Five Easy Ways to Get Started Investing

So you find yourself with an extra $500 and
want to learn to invest. These days there are multiple online platforms that
give access to types of investments previously unavailable to anyone but the
highest-worth individuals.

Here are five of the easiest and most
lucrative ways to invest your $500, and to learn how investing works while your
money grows.

#1 – Contribute to your employer’s
pension plan.

This is number one for a reason, especially if
your employer matches contributions. You should contribute at least up to that
amount each year to your employer’s pension plan.

Most pension plans give you choices as to how
much risk to assume and will offer diversified portfolios categorized as a low,
medium, or high risk. In general, the younger you are, the more risk (and
perhaps reward!) you can assume. The older you are, you should move your
retirement funds into more conservative investments.

#2 – Invest in Exchange-Traded
Funds (ETFs)

An ETF is a diversified collection of stocks
and/or bonds in a single fund. Similar to mutual funds but with greater
returns, ETFs give you broad diversification at low costs. Your $500 is a
typical minimum to invest in ETFs online. Look out for commission charges for
each transaction (each time you invest) and perhaps plan to contribute
quarterly rather than per pay period to reduce costs.

#3 – Invest in a Dividend
Reinvestment Plan (DRIP)

You can buy shares of stock online, and
arrange to have your dividends automatically invested in additional shares or
even fractional shares. This eliminates the need for a broker and therefore the
costs of a broker’s commission. Even purchasing a single share of a company you
like will get you started.

#4 – Invest in a Real Estate
Investment Trust (REIT)

A REIT typically owns and manages commercial
real estate, or lends to commercial or residential mortgage borrowers. In this
way, small investors can invest in real estate without the attendant risk and
overhead.

#5 – Invest in Micro Loans or
Peer-to-Peer Lending

There are myriad platforms for small investors
to invest in lending, and many serve a public or humanitarian interest such as
lending to minority business owners, or lending to small businesses in
underserved areas.

Keep in mind that regardless of where you
choose to invest, you should plan to tie up your $500 for five years or more to
see any return. For this reason, that $500 should be money that you don’t think
you’ll need ready access to. You should also plan to add to your investment
every pay period, and if you automate this through your bank you will not even
miss that money.

Before you act on any of this advice, take a
look at your total financial situation. First, if you don’t have an emergency
savings fund of 6-8 months’ worth of expenses, use this $500 to start one
instead of investing it. Second, if you have any high-interest credit card
debt, use your $500 to pay it down or pay it off. No investment exists that
will give returns that will match or even come close to what you’ll pay due to
a credit card’s rate of interest.

About
the Author

Veronica Baxter is a legal assistant and
blogger living and working in the great city of Philadelphia. She frequently
works with Philadelphia
bankruptcy attorney David M. Offen.