Investing in your 20s and 30s is a strategic move that can lay the foundation for long-term financial success. While the journey to financial independence may seem overwhelming, there are smart investment options tailored for millennials. Right out of school, I wanted to grow my net worth but had very little funds to start. There were so many times I was just making ends meet, just having enough money to cover my daily expenses. But after doing some thorough research, I realized there were ways that I could build wealth over time, making small steps to grow and diversity my own portfolio of investments. Just keep in mind: all investments carry some level of risk, so it’s important to do your research and if necessary, work with a professional before making any big money moves. If you have limited funds, here is how to invest when money is tight.
How to Invest When Money is Tight
Stock Market Investments. One of the most common and potentially lucrative forms of investment for young adults is the stock market. Investing in well-established companies or exchange-traded funds (ETFs) can provide the opportunity for capital appreciation over the long term. While the stock market can be volatile, the key is to focus on a diversified portfolio and take a long-term approach to ride out market fluctuations. One way that Kurt and I were able to purchase our first home/fixer-upper was by cashing out stocks we purchased years before. Neither of us were super experienced with the stock market, however, we invested in companies we were familiar with (for example, I had a few shares of Disney, Under Armour, PepsiCo, Nike, etc.) and sold them after years of growth.
Collectibles and Alternative Investments: Collectibles, such as rare coins, stamps, or vintage items, can be unique investment opportunities. Additionally, alternative investments like peer-to-peer energy lending or social impact investing may be accessible with lower capital requirements. As a sports head, I know many people who invest in items such as sports cards, sneakers, gear, and other items that gain value over time. This approach definitely requires collectors to play the long game, as many of these items appreciate in value over time.
Micro-Investing Apps: Micro-investing apps allow users to invest small amounts of money, often as little as a few dollars, in fractional shares of stocks or exchange-traded funds (ETFs). Popular platforms like Acorns or Stash round up your everyday purchases to the nearest dollar and invest the spare change.
Peer-to-Peer Lending: Peer-to-peer lending platforms connect borrowers with individual lenders. Investors can lend small amounts of money to multiple borrowers, earning interest over time. While there is a risk of borrowers defaulting, platforms like Prosper or LendingClub offer opportunities for diversification.
Cryptocurrency: While volatile, cryptocurrency has gained popularity among younger investors. Bitcoin and other cryptocurrencies can be a part of a diversified investment strategy. Like with any investment, it’s so important to conduct thorough research and only invest money that you can afford to lose due to the inherent risk in the cryptocurrency market. Cryptocurrencies like Bitcoin, Ethereum, or smaller altcoins provide an opportunity for individuals with limited funds to enter the market.
Savings Bonds: U.S. Treasury Savings Bonds are a low-risk investment option with a relatively low entry point. While many of these investments won’t make you wealthy overnight, they are great options for those who have little cash and have the patience to let the interest add up. They can be purchased for as little as $25 to start.
Real Estate Crowdfunding. For those interested in real estate but lacking the capital to buy property outright, real estate crowdfunding platforms offer an alternative. Millennials can invest in real estate projects with relatively small amounts of money, diversifying their investment portfolio. This allows for exposure to the real estate market without the responsibilities of property management.
Retirement Accounts (401(k), IRA). Maximizing contributions to retirement accounts, such as a 401(k) or an Individual Retirement Account (IRA), is a smart move for young investors. These accounts offer tax advantages and compound interest over time, providing a substantial nest egg for the future. Additionally, many employers match 401(k) contributions, making it an even more appealing option.
Education and Skills Development. Investing in yourself is a wise strategy that pays dividends throughout one’s career. While I think this is an amazing investment, this might also mean playing the long game. For example, if you go back to graduate school, your degree might come in handy years later when you apply for a senior level role. Consider allocating funds for education and skills development. This could involve taking courses, attending workshops, or pursuing certifications that enhance your professional qualifications and increase earning potential. Months or years later, the perfect role might open up, one that requires the qualifications you worked so hard to achieve.
High-Yield Savings Accounts and CDs. For a more conservative approach, millennials can allocate some funds to high-yield savings accounts or Certificates of Deposit (CDs). While the returns may not be as high as riskier investments, these options offer security and liquidity. It’s a prudent choice for an emergency fund or short-term financial goals.
Robo-Advisors. Robo-advisors provide a hands-off approach to investing, making them particularly attractive for those who are new to the investment world. These automated platforms use algorithms to create and manage a diversified portfolio based on individual risk tolerance and financial goals.
If you’re tight on cash, you truly have a variety of smart investment options to choose from as they navigate their financial journey. Don’t let a lack of money dissuade you from ‘jumping in the ring’ and learning about investment opportunities that work for you. Diversification, long-term thinking, and staying informed about market trends are key to building a robust investment portfolio. It’s also important to set realistic expectations, especially early on. It took years of planning, sacrifice, and persistence for many wealthy people to get to where they are now. By making informed decisions and embracing a combination of these investment options, you can set yourself up on a path to financial success and security. Remember, the earlier you start, the more time your investments have to grow.