Babe Ruth had to swing his first baseball bat. Joey Chestnut, world-renowned competitive eater, had to eat his first hot dog. Kim Kardashian had to make her first, ahem, reality TV tape.

You, a new investor, must make your first investment. We all have to start somewhere! The key is to just get started.

Luckily, there are better options for us baby kittens than ever before.

There was a whole lot of financial tom-fuckery happening as recently as 50 years ago. Women weren’t allowed to open credit cards, banks actively denied home and business loans to people of color (this still happens), not to mention YOU COULDN’T EVEN PAY TO GET A FULL ROTISSERIE CHICKEN DELIVERED TO YOUR DOORSTEP FROM YOUR HANDHELD INTERWEBS DEVICE. IT WAS BASICALLY THE FINANCIAL DARK AGES.

Around this time, it also wasn’t all that great to be a new or small investor. (Investment funds weren’t transparent, people didn’t understand that impact of fees and active management, Wall Street hustlers were snorting powdered rhino horn off the backs of investors who didn’t know better.)

But hey! It’s 2019 babay!! Our planet’s been reduced to a clump of magician’s flash paper and we’ve replaced human interaction with memes BUT there ARE good, affordable investing options, where we can get started with a few dollars.

So, let’s talk about how to get started investing with $100.

 

1) Buy an index mutual fund at Charles Schwab or Fidelity

 

A mutual fund is a big ol’ basket of some other type of investment, such as stocks or bonds. (Want more info? Read this.)

An index mutual fund is an easy, affordable way to get broad exposure to the stock, bond, or real estate markets (through what are called REITs) at a very low cost.

For example, buy FZROX at Fidelity or SWTSX at Charles Schwab and voila! You have a portfolio of 2,500+ stocks in the United States.* (To be clear: 1) Open an account at Fidelity or Charles Schwab. 2) Send in money from your checking account. 3) Buy the fund.)

Or, buy FNILX at Fidelity or SWPPX at Charles Schwab; you’re buying into the 500 leading companies in the United States. BEHOLD! You’ve now got the same strategy that legendary investor, Warren Buffet, recommended to LeBron James.*

These funds have a) no transaction charges b) no minimum and c) no or extremely low expense ratios. You can get started with as little money as you have available, and worry not about getting bamboozled with damaging fees.

*THIS IS A DUMB BLOG FOR ENTERTAINMENT PURPOSES ONLY. NOT RECOS. DO YOUR OWN RESEARCH. KNOW WHAT YOU’RE GETTING YOURSELF INTO TO. 

Pro Tip: If you’re building your wealth for the long-term, buy one of these index mutual funds within a retirement account, like a Roth IRA, Traditional IRA, or if you’re self-employed, a Solo 401(k). You can open one of these accounts, for free, at Fidelity or Charles Schwab. If you’re covered by a 401(k) or 403(b) at work, check to see if you have index fund options within your accounts! Investing within a 401(k) is absolutely investing!!

2) Buy a retirement-target date fund at Charles Schwab or Fidelity

A retirement-target date fund is a FUND that holds other FUNDS; specifically, it is a fund that holds stock index mutual funds and bond index mutual funds in a mix (called an “allocation”) appropriate for your stage in life. There’s a futuristic year, like 2055, listed in the title of these funds. For 2055 funds, have a look at FDEWX at Fidelity and SWYJX at Charles Schwab.

Here are the holdings in FDEWX, Fidelity Freedom Index 2055 Target Date Fund.

 

In the above example, this person with a far-off retirement date is invested in 90% stocks and 10% bonds using four index funds. As we move closer to 2055, this fund will shift into more bonds (a more conservative allocation).

You’re supposed to pick the year that approximately corresponds to your age-65 retirement year. This date DOES NOT INDICATE WHEN YOU GET TO QUIT YOUR JOB; it simply determines the mix of stocks and bonds (using mutual funds) that is appropriate for your age. Picking a sooner date will put you into a more conservative mix of investments.

