10 Smart Ways to Invest $500 or Less

Investing

Many people believe that you need thousands of dollars at your disposal to start investing. However, this couldn’t be further from the truth. For example, you can even begin investing in the stock market today with $500 or less.

young woman

If you’re looking for other ways to invest, but don’t have much cash, here are ten of the best ways to invest $500 or less.

1. Micro-Investing

With micro-investing, you can start investing with as little as $5. This makes it the perfect option for college students or anyone who wants to invest but doesn’t have much disposable income.

There are plenty of micro-investing apps you can choose from with an initial investment of $500 or less. These apps are easy to use and cater to brand-new investors. To learn more about micro-investing, here are five apps you can look into.

Robinhood

Robinhood is an excellent option for new investors. There’s no minimum balance to open an account with Robinhood, and the company doesn’t charge any trading fees. And the company’s app is relatively intuitive to use.

Plus, Robinhood is one of the few micro-investing platforms that let you trade full stocks, mutual funds, options, and cryptocurrencies.

To find out more, read our comprehensive review of Robinhood.

Stash

Stash caters to all different types of investors. When you sign up, you’ll take a brief survey to determine your level of risk tolerance when it comes to investing. From there, you’ll pick how much and how often you want to invest.

And Stash lets you choose the types of companies you want to invest in. So, for instance, if you’re only interested in investing in eco-friendly companies, you can specify this in your profile.

Acorns

Acorns is one of the easiest and most low-cost ways to start investing. There’s no minimum balance required to sign up for Acorns, and the company only charges $1 per month.

After you sign up, you’ll connect your Acorns account to a credit or debit card. Then, every time you make a purchase, Acorns will round that purchase up to the nearest dollar. Once you hit $5, Acorns will begin investing that money for you.

Betterment

Betterment is a viable option for anyone interested in micro-investing but wants to have a little more control over their investment portfolio. The company does the investing for you but allows you to work with a financial advisor and have more say in your investments.

There are no minimum balance requirements to sign up for the company’s most basic plan. However, the company does charge a 0.25% monthly fee on your investments.

Rize

With Rize, you can save or invest money. To get started, you’ll set up your savings goals and timeline. From there, the company recommends how much and how often you’ll want to save to meet your goals.

2. Exchange-Traded Funds (ETFs), Mutual Funds, or Index Funds

For those looking to invest $500, exchange-traded funds (ETFs), mutual funds, and index funds are all great options. ETFs offer a basket of securities that can be exchanged on the market, just like a stock. You can find plenty of online brokers that offer a wide selection of commission-free ETFs.

Mutual funds are managed by a professional broker and aim to beat a given stock market index, while index funds are designed to match the index and grow from there.

All three types of investments have low expense ratios, low fees and commissions, and offer broad, diversified exposure to the stock market

3. Buy Bitcoin

For some, investing in cryptocurrency may be too risky and volatile for their taste. However, Bitcoin has had an average growth of over 100% per year for the past 12 years! In fact, if you had invested $500 in Bitcoin five years ago, you’d have approximately $90,000 today.

If you’re interested in getting into crypto, Coinbase is a great place to start. They’ll give you $10 in free Bitcoin when you buy or sell $100 or more in crypto. They also offer ways for you to earn up to $32 worth of crypto for free.

4. Open a Roth IRA

If you haven’t started saving for retirement, you should seriously consider opening a Roth IRA. This retirement savings plan allows you to contribute after-tax money to your investment account. So eventually, when you reach retirement age, you can withdraw that money tax-free.

However, there are a few things you’ll need to know before opening a Roth IRA. First, you should only open an individual retirement account (IRA) if you’re prepared to leave the money there.

If you withdraw the money before you’re 59½, you’ll end up paying penalties. So if you think you’ll need to take your money out early, you should consider one of the other options on this list.

5. Start an Online Business

If you’re looking for an unconventional way to invest your money, why not try starting an online business? Traditional brick-and-mortar businesses require a lot of capital to get up and running, but the same cannot be said for an online business.

You won’t need office space, a warehouse, or expensive equipment. In all likelihood, you won’t need to invest $500. It will cost much less than that. Here are some popular online business ideas:

  • Starting and monetizing a blog
  • Selling things on eBay or Craig’s List
  • Selling services like freelancing writing, editing, or graphic design
  • Opening an e-commerce store
  • Buying items and flipping them for profit

6. Use Robo-Advisors

And finally, you might consider using a robo-advisor to invest your money. A robo-advisor is a simple online investment platform.

When you sign up, you’ll fill out a list of questions, and the company will create an investment portfolio for you. Robo-Advisors tailor your portfolio to you and how conservative or risky you are.

A robo-advisor will have fewer capabilities and services than you’ll receive if you work with a financial advisor. For example, you won’t receive personalized advice based on your financial goals.

But the fees are low, and it’s a great way to invest $500 in the stock market. Robo-advisors also offer several investing options, including:

  • Roth IRAs
  • Traditional IRAs
  • Solo 401(k)s
  • Taxable accounts

7. Open a High-Interest Savings Account

If you’re not quite ready to start investing, then you could try opening a high-interest savings account. This is an easy, low-risk way to start earning interest on your money. The best high-interest savings accounts currently pay about 3% to 5% in interest.

Of course, you’re not going to get the same kinds of returns that you would if you invested that money in the stock market. But this is a better option than doing nothing, and your savings account could serve as a long-term emergency fund.

8. Pay Down Your Debt

Paying down your debt is one of the best investments you can make in your future. This is especially true if you have high-interest credit card debt. According to the Federal Reserve, the average interest rate on a credit card is just over 15%.

And if you don’t have a good credit score, your APR will likely be much higher. A high APR can add up to hundreds of dollars in interest every month. So by paying down your debt, you’ll be saving yourself thousands of dollars over the next year.

9. Try Peer-to-Peer (P2P) Lending

Peer-to-peer lending is an alternative to traditional lending. Instead of taking out a loan from the bank, borrowers use services like Prosper that connect them to investors like you.

P2P lending platforms allow you to earn a fixed monthly income by lending to individuals or companies. The money is deposited directly into your account.

10. Invest in Your Financial Education

Perhaps the best investment you can ever make is investing in yourself and your financial education. For $5-$15, you can buy some of the best personal finance books or audiobooks. For example, great books like Rich Dad Poor Dad are available on Amazon for $11.36 for the paperback edition. You can get the Kindle version for $6.82, or a month of Audible membership for $14.95.

You can learn how to invest in real estate and how to make money in the stock market. In addition, you can learn how to manage your money, get out of debt, and achieve financial freedom.

If books aren’t your thing, there are plenty of inexpensive online courses. It’s truly remarkable how much great education you can get for less than $500.

Frequently Asked Questions

What is the best way to invest $500?

The best way to invest $500 depends on your individual situation and financial goals. A good way to start is by investing in a low-cost, diversified mutual fund or exchange-traded fund (ETF). This type of investment allows you to spread your money among a variety of stocks and bonds, reducing the risk of any single investment.

Additionally, you could look into opening a Roth IRA or investing in a high-yield savings account. Ultimately, the best option for you depends on your risk tolerance, investment horizon, and overall financial goals.

Is it possible to invest $500 in stocks?

Yes, it is possible to invest in stocks with an initial investment of only $500. The micro-investing apps that we mentioned above allow you to purchase individual stocks or invest in an ETF that tracks a specific index. It’s important to do your research and talk to a financial advisor to find the best option for you.

Is it worth investing $500 in a robo-advisor?

Robo-advisors can be a great option for investing $500. Robo-advisors use algorithms to manage your investments and can provide a more hands-off approach to investing. They can also be more cost-effective than traditional financial advisors, making them a great option for those looking to get started with investing.

What are the risks of investing $500?

Investing $500 can be a great way to get started with investing, but you need to be aware of the risks associated with investing. As with any investment, there is always a risk of losing your money. Do your research and talk to a financial advisor to find the best option for you.

Bottom Line

Hopefully, this article has shown you that investing doesn’t have to be confusing or expensive. You can get started right away with very little money. And if you aren’t ready to invest just yet, you can focus on paying down high-interest credit card debt, boosting your income, and saving an emergency fund.

Jamie Johnson
Meet the author

Jamie Johnson is a freelance writer who has been featured in publications like InvestorPlace and GOBankingRates. She writes about various personal finance topics including student loans, credit cards, investing, building credit, and more.