The best way to become a successful investor is to manage risk and not delude yourself into thinking you can avoid it. And the biggest risk relative to investing is losing all of your money. However, there are many ways to invest small amounts of money today. You can start investing with various spare change investment apps. You don’t need a lot of money to start investing. There are a few smart ways to invest $100 to $5,000.
Here are four ways you can invest relatively small amounts of money and get back a reliable return.
Ways to Invest $100 to $5,000 – A Primer
Don’t invest your money on a whim.
Research any investment opportunity you come across thoroughly. Also remember that it can take years for you to realize an appreciable return on your investment.
It’s a lot easier to lose money than make it, so tread lightly.
Upstart
Upstart is a California-based P2P lending platform service that was launched in 2012 by several former employees of Google.
In just under a decade, Upstart has originated over $6.7 billion in P2P loans. Qualifying Upstart loan applicants can borrow anywhere between $1,000 to $50,000.
Interest rates for Upstart borrowers can range between 7.35% to 35.99% depending on their creditworthiness. Upstart borrowers have between three to five years to repay their loans and need a FICO score over 600 to qualify.
Now why should you care as an investor? If you invest $1,000 to $5,000 in Upstart as a lender, you will almost assuredly make your money back with appreciable interest.
The reasons why can be explained via Upstart’s prohibitive and exactingly strict qualifying standards for potential borrowers.
Upstart’s Qualifying Algorithm
Upstart utilizes an advanced A.I. algorithm to analyze a lot more than FICO scores. Upstart’s evaluation