How to Join the New Generation of Confident Investors (Even With Only $100)

This is a guest post by Joel Zaslofsky of ValueofSimple.com

confident investorIt’s a sad and unsurprising truth.

Not all of us can have Jeff Rose as our pocket financial mentor. After all, he has limited time, energy, resources, and attention… just like the rest of us.

But the happy – and shocking – truth is that you might not need Jeff’s one-on-one time or the full suite of certified financial pro resources.

You can confidently and successfully invest by yourself.

I’ve been self-investing for twelve years and the rewards – financial, emotional, and practical – have been amazing.

But maybe you didn’t start reading your parents’ personal finance magazines when you were twelve or work for a decade in the investing industry like I did.

It doesn’t matter.

I’m not an investing pioneer and I don’t know the “right way” (© Wall Street 1880-2013). Yet, self-investing success is not new and is much more likely now than it ever has been.

The tools for joining a new generation of confident investors are available. And the emotional or practical obstacles to building momentum are ready to crumble in your capable hands.

Here’s how to hit the start (or restart) button on investing… with as little as $100.

Step Behind the Curtain

Investing myths last longer than old wives’ tales and urban legends. You don’t believe that swallowed gum takes seven years to digest or that shaving a body part makes the hair grow back thicker, do you?

Yet some people still believe that these myths are true:

  1. Investing is worthless without a lot of money
  2. The investment gatekeepers won’t let you in without serious cash
  3. If you don’t understand “The Market”, don’t bother learning
  4. Investing isn’t necessary if you (eventually) make enough money
  5. You should pay off all your debt – regardless of the interest rates and terms – before investing
  6. Investing in your business will always generate higher returns than other investments

However, I can promise that one thing is true.

Taxes and inflation are constantly devouring your purchasing power.

You’ll need to fight back against the bite of taxes and the hammer of inflation (among other forces like compound interest) since you like being able to buy the things your loved ones need.

Let’s break down one way to accomplish this.

1. The Initial Considerations

Before you consider thoughts like what the “perfect investment” is or what person/company to invest with, there are more important initial considerations. For example:

  1. How comfortable are you with paying taxes?
  2. Do you have an emergency fund and, if so, how full is it?
  3. Are you investing infrequent lump sums or scheduled periodic investments?
  4. Who gets the money in your accounts when you die (a.k.a. beneficiaries)?

I’m OK with paying taxes, I have a comfortable emergency fund, I like to make lump sum investments, and I have a will in place.

It’s these answers – among others from insightful questions – that inform my investment decisions more than knowing every investing process, definition, and principle around.

You just need enough financial analysis, and emotional or mental health accounting, to direct your investment goals.

2. Build Your Financial House

You don’t furnish your place or pay for it before you know what you’ll use it for.

Knowing I would need to put two kids, two dogs, two cars, and a wife inside my current house directed all the other decisions about it. So it is with your financial house, also known as your account type.

The newly empowered investor could share a house with 1,000 friends (a limited partnership), get one with crystal balls (futures), or get fancy with other structures. But most people will find them too expensive, complex, and risky.

Instead, build your financial house by answering this core question:

Are you focused on your retirement, paying for higher education, or something else?

Each focus narrows down the account type choices and they look different based on your country:

  • Retirement: Choose between options like an Individual Retirement Account (U.S.), Tax-Free Savings Account (Canada), or Individual Savings Account (U.K.).
  • Higher education: Pick among choices like a 529 College Savings Plan (U.S.), Registered Education Savings Plan (Canada), or Junior Individual Savings Account (U.K.).
  • Something else: Looking to pay for an actual house, a sweet new ride, a wedding, an amazing vacation, or something else? The plain vanilla account is a great option.

Make your decision easy by choosing among three options and incorporate the fancy stuff later.

3. Select a Suitable Investment

Repeat after me:

There is no such thing as a “perfect investment.”

Ahhh. That feels goooood.

There are hundreds of thousands of investments to potentially put money into. But only a very select minority will be suitable for your needs.

And that’s the goal: find a handful of investments that are most appropriate for your unique situation and pick one or two to start.

