How to Invest Small Amounts of Money

There are plenty of ordinary people out there who would like to invest money for the future, but ordinarily an investment counselor won't talk to them because they have only small amounts of money and their small amount would be eaten away by the commissions (and, after all, those investment counselors have to eat). So, for the person with $10 a month, or even $10 a week, how do you find ethical, worthwhile investments that are going to give you a reasonable return? These days, with interest rates near zero, putting your money in a savings account is no longer a reasonable option, because it is likely that unless you are in a local credit union, small amounts of savings will be eaten away by bank charges. Penny stocks might be an option, but you would have to save a considerable amount of money to be able to buy one stock even one time.

However, there are relatively safe, ethical investments that are open to the average person who has only a small amount of money to spare. These range from loans to more unorthodox business ventures, and while, as with almost any investment, there is some risk, the likelihood is that most of these ideas will give you some return plus your original investment back.

When you buy a stock, you are buying shares of a company. But you actually don't need the stock exchange to do that; you can invest in a privately-held company you care about, simply by taking the time to get to know the owners, and finding a way to help them out.

Take, for example, a local mom-and-pop business that you love: perhaps a coffee roaster, or a microbrewery, or any local startup without an internet presence. You can offer to build and host a web site for them (web hosting fees are usually under $3.00 per month). Then you simply make a written agreement that they will pay you a certain percentage of the profits that come from internet sales, or from new customers who find them through the internet. Of course, this will have to be a business you trust, and you will need some form of a contract (even an agreement written on notebook paper, and signed by both parties, would be valid in most cases). While I am not a lawyer, in my research I find that if a contract is reasonably fair, it will be upheld by the courts, should a problem arise.

Small businesses, especially startups, have all kinds of problems. By solving a problem for a local small business, you can ask for a small percentage of ownership in exchange, and that is the same thing as owning shares of stock in a larger company. In addition, you will have more control over the company than with stock, because your ownership will not be diluted by thousands of other shareholders.

If you like to be in charge of things and don't mind a whole lot of hard work, you could take that small investment and turn it into a business. For example, if you like crafting, you can buy a few dollars' worth of crafts and sell them at a profit, and then use the profits plus that same amount of investment to make a larger purchase, and so on. Of course, you will have to be mindful of local laws and make sure to pay taxes on what you earn, including, if applicable, sales taxes.

For advice on starting your own business, one of the most helpful resources is SCORE—The Service Corps of Retired Executives. No matter what you need to know, or don't know that you need to know, experienced business professionals are ready to help you, and it's free!

Investing in a government vehicle is usually very safe and can be done for just a few dollars. For example, the United States government has savings bonds, which can be purchased for as little as $100. This is a long-term investment, because U.S. Savings Bonds mature in thirty years, so don't use this for money you may need in the meantime!

However, there's a new kind of government bond investment: I-bonds. You can purchase all kinds of bonds at treasury.gov, but the I-bonds start at $25, have just a five-year term, and the interest rate keeps up with inflation.

So you see, with a little forethought, you can turn even a few dollars a month into a quite reasonable investment opportunity and begin to build your personal wealth. The process doesn't have to be risky or complicated; simply do what makes the best sense for you, given your situation. Of course, you will want to research any investment opportunity thoroughly, and understand the risks and rewards; if there is a prospectus, you will want to read it carefully and make sure that everything is clear to you. Take your time, think any decision through rationally, and ensure you understand what you are investing in.