't afford to shell out thousands of dollars, investing may seem out of reach.
The good news is that there are ways to start investing without spending an arm and a leg. Even if you only have $100 (or less) to invest, these three options make it easy to start making money in the stock market.
1. Contribute to your 401(k)
Contributing to your workplace 401(k) is one of the easiest ways to get started in the stock market. Many employers automatically enroll new workers in the 401(k) plan, so you may already have access to this type of account, even if you haven't contributed anything yet.
With a 401(k), you typically have a handful of investment options to choose from, which helps take the guesswork out of deciding how to invest your money. You can also invest as much or as little as you'd like. You may choose to make a one-time investment now or set up automatic contributions so that you're investing a set amount on the schedule you choose.
If you don't have access to a 401(k) through your employer, investing in an IRA is another great option. IRAs are similar to 401(k)s in many ways and also allow you to invest on a budget.
2. Invest in index ETFs
An ETF, or exchange-traded fund, is an investment that includes dozens or even hundreds of stocks. The fund also tracks a particular stock market index, such as the S&P 500 or the Dow Jones Industrial Average. In other words, the ETF includes all the same stocks as the index it tracks.
Index ETFs can be a smart option for investors who want more control over their portfolios but still prefer a low-maintenance investment. There are countless index ETFs to choose from, ranging from broad-market funds like S&P 500 ETFs to niche funds that track particular industries. You don't need to worry about buying individual stocks with ETFs, but because you have so many options, you can still create a personalized investment portfolio.
ETFs are also an affordable choice. Because each fund contains many different stocks, you can have an instantly diversified portfolio with just one ETF. From there, all you need to do is invest as much as you can afford and watch your savings grow.
3. Buy fractional shares
If you're eager to invest in individual stocks but can't afford to buy full shares, fractional shares are your best bet. When you buy a fractional share of stock, you're investing in just a small slice of a full share -- for a fraction of the price.
Say, for example, you wanted to invest in Amazon. Currently, the stock trades for just over $3,400 per share. With fractional shares, you can buy a portion of a share of Amazon stock for as little as $1.
The best part about fractional shares is that you can invest in a wide variety of stocks for next to nothing. Rather than spending thousands of dollars building a diversified portfolio, you can invest in up to 100 stocks for $100.
Of course, the fewer shares you own, the less money you can expect to make on an individual stock. However, fractional shares are a fantastic way to get started building a portfolio. And when you do have spare change to invest, it's easy to put that money toward more shares to grow your investments.
Regardless of how much you can afford to invest, the stock market is one of the best ways to make money over time. By taking advantage of these affordable options, you can get started investing and begin building wealth.
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