How to Invest 500 Dollars: Smart Tips for Investing on a Small Budget

Investing money is for rich people, right?


If you have been thinking about investing, now is the time. With the right tools, you can get started today.

Want to learn how to invest 500 dollars? Read this article for small tips for investing money when on a small budget.

How to Invest 500 Dollars Today

Sitting on a tax refund? Got some stimulus money still lingering in your bank account?

Don’t wait until it dwindles. Small investment opportunities that make serious money are all around you. Here are the best places to start.

Pay Off Debt

Not sexy, we know. But the numbers alone show that paying down high-interest debt is the best financial decision you can make. 

Credit card loans can carry anywhere from 12%-20% interest. Student loans carry an interest rate of up to 10%. The price for an average stock market investment hovers at around 7%. 

So you do the math.

Any stock market return of 18% would make most investors dreamy-eyed. But if you have a credit card debt with this amount of interest, an above-average rate of return is just one payment away.

Better yet, consolidate your debt and pay more of it off with that same $500. This company will help you get the most out of your debt repayments.

Invest in a Roboadviser

Probably the second-best thing you can do with $500 is to give it to a “roboadvisor.” Trading by algorithm has gotten smarter and smarter. Some companies even use artificial intelligence to do the trading for them.

If you want to set and forget that $500, investment firms like Betterment and Wealthfront specialize in smart investments that you can enter with just a few dollars. 

Algorithmic trading will arrange and rearrange your investments in real-time, based on performance. You’ll get the most out of your investment, and it can even be the beginnings of a nice little nest egg!

Exchange-Traded Funds (ETFs)

ETFs are kind of like an updated version of a mutual fund. 

Similar to a mutual fund, ETF’s are a basket of securities. An ETF may include stocks and bonds and often follow an index, like the S&P 500.

An ETF is an excellent choice for a smaller starting investment. You can find specialized ETFs that follow industries.

For example, if you want to invest in the marijuana industry, there’s an ETF for that. Interested in a basket of foreign securities? There’s an ETF for that.

How about a group of companies that specialize in energy, even sustainable energy? There are ETF’s of virtually any investment route you’d want to take.

So, if you invest that $500 into an ETF that follows the S&P 500, you’re looking at a 4-6% return. This is what many finance pros recommend as a retirement target.

At this rate, your $500 would be worth $31,000 after thirty years. Not a bad day!

The Start of Something Bigger

Want to eventually grow a retirement fund? Start small. Just like anything else, saving takes practice and consistency. Learning how to invest 500 dollars well help you to eventually manage larger and larger amounts.

So start today. Your future self will thank you.

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