I have written numerous posts over the past month on how to invest differing amounts of cash. Those who have deeper pockets ($100,000 or more in capital) should read How To Invest $100,000. For individuals who are starting with $10,000, take a look at How To Invest $10,000. Those starting with $1,000 should check out How To Invest $1,000. This post will help the beginning investing who is looking to start with a Ben Franklin bill. Let’s take at a few different strategies for how to invest 100 dollars.
Best Ways For How To Invest $100
Buy Stock Directly From The Company
You can buy stock direct without going through a brokerage company. Brokerage companies are middlemen who make their money charging commission fees every time you buy or sell stock. Direct stock purchase plans (DSPP) are a cheap way for investors to eliminate the middleman and buy stock straight from the company itself. Direct stock purchase plans are good for the initial stock purchase. DSPP’s often have no fees attached and sometimes offer discounts for purchases. You can buy stock direct by enrolling in a DSPP through the company’s transfer agent. Transfer agents keep shareholder records, record ownership transactions, and handle all investor issues for publicly traded companies.
Computershare, American Stock Transfer & Trust, and Equiniti Shareowner Services are the largest transfer agents offering investors the ability to purchase stock directly from large and small companies. You can buy shares of Alphabet Inc.(Google), Broadcom, Costco, Exxon, Marriott, McDonalds, Home Depot and hundreds of other stocks with under $100. You can also add to your initial investment whenever you want by logging into the transfer’s agent website and making a purchase. Additional purchases can be made for as low as $25.
I still use direct stock purchase plans to increase my positions in stocks that I purchased years ago. I used DSPP’s to take a small position that started at $50 and grow it to over $30,000 over time through small investments and stock market growth. Direct stock purchase plans are my favorite way to start investing with $100.
Buy A Single Share Of Stock
GiveAShare is a site that I have used on multiple occasions to buy physical stock certificates. I have used the site to purchase a share of stock for myself, nephews, nieces, godchildren, and others. GiveaShare is a good site to use to initiate a position in a stock. I only buy stocks in companies that offer Dividend Reinvestment Programs (DRIP) because then I can buy additional shares without having to purchase additional stock certificates. The additional shares are recorded electronically. A DRIP allows investors to buy shares of stock cheaper by avoiding paying brokerage fees.
Some companies do not offer direct stock purchase plans but do offer dividend reinvestment plans. Dividend reinvestment plans require investors to own at least one share of stock to enroll. The stock that your purchase on GiveaShare gives you the one share necessary to enroll in a DRIP. Buying one share of stock in companies with dividend reinvestment programs like Disney, Citigroup, Pfizer, Nike, PepsiCo. gives you the right to purchase additional shares directly from the company without going through a broker.
You can enroll in a DRIP which will also reinvest dividends directly back into the company and let you buy more shares for as low as $25 a month. You can buy both fractional and full shares. I was able to build large stock positions in Nike and Hershey’s using this method. Buying one share of stock is a great way for how to invest 100 dollars.
Buy Stock From A Low Cost Discount Broker
My favorite small brokerage for buying stock electronically with $100 is Stockpile.com. Stockpile is an app based brokerage that allows small investors a quick and easy way to buy stock electronically. Stockpile enables small investors to buy shares in the stock of large companies and also purchase exchange traded funds. You can buy stocks with as little as $5 and are not charged any monthly maintenance fees. Stockpile’s only fee is the 99 cents per trade that you will pay when buying or selling stock. You can also reinvest dividends automatically.
This site makes it easy to buy shares of companies like Amazon or Apple. A share of Amazon is near $1,800 per and a share of Apple is over $200. You would need $2,000 buy a share of both companies at a traditional broker because you must purchase a minimum of 1 share. Most brokers have an all or nothing approach. Stockpile allows investors to work their way to owning a whole share by buying fractional shares. Stockpile enables the same investor to use $100 to buy 0.5 shares of Apple. You could own one whole share of Apple after two months of investing.
Stockpile’s drawback is that the company does not offer bonds, mutual funds, or options investing. The stock offerings are not as robust as those found at a traditional broker. The platform is also limited but useful for basic investing. Stockpile is an easy way for new investors to get their feet wet investing.
Stockpile is a good starting point for those who need to know how to invest 100 dollars. But once your account has reached the $1,000 level, you should open an account with a bigger broker like TD Ameritade, Merrill Edge, or Etrade. You will pay $6.95 for a trade but you get access to a greater amount of investment options including more stocks, exchange traded funds, bonds, and cash management options. Bigger brokers also provide more investment research, greater pricing control, and allow real time trading. They also have better platforms which are more user friendly.
Buy A Mutual Fund From A Fund Company
Mutual funds are a great way to buy a collection of stocks with a small amount of money. You can build a diversified portfolio starting with a single purchase. Diversification is important because it eliminates company specific risk and protects you from losing all of your money. While the majority of mutual funds require a large initial investment; there are a few mutual funds that a beginning investor can buy with under $100.
For example; Fidelity is a well-known fund company who offers no minimum investment mutual funds. Franklin Templeton offers mutual fund investing for just $25 as long as investors enroll in the automatic asset builder program which requires investing an additional $25 a month. Automated monthly investing allows investors to mitigate downside risk though dollar cost averaging. Automatic investment programs also allow smaller investors to purchase shares at mutual fund companies with $2500 plus initial investment minimums.
Brokers charge fee ranging from $29.95 to $49.95 for buying a mutual fund. Buy your fund directly from the mutual fund company’s website and the fee is zero!
Buy An Exchange Traded Fund
Exchange traded funds (ETF) are the mutual funds of the 21st century. They offer broad diversification and low expense ratios. But unlike mutual funds they are often cheaper to buy and are priced daily on the stock market. Mutual funds are priced at 4pm after the market closes whereas exchange traded fund prices fluctuate just like a stock. Buying an exchange traded fund just requires opening a brokerage account and buying at least one share of an ETF.
You can buy one share of an index fund ETF that tracks the return of the S&P 500 or the Dow Jones. You can also buy a balanced fund ETF that invests in a mixture of stocks and bonds. Or you can purchase a dividend ETF and start generating dividend income.
Buy A Savings Bond
Savings bonds still have a place in investment portfolios. A savings bond is a low risk conservative way of investing $100. You can buy a $100 I bond electronically from the TreasuryDirect website. I bonds are inflation indexed bonds that pay interest on a semiannual basis. Interest rates are recalculated and adjusted every May and November. As inflation rises, so does the interest rate paid on the bonds. You can buy $100 in I bonds on a monthly basis and build your bond portfolio while accumulating long-term passive income.
Invest In Peer-To-Peer Lending
Do you want to know how to invest 100 dollars in a nontraditional way? Investing in peer-to-peer lending is a high risk high reward endeavor. Sites like Prosper, Upstart, and Lending Club pay high rates of return to investors who lend capital to borrowers. You can take $100 and divide it up amongst four different loan opportunities. You can reinvest your earnings and spread the capital out over even more loans.
I believe that the best way for how to invest 100 dollars is to buy an individual stock or a mutual fund. In my opinion, the small investor needs to build up their capital by taking risks on these higher growth securities.
Investing $100 won’t make you rich but it can place you on the path to financial prosperity. Continue adding to your initial investments on a monthly basis. You will see your investments grow from the $100 level to the thousands by making regular investment contributions and through the magic of compounding investment returns.