It’s not just your imagination if investing seems like a rich person’s game: many investments target the affluent. However, there are other methods to invest $500. The best way to build wealth, after all, may be to consistently invest as your finances allow over an extended period. This is especially true if you have paid off any high-interest credit card debt and are making enough contributions to qualify for any employer 401(k) match that may be offered.
Not sure where to begin with $500 in investments? Let’s explore how far $500 may go when invested, as well as some of the best methods for getting started with investing – even with a modest sum of money like 500 dollars.
1. Contribute to 401(k)
The simplest option to begin investing, even with a little sum of money, is probably through your employer’s 401(k) plan. First, very little work on your part is necessary to get started because your employer sets up the plan on your behalf. Some employers require their employees to automatically opt into the plan. If they do not wish to participate, they must opt out.
The fact that your return is frequently significantly higher due to an employer contribution is another advantage of investing in a workplace 401(k) plan. Let’s say your employer matches up to 3% of your 401(k) contributions. In other words, if you put in 3% of your salary, your employer will do the same. Your investment has already generated a 100% return. Finally, because 401(k) contributions are deducted from your paycheck prior to taxes, contributing will save you money in taxes.
401(k) plans are a great location to start your investing adventure due to their tax benefits. You’ll pay less in taxes as a result, allowing more of your money to stay invested. You may be sure that you’ll have money waiting for you when you’re ready to quit working because they were created with retirement in mind.
2. Make a High-Yield Savings Account Available (HYSA)
At any point of your life, saving money is essential, and opening a savings account can be a wise choice, especially given how fiercely contested saving rates and internet banking have become in recent years. In specifically, a high-yield savings account, which is gaining popularity, is a kind of account that offers 20–25 times the interest and savings rates of a typical savings account. This means that you can profit from your money just by letting it accrue interest in your account!
Will that amount be sufficient to open one and what is the minimum balance required for the account? These are a few often asked questions. As a rainy day fund, these kinds of accounts can be the ideal investment.
3. Purchase Individual Stocks
Purchasing individual stocks is unquestionably the best course of action for the simplest sort of investment that has to do with the market. Since many decisions are made by you alone, this investment may be the riskiest one, but it may also be the most effective way to turn $500 into tens of thousands of dollars.
Make sure your finances are sound enough for you to invest in stocks first. This entails having no debt or credit card balances. Then, research various internet brokers who may assist you in purchasing stocks. Every platform will have a separate set of pricing options and transaction costs.
Finally, placing stock orders is simple! Fund your account with your $500 deposit and start working. Keep in mind that the market is only open from 9:30 am to 4:00 pm Eastern Time, Monday through Friday. Ascertain that you are ready to place your orders during the active window. Checking your stocks frequently can help you maintain track of them as well. Avoid becoming overly invested emotionally in the ups and downs of your favorite stocks. Simply keep track of how they are doing so you can decide when to acquire more or sell by making informed decisions.
4. Pay off Debts
The majority of people accumulate debt at some time along their financial journey. Using debt relief applications to pay off your debt and making investments in your future are wonderful ways to ensure that you don’t fall behind or feel anxious about your finances in the future.
Start by going back and concentrating on the expenses you made that must be repaid right away. Before tackling bigger projects like your mortgage and student loans, for instance, you should first focus on paying off your credit card debt and auto loans. The two previous elements should be your top priority because they have a big impact on your credit score, which gives you more financial flexibility.
5. Make Investments for Future Profits
Once the debt from the past is paid off, consider how you may save $500 each month going forward so you won’t have to repeatedly make up missed payments. Simple examples include using money-saving apps, paying a one-time price for a house warranty on kitchen appliances in case they break (rather than paying a much higher fee later), and keeping your automobile warranty current in case of any accidents or part breakdowns. These are small actions and investments you can start doing today that will end up saving you hundreds of dollars over time.
The Bottom Line
Feeling as though they don’t have enough money is one of the things that prevents so many people from investing. The good news is that by investing even a small sum of money from your budget, you can make a big difference in the long run. If you invest just one lump sum of $500 in an asset with a 10% annual return, you would have roughly $1,300 after ten years. Your 10-year returns would be over $8,000 if you were able to invest $500 extra each year. Additionally, if you were able to invest $500 each month for ten years at a 10% annual return, you would have nearly $100,000.
Make sure to carefully consider whether investing your $500 in a particular project is the correct decision at the right time. While money is transient, time is eternal, and wisely investing in many opportunities can lead to a happy and satisfying life. Even while $500 may not seem like much, it can add up over time. Getting started and forming the habit of regular investing is the most crucial initial step. When you have more money to deal with, you may strengthen your portfolio and see your investments grow even faster as your $500 investment continues to increase.