Whether you own a business or aspire to do so, investment is an important aspect of building financial stability. If you want to have a financially healthy future—even If you only have a few hundred to a few thousand dollars to invest—consider these nine top small investment ideas.
1. Start Your Own Business
Starting your own business can be an expensive proposition, depending on what you wish to do. However, there are many entrepreneurial opportunities or microenterprises that require very little initial investment. If you have a skill, such as carpentry, repair work, or cooking, you can start a business on the side and make some money in the process.
Investing your own money in your small business is a simple process, but it can cause headaches down the road if you don’t take the right steps from the beginning. Check out our guide to putting personal money into a business to make sure your accounts are in order and things don’t get messy between your business and personal finances.
2. SEP-IRA Plans
A simplified employee pension individual retirement account (SEP-IRA) is a retirement plan for businesses with five or fewer employees. If you are a sole proprietor or own a very small business, it’s a way for you to put money away for retirement through tax-deferred investments similar to a traditional IRA. While the annual maximum contribution is above $50,000, there’s no minimum contribution requirement for a SEP-IRA plan. Many investment platforms offer low- or no-minimum balance requirements.
3. Solo 401(k) Plans
Solo 401(k) plans are designed as a way to save for retirement. They are designed for single-employee businesses only, unlike SEP-IRA plans, which can be used if you have a few employees. Solo 401(k) plans have administrative costs involved, such as annual fees and administrative charges, depending on the provider, but they are another option for providing tax-deferred retirement savings.
4. Partial Shares of Stocks
Conventional investing requires a significant amount of money, given that many stocks have a very high price. But fractional share brokerages, including sites like Robinhood, allow you to buy partial shares of individual stocks or fractional shares of exchange-traded funds (ETFs) or indexes, giving you access to investing with lower levels of cash.
These fractional share services often run on low or zero commission. Since investors can buy partial shares with very small amounts of money, standard commissions would eat up their investments quickly. The rise of zero-commission trading has also led to larger brokerages changing or eliminating their commissions.
Invest your personal funds in stocks: Ideally, any stock purchases should be made with disposable personal income since stock prices aren’t guaranteed to continually increase in value. Given the risk of volatility, it’s not a good idea to tie up your business’ money in the stock market.
5. Savings Accounts and Certificates of Deposit
Savings accounts aren’t what people tend to think of first when they think of investing. However, a savings account does give you returns in the form of interest, and it’s an easily accessible and useful small investment opportunity.
There are different kinds of savings accounts you can open, depending on your needs. A high-yield savings account and a money market account both give you a higher rate of interest than a standard savings account, but you’ll usually have to keep a minimum balance in either to avoid paying a fee. A certificate of deposit (CD) offers you a longer-term guarantee of interest but requires commitment for months or years to avoid potential penalties.
6. Invest Your Spare Change
For investors who want to put small amounts of their personal funds into the market, Acorns offers you the ability to invest your spare change. When you make a purchase with your credit or debit card, Acorns rounds up your purchase to the nearest dollar and puts the change into an investment account. You can put money into a standard investment portfolio, a retirement account, or even an investment account for your kids.
One of the problems with small investments is that it can take a long time and a lot of work for your investments to grow into something significant. With automated investment, it’s surprising how quickly your accounts grow, and all the while, you may not even notice the money leaving your checking account because it gets taken out in such small amounts.
Remember to pay it off. If you use your credit card to invest via Acorns, make sure you pay the balance down every month so you don’t end up paying more in interest than you get in portfolio growth.
7. Crowdfund Someone Else’s Business
While there’s always a risk of losing money when investing in another’s business venture, both equity and debt crowdfunding can offer an opportunity for small-level investment in a new venture that you think has potential. Your investment can be made in return for either ownership stake or your principal investment being returned over time plus interest.
Platforms like Kickstarter and Indiegogo are popular for researching potential business investment options. Peer-to-peer (P2P) lending―where you lend money to another individual through a third-party platform―may also be a viable option to pursue. Just like investing in the stock market, the potential risk of loss means that personal funds, not business funds, should be used if you choose to invest in crowdfunding.
8. Paying Off Debt
Whether personal or business, paying off existing debt will help build your overall net wealth. If you have debt, you are paying a higher rate of interest than you would be able to earn on investments or savings. A savings account that gives you a 1% annual percentage yield (APY) is offering a really good interest rate, but your credit cards might be racking up interest at 15% or higher. Putting additional money toward that debt won’t only pay it down but will cost you less in monthly interest payments.
Additionally, it may be worth shopping around to get a new credit card to help save a few additional dollars. There are credit cards that offer an introductory period―usually 12 to 18 months―of 0% annual percentage rate (APR).
Don’t procrastinate in paying debt off! Should you transfer credit card balances to a new card to take advantage of the introductory period, make sure you pay off your debt, or you’ll start paying a lot more in interest once that introductory period passes.
9. Reinvest in Your Business
In addition to paying off debt, look at low-cost ways to improve your business’ efficiency and performance. The increased processing power of computers and mobile devices, combined with increased affordability, makes updating your business’s technology a viable option. Additionally, you can consider collaboration software or other office tools that help improve efficiency within your company. Some of these tools may be particularly useful if your employees work remotely.
While investing in your business will cost money on the front end, the increase in productivity will hopefully yield additional revenue and profit.
Bottom Line
There are several options available to business owners for low-cost investment. Some of these options are designed to help owners save for retirement while others offer ways to improve business productivity and the company’s bottom line.
