Even just hearing the word “investment” can be an intimidating and scary experience for some people. It just seems like something that other people do, and not everyday people like us. After all, doesn’t investing require huge amounts of money up front? What if you don’t have it? In this economy, not many people can say that they have piles of money lying around that they’re not using. Right now, every dollar counts. Setting aside some of those much needed funds for something as nebulous and easily misunderstood as investing is going to require a lot of confidence. Don’t worry. There are more options available to you than you may think.
Making smaller, more modest investments is becoming more of a trend now that everyone is so reluctant to part with “extra” money. Where before, you may not have even considered investing with anything less than five figures, nowadays, there are some really solid investments which can earn you interest and returns for as little as $50 on your part. A little guidance on basic investment concepts is all you need to get started. I’ve assembled a list of some of the safer, smaller investments available to everyday folks like you and me, that will still let us all earn a little something for our trouble
Begin (or Increase) Your 401k Contributions
Retirement may seem like it’s a long ways off. Indeed, it is probably a longer ways off for you and me than it was for our parents and grandparents. Still, a different way of looking at these longer times between your first job, and your big sendoff party is that it gives you more time to save up for your golden years.
I had a retail job when I was a young teen, and I remember a team meeting wherein our manager discussed the newly available 401k plans we could take advantage of. Being a high school student, and only earning a few dozen dollars for my weekend work, I didn’t really think it applied to me. Something that has stood out to me after all these years is something one of my managers said. She mentioned that she began saving for retirement in her mid 30s, because she didn’t think she needed to start any earlier. However, when she went back to look over what she might have made if she had started in her 20s, she said “It made me sick to realize how much money we’d missed out on”. That was an eye opener.
In reality, it is never too early, and pretty much any amount you choose to contribute is only going to help. Many companies have options for you to save as little as 1% of your income. If that is all you feel you can afford at this time, I still recommend you save it. You can always go back and increase your contributions later on, as circumstances change. Many companies will match part or all of your retirement plan contributions, so that 1% will actually be more. Add onto that the interest yields over time, and you will see how even a small amount can grow into something more substantial.
Invest In an Indexed ETF
Let’s say that you have a small bit of money put away, but you are still interested in getting to know the stock market. Even with an investment of $1,000, it may be very worth your while to look into an indexed ETF such as the S&P 500 or the iShares Russell 2000 Index. What you are doing in this case is placing your money into something very similar to a mutual fund, but one with wider variety that trades more like stocks.
While these Indexed ETFs can be great starting points, one word of caution: watch those fees! Some institutions charge “convenience fees, “managing fees”, or something similar. Really, all these are doing is slowly chipping away at your nest egg, and that’s not exactly what you were looking for when you put your hard earned cash into this endeavor. Do a little homework beforehand, and make sure that what you will be earning back as interest is much greater than whatever fees you are being charged. Better yet, check for an institution that doesn’t charge any fees.
Invest in Your Home
If you own your home, but think you may be selling it some day, you can seriously up the value by making a few improvements. If your home is not currently on the market, so much the better. This allows you the time to shop around for the best deals on kitchen, bathroom and landscaping updates without feeling rushed about it. We all know how those “weekend projects” turn into something more like “six weekend projects” due to unforeseen circumstances (this just happened to me last month!). Giving yourself a nice, comfortable time frame in which to finish these upgrades allows for a less stressful process.
Little updates such as cabinet refacing, swapping out sink fixtures, and prying up that old, pink tile in the guest bathroom are all relatively inexpensive ways to add value to your biggest investment. Even if you feel like you have a good two or three years left before you want to list your home on the market, go ahead and get started now. After all, what’s the point of putting in a brand new steam shower if you don’t get to enjoy it a little first?
Get Rid of Lingering Debt
I know, I know. You really want to do something more productive with this nest egg than just throw it at those accumulating interest fees. Here’s the thing though, those interest fees are slowly eating away at your income. The more they sit there, the more you ultimately end up paying over time. If you have enough set aside to eliminate, or at least make a sizable dent in your debt, this might actually be the best bet for you.
Things like student loans and credit card debt have a bad habit of hanging around for years longer than we thought they would. You may not even glance at that “interest” column on your statement, because making your monthly payments has become so mechanical. Still, if you add up all the interest you’ve paid thus far, it might make you go a little green to see that grand total. If you are can get out ahead of those interest payments, then you have just patched a crucial money leak. That alone may be more of a payout than a stock investment. Your credit scores are likely to benefit from this as well, so there could be more advantages than you think.
Buy Stock In a Reliable Company
Getting involved in the stock market can be as exhilarating as it is nerve wracking. It is an extremely fast paced environment, with gains and losses based upon speculative reactions to things us regular folks barely understand. Furthermore, many stock trading services charge you close to $8 every time you make a transaction. So even making only a few trades can easily cost you more than you earned in interest. For those of us looking to invest only a small amount, those fees are enough to scare most of us off.
A better option might be one of those “old reliable” stocks. Something that has a strong history of slow and steady growth, and one that you can comfortably leave alone for a long time. Most of the big name companies fall under this umbrella. Look for names like IBM, McDonald’s, J.P. Morgan Chase, and other bedrock stocks. These companies have been around long enough to show continual growth over the years. Furthermore, they have probably weathered economic ups and downs in the past, and haven’t been shaken much. Obviously, nothing is guaranteed, but in the world of stock market investing, these bedrock stocks are often considered safe harbors.
Invest in Yourself
Are you missing out on opportunities at work because you simply lack a certain certification? Could you have brighter prospects with a little professional resumé writing help? Chances are, there may be only a few hundred dollars (or less) standing between you, and your next big career step. Investing in ourselves is something we often overlook, either because it seems selfish, or because it seems like we do not have the time. This is one case where making the time, and really pursuing that next goal can pay of in a tremendous way.
It is always beneficial to widen your knowledge base and add to your skill set. How much more could you accomplish with some computer skills training, or a refresher course on public speaking? Employers are always looking for valuable employees, so add to your own value, and try investing in yourself starting today. It might be one of the most important uses for that nest egg you have been saving.