I’ve found stocks, fixed-income products (i.e. bonds), mutual funds or Exchange Traded Funds, Real Estate Investment Trusts (REITs), and commodities (i.e. gold) to be suitable for the widest scenarios. But there are many alternative perspectives and some of them are persuasive.

The easiest way to sort through the subjective opinions and overwhelming options is by using a filter or screening tool.

Excited or confused? Let us hear your investment screening tool thoughts or questions in the comments. But not yet since we’re not quite done.

4. Who Gets Your Money

Take another deep breath. It gets easier now.

Your investment company or Certified Financial Planner selection is simplified because your preferred account structure and appropriate investments aren’t offered by everyone.

If you don’t have a massive stack of money sitting around, that means your core criteria can now become minimum account opening and minimum investment type balances.

Other important investment company filters may include:

  • Support methods: Can you interact with the company via email, phone, online chat, or mail?
  • Online functionality: Can you get electronic statements? Does their website look like it was built last century?
  • Decreased minimums: Do they offer automated periodic investments with lower minimum account or investment thresholds?

Pro tip: Every developed country has investment companies that will open an account with zero money or with investment minimums as low as $100.

You don’t need my big, bad spreadsheet from Start Investing with $100 to narrow down the candidates for handing over your money (although it helps).

how to join the new generation of confident investorsThat’s because there are free tools right here that Jeff gives you:

Bada-Bing, Bada-Boom! You’re Investing.

You’ll achieve rarified self-investor status once your financial account is open and your first trade is made.

Now you’ll have confidence that investing will help you have the money when you need it, even if your account balance is small-time (for now).

Take that taxes and inflation! This four-step process – initial considerations, account type selection, picking suitable investments, and investment company choice – will do some financial jujitsu on you two.

Just remember that not everyone should invest without oversight and guidance. That’s why CFPs and Registered Investment Advisors like Jeff exist.

So tell us: when are you going to hop on the train to start (or restart) investing with as little as $100? Let us know in the comments!

Joel Zaslofsky is offering instant access to download the free tools that he and countless others use to simplify, organize, and be money wise. When he’s not helping people Start Investing with $100, enjoying nature, podcasting, or chasing his son around the house, he’s cranking out useful stuff at Value of Simple to support the liberation of your time, money, and talent.

Photo credit: s_falkow

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Comments | 6 Responses

  1. says

    Once our son gets a real summer job (he’s 12 now), we plan to fund his Roth IRA equal to his paycheck. We will put all money into a low-cost passive mutual fund or ETF, such as Vanguard’s Total Stock Market.

    • says

      I’m curious, Bryce. Was it your son’s decision to have you match his summer job earnings in a Roth IRA, or was that your decision? I think it’s awesome that you and he are thinking 50+ years into the future for when he wants to tap an income source other than a work-based one. But I’m just wondering whether his investing goals align with retirement (a strange concept for most 12-year-olds) or whether they would be with something else in mind (e.g. college, a car when he turns 16, a sweet new video game system).

      Thanks for sharing your approach!

      • says

        Our son doesn’t really know anything about saving in a Roth. He knows that we are constantly saving for our retirement because my wife and I talk about our plan and schedule in front of him. He is very frugal and likes socking away his money in the bank to save for large purchases. He does think about college savings. He commented last year upon hearing that we spent over $3000 for plane tickets to Europe, “$3000! That could have gone into my college fund.”

        The idea of funding his Roth while he is younger is something my wife and I want to do to set him up for the future. I doubt he will be making much money, but we will match his salary in a Roth. It goes along with your post’s theme that investing even small amounts of money for a long period of time is worthwhile.

  2. says

    I personally like investing. Really! It’s one of my favorite pass times: researching the stock market, finding stocks, funds and bonds to invest in and waiting for the future outcome. You really don’t need much money to start investing. I started with $3,000 6 years ago and grew it to $100,000 just by adding some money to my investment account and also reinvesting profit from sales and dividends.

    • says

      Right on, Elena! Now that’s the kind of story I love hearing about. Investing is like a lot of things in life, isn’t it? The getting started part can be the hardest, but once you do… look out world!

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