For those who are looking for the best small investments to make, keep in mind that even these small investments can turn into large profits. By investing a small amount out of each paycheck, monthly, or perhaps quarterly, the investments will grow through the benefit of compound interest. By doing this over years it can add nicely to a financial portfolio. It's easy to see why the best small investments are small amounts of money put away regularly.
1. Retirement Plans
Retirement plans, such as a 401(k), IRA, or others are one of the best ways to invest a small amount of money regularly. The funds come out of your paycheck, making it a regular deposit. Most of these accounts also offer tax advantages, including taxes deferred until withdrawal or taxes paid up front, and the invested money grows tax-free. Take the time to choose the most appropriate retirement plan. Employers often offer them, but you can open an IRA through your local bank or credit union.
2. College Savings Plans
Those with children will want to consider long-term investments for their college education. Bi-weekly or monthly, these programs pull out a set amount of money from your checking or savings account. The funds are in portfolios. You can choose the type of investments those funds are placed into, including how aggressively the funds will grow. If investing for a young child, investing as little as $50 a month can help pay for college. What's more, parents, grandparents, friends of the family or anyone else can also contribute to the plan.
3. Dividend Reinvestment Plans (DRIPs)
This is one of the best small investments because it allows everyday people to purchase stock in a company for as little as one share at a time. In addition, the plan allows individuals to purchase stock directly from the company, instead of working through the stock market. The name comes from the benefit of allowing shareholders to reinvest their dividends back into the company to purchase additional shares. Invest a small amount of money monthly and gradually. Dividend reinvestment plans are available for more than 1000 companies, including some of today's largest and most influential (and stable) companies.
4. Direct Investment Plans
Those who wish to utilize the benefits of a dividend reinvestment plan, but want more flexibility in the companies they invest in, will want to consider the benefits of a direct investment plan. Here, you purchase one share at a time (or more if you would like to) on a monthly basis. In order to do this, you will need to become a member of an investment organization, such as the National Association of Investors Corporation. They do charge a fee for providing this service, but the diversification they offer can really enable you to be more flexible, even in a tough economy.
5. U. S. Savings Bonds
Many people overlook these ideal investments, which can be troublesome. If you have only a small amount of money to invest, and you want to keep it secure, bonds are perhaps one of the best bets. Here, you can invest as little as $25 to start and purchase bonds as frequently as you would like to, in $25 increments. You can also do this through a payroll deduction if your employer allows for it. To learn more about this particular investment, visit the U.S. Treasury.
6. Mutual Funds
Mutual funds are another of the best small investments. There is no minimum to get started. After you open a mutual fund account, you'll add more to it regularly in increments of $50 to $100. You will need to work with an investment company. They will make automatic withdrawals from your bank accounts, from your paycheck, or from your Social Security check monthly. While there are fees on this type of investment, they are still highly affordable, especially when you take into account the avoidance of costly stock brokerage fees.