You may be wondering what you can do with your extra cash as you start to plan your financial future.
Many people are put off by the fact that not everyone can invest thousands of dollars at once.
In this digital age, with new regulations on investing and fintech companies, you can invest much less. There are several ways to invest $20 and build a small but growing nest-egg.
Investing $20 will not make you rich over night, nor can you expect to get a lot of returns. If you have any extra cash, it’s a great idea to invest it.
Learn how to invest 20 dollars and the best way you can start.
Table of Contents
Is investing $20 worth it?
What can you invest $20 in?
Final Thoughts
Is investing $20 worth it?
You might be pleased that you have $20 but investing it once isn’t going to change your life. It will get you into the habit of investing and in the right mindset.
When you look at the numbers, you might be surprised by how much money you can accumulate.
Here are three scenarios for investing $20.
If you invest $20 and don’t invest again for 30 years, you will have more than $150. It’s not that exciting, is it?
If you consistently invested $20 each month in the stock market, you would have more than $2,100 in 30 years. It’s not much, but you now have a lot more.
If you invest $20 each week in the stockmarket, you will have more than $8,400 in 30 years if you get a return of 7%.
These examples will show you the benefits of compounding.
You’ll need to make a recurring contribution of more than $20 to ensure you can survive retirement. You should, for example, take advantage of your company’s 401k plan and make sure you contribute enough money to receive any matching funds offered by your employer.
If you’re just getting started or have $20 extra to invest, it is worth increasing your investment. Every little bit helps you achieve your financial goals.
If you do not have an emergency fund, start building one. Continue to put that $20 extra towards it as it could be a lifesaver in an emergency.
What can you invest $20 in?
You know that $20 may not seem like a lot of money but you can invest it. How can you invest the money? You have several options to choose from, each with its own pros and cons.
It’s also important to remember your risk tolerance and financial goals. Also, consider your timeline for when you might need the money.
- Stock Market
Stock market is the first place to invest $20. Stocks are the most popular way to start investing and there are many options.
Due to costs, you will not be able buy ETFs or index funds with only $20. Vanguard Index Funds, for example, require a minimum investment of $3,000 before you can invest.
ETFs may be cheaper, but they are usually at least $50+ per share. You can then open an IRA or Roth IRA account or a traditional brokerage account with the $20 and invest it in the ETF once you have enough. You’ll have to add at least $20 to your account every month.
A second option is to buy individual stocks under $20. I only invest in select companies because there is more risk. Companies that are worth less than $20 per share can also be more volatile. You can find some real gems for this price.
- Fractional shares
There is a second way to invest your $20 if the traditional stock market route isn’t appealing. You can invest in stocks you cannot afford but you do so by purchasing fractional shares, or a “slice”, of the stock price.
Investors can buy fractional shares based on their money, which makes it easier for them to start investing with smaller amounts. This concept, also known as “micro-investing,” has revolutionized the financial world and allowed more people to start investing.
The cool thing about fractional shares is that you can buy individual stocks for a few dollars (and ETFs depending on the broker).
You can buy fractional shares in the following places:
Acorns allows you to invest spare change in ETFs or stocks based on your goals. Start investing with $5 and set up automatic recurring investments. Acorns is a great way to get started.
Stash is another micro-investing platform where you can invest as little as $5. You can also earn stock by using their Stock-Back (r) Card. You also have access to a huge selection of stocks, ETFs, and bonds. Stash is a great way to start investing.
Public is a company that has gained popularity. Investors can buy fractional shares in stocks, ETFs or select funds that are based on their interests. Public also has a social component to help you learn from other investors. Get started and learn more about Public.
- Real Estate
Diversification is important when investing your money. Diversification is important for protecting your money from volatility and allowing your money to grow.
Real estate can be used to fund real estate through REITs or crowdfunding, rental properties, farmland or land, or even real estate.
How do I invest 20 dollars in real estate? Is it possible? It is possible!
This amount will not get you far in the stock market. It will get you into the habit of learning and investing without risking any money.
You have two options with $20 to explore real estate.
REITs:
Real estate investment trusts are companies that own income-producing properties. REITs are typically commercial properties, such as office buildings, apartment blocks, warehouses, hospitals and shopping centers.
Vanguard VNQ, for example, is an ETF that has a broad range of companies with real estate holdings. You can also invest in publicly-traded real estate investment trusts (REITs) on the stock exchange. Most will cost more than $20, so you’ll need to save money to start investing.
Real Estate Crowdfunding:
Real estate crowdfunding is growing rapidly, giving investors the opportunity to invest in properties or portfolios with ease. You don’t need to be a property manager or landlord.
Fundrise and DiversyFund, two of the most popular names in this space, require a minimum investment of $500 to begin. There is another platform, Groundfloor, that offers single-family home investments for just $10.
Groundfloor offers you the opportunity to invest in short-term, high-yield real estate debt with returns of 6 to 9 month. It is a good way to learn, diversify and mix in real estate without risking too much money.
- Fine Art
Fine art or well-known artwork is another alternative investment option that wealthy individuals are considering. This can cost hundreds of thousands, or even millions, to invest in, so it’s not for everyone. The crowdfunding market is not just changing the real estate game, but also the art world.
Masterworks is the latest platform to invest in fine art.
Art experts founded the company, which acquired paintings by the most famous names in art. Andy Warhol was one of the artists who acquired famous paintings from the most prestigious names in art. You can buy shares in this art for only $20!
You can sell your shares to other investors on the Secondary Market.
The art market has its own set of risks. However, it is not correlated with the performance of the stock or real estate markets.
When you first start investing, I recommend that you start with the stock exchange. You can start your 401k or IRA (if you have one through your job) here. If you already have these outlets, then investing $20 or even more in art can be a good alternative investment.
Final Thoughts
A $20 investment won’t make you rich, but it will help you develop a good money mindset and establish personal finance habits.
If you consistently invest $20, whether it’s monthly, weekly, or sporadically — over time, that consistency will add up. As you become more comfortable, you will start to see the compound interest work in your favor.
You have to start somewhere. Even if you don’t know what you are doing or you only have a little money, these options can still be a great way to learn. How will you invest your $20 today?