Here’s the rub: Not all retirement-target date funds are created equal. Some target-date funds are made up of low-cost index funds (mama likey) and some are made of high-cost managed funds (mama no likey). At Fidelity, these are called the Fidelity Freedom Index Target Date Funds and at Charles Schwab they are called Schwab Target Index Funds. Here are the “tickers”:

 

RETIREMENT YEAR Fidelity Charles Schwab
2030 FXIFX SWYEX
2035 FIHFX SWYFX
2040 FBIFX SWYGX
2045 FIOFX SWYHX
2050 FIPFX SWYMX
2055 FDEWX SWYJX
2060 FDKLX SWYNX

 

Have access to something different? Don’t be shy, rip the damn buttons off that target-date fund’s shirt and take a peek at what’s inside. If you can’t find a breakdown via the bank’s website, I like to use Yahoo Finance. 

3) Use a robo-advisor like Ellevest, Betterment, or Wealthfront

 

Robo-advisors are investment management platforms that build you an investment strategy using index funds, not unlike the target-date funds that I mentioned above. But, you’d be paying more in fees.

I wrote a Whole Damn Thing on whether you should use Ellevest, or any robo-advisor. Read it.

Both Ellevest and Betterment have a minimum of $0. If you’re intrigued, give ‘er a spin. My opinion on robo-advisors is that you’re paying for a service that you could easily do yourself, but it’s a good service and it’s better than nothing.

Pro Tip: These services aren’t compatible with your 401(k) or other workplace retirement plan. In many circumstances, you’ll want to focus on filling up your workplace retirement first!

4) Buy a stock (or ETF) on Robinhood or SoFi Invest

 

It can get expensive to buy a stock at a brokerage firm, even at the “discount” brokers like Charles Schwab and Fidelity. Not only will the transaction cost you between $5 and $10, but you have to buy “full” shares, which is hard as hell to do when one share of Alphabet (Google) costs $1,250 and Amazon costs $1,943. Unfortunately, building a diversified portfolio of individual stocks is a strategy mostly for the wealthy. (And even then, it may not be the best strategy.)

But, there are some new platforms where investors who want to dabble in picking stocks and ETFs can now buy “partial” shares free from any transaction costs. Two such apps are Robinhood and SoFi Active Invest (the latter of which I have yet to try). I can’t totally recommend ’em because they’re new and Robinhood specifically has had some weird complaints about accounts locking up, no customer service number, no price transparency, etc., but in full honesty, I use Robinhood when I want to invest a little splash-around money. For small investors, I still think it’s more affordable than buying a stock at a brokerage.

Proceed at your own risk.

I don’t think buying individual stocks on a trading app is a great long-term strategy for building out a Grown-Up Investment Strategy, but it’s fine for people who want to learn how to make stock transactions and play around a bit in the stock market. Just be aware that this shouldn’t be “it” for you. Soon, you’ll need to diversify your investments (see above strategies.)

With both Robinhood and SoFi Invest, you can start with as little money as you’d like, because they allow you to buy fractional shares. So, pick a company or two that you think are essential to American and global life, companies that will grow over time and/or pay a good dividend, and get a feel for what it’s like to be an investor.

*AND AGAIN, I AM NOT MAKING A RECOMMENDATIONS, DO YOUR OWN RESEARCH, HEAUX

 

WANT TO LEARN MORE ABOUT THESE OPTIONS, AND MORE? WANT TO BUILD OUT YOUR OWN BEAUTIFUL INVESTMENT PORTFOLIO, AND FEEL CONFIDENT AS HELL? I GOT YOU. Take my Invested Development virtual course; it’s six hours of instruction on navigating the world of investing. No more feeling twisted by financial jargon. No more feeling like you should have “already learned this by now.” Time to take control and finally feel good about yourself and your money!

Just four classes (one month) until you totally got this. Sign up for Invested Development now! 

6 thoughts on “Everyone Begins a n00b. Here’s How to Invest Your First $100”

    1. Dumpster Doggy

      Hi there! All Vanguard mutual funds have either a $1,000 or $3,000 investing minimum. You could potentially do Vanguard ETFs, but you have to buy full shares, which means you might not get your whole $100 bucks invested, whereas with a mutual fund you can buy in with the full dollar amount. (This article is about investing $100). Also, Vanguard has a $20 account maintenance fee, which is too much if you’re only investing $100.

      1. Awesome! Thanks. I did a little reading and it sounds like Fidelity offers zero fee index funds, which could be cool as well.

      2. Good point about the minimums with Vanguard. (I could be wrong but I think you can waive the $20 fee if you get electronic docs.)

        Thanks for putting this primer out there, friend. I really appreciate people who write in a way that actually educates & helps people starting out.

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