5 ways to start investing with less than $500

Hesitant to start investing? Maybe you think you don’t have enough money. Or, you aren’t sure where to begin and may be nervous to get started. But there’s good news. There are quick ways to get started. If you have $500—or even less—you can start investing today.

Below are five ways you can start investing with less than $500.

1. Invest in your workplace 401(k)

We’ve seen examples of employees who are well aware that their company offers a match to their 401(k) contributions. Yet, they have not taken the time to understand this valuable benefit. This may be due to an unfamiliarity with investing. Maybe they feel unqualified to choose the right investments for their given situation and retirement goals. Some employees may not feel they have enough assets on hand to invest. 

Whatever the reason, new and even tenured employees may put off investing in their workplace’s retirement plan. But what many employees don’t realize is that they can begin saving for their retirement—even with small contributions.

Investing in your 401(k) is one of the most common ways you can dip your toe into the investing waters. Many employers match a portion of your investment contribution. For example, if you earn $40,000 per year and commit to 3% to a 401(k) contribution, you’ll divert $100 per month into your retirement account. If your employer matches that 3%, that’s an additional $100 per month that your employer invests in your account, and on your behalf, simply for contributing to the plan. Note: Employer match percentages can differ from plan to plan and are typically subject to vesting requirements.

After one year, your investment account could be worth $2,400 (more or less), depending upon how you are invested and how the investment markets perform that year.¹ Now, imagine you continue this small investment from age 25 until age 55, or for 30 years. Hypothetically, if you invest in a diversified² model portfolio managed by professional advisors that earns an assumed return amount of 6.5% annually, at age 55, your 401(k) could be worth $223,174.15.³ Not bad for a $100 per month (plus $100 employer matching) investment.

2. Auto-invest: From bank to brokerage account

Automated investing has become one of the most popular ways to invest. By setting your investing on autopilot, you may be more likely to keep it up for the long term, as it’s much less likely that you will notice the impact of small transfers to your investment account.

The process here will most likely begin with the initial action of setting up the account fund transfers, and choosing the investment or investments within the account. From there, you can begin your wealth-building journey with less than $500! You may be surprised to find that once the money is out of your account, you adjust to living on less.

Here’s how it works. Once your account is established, you decide on a monthly amount to invest. It’s okay to start small—you can always increase the amount as your income grows. Next, choose an investment for your cash contribution, and the money is automatically invested in that/those investments every month. 

Note: Many brokerage platforms offer the advantage of requiring only a small minimum dollar amount to start an automatic investment program. Be sure to research and learn about any associated costs with owning a brokerage account.

3. Automated platforms can be a strong fit for beginning investors

Automated platforms seek to optimize your investing through modern technology that provides digital financial planning and investment management. You typically answer a risk and goals questionnaire, and then the platform recommends a diversified² investment portfolio. Some automated platforms require high minimum investments to get in the door, while others have low minimums—so it’s always important to check on the requirements and cost before signing up.

By using an automated platform, investment dollars can be regularly directed to investments that are determined as an appropriate fit for your objectives (along with your input), given your own personal risk tolerance level. 

Additionally, you can expect to pay an expense ratio—the fee charged by professional money managers for the investment's management—and asset-based fees charged by the automated platform for maintaining the overall account, both of which are based on the amount of money in the investment account.

4. Pay off high-interest-rate debt

You probably weren’t expecting “pay off debt” as an investment. Yet, if you’re holding debt with high interest rates, you may be better off first getting rid of that debt.

Let’s consider a hypothetical situation where you are holding consumer debt, such as a credit card balance, with a 20% interest rate. The S&P 500 stock market index, a proxy for the total U.S. market, returned 12.11% annually on average from 2006 through 2024. During the same period, the ten-year treasury bond yielded an annual average of 2.95%⁴ (source).

If you were to invest your money and earn the historical average, mentioned above, of 12.11% in the market—rather than pay off your high-interest debt—your net outcome is a loss of 7.89% (20% paid in interest minus 12.11% earned).⁵ This is just one reason it could be beneficial to pay off high-interest debt sooner rather than later.

5. Consider low-fee index funds to help save more on investment expenses 

Whether you’re starting to invest in your workplace 401(k) plan, a robo-advisor, or other types of investment accounts, the types of investments you choose matter. Although it’s helpful to educate yourself about many investing areas before diving in, there’s one thing you need to understand right now, no matter how small you start. Fees matter.

Most mutual funds and exchange-traded funds charge a management fee or expense ratio. These fees can range from 0.01%  to 1.70% or even more. Although all investors should care, we think it’s even more important for the small investor to consider these costs, as low-fee funds might be a strong fit for them at this stage in their investing journey.

Depending on the fund, low-fee, diversified² index funds (also known as passively managed funds) can generally keep up with actively managed mutual funds. Sometimes, they may even outperform them.⁶ We believe it’s easy to grasp that part of the reason that low-fee index funds have the potential to outperform their actively managed counterparts is that more of your money is going into the financial markets, and not to fund expenses. Also, the individual investments within an index fund are typically bought and sold less frequently than those in actively managed funds, they shouldn’t incur as many trading costs.

If you’re short on cash and want to start investing for your future, don’t despair. Consider starting your investment plan today, and know that when you begin this journey, you’re taking the first step on the path to building your future. Remember to be patient and try not to panic when you see your investment value fluctuate. Investing for the future requires consistency, discipline, and patience.

—

Human Interest Inc. is an affordable, full-service 401(k) and 403(b) provider that seeks to make it easy for small and medium-sized businesses to assist their employees with investing for retirement. For more information, please visit humaninterest.com. Investment Advisory services are provided through Human Interest Advisors LLC (HIA) to plans that select HIA as the investment adviser. HIA is a Registered Investment Adviser and subsidiary of Human Interest Inc. For more information on our investment advisory services, please visit https://humaninterest.com/hia/.

This content has been prepared for informational purposes only, and should not be construed as tax, legal, or individualized investment advice. Neither Human Interest Inc. nor Human Interest Advisors LLC provides tax or legal advice. Consult an appropriate professional regarding your situation. The views expressed are subject to change. In the event third-party data and/or statistics are used, they have been obtained from sources believed to be reliable; however, we cannot guarantee their accuracy or completeness. Investing involves risk, including risk of loss. Past performance does not guarantee future results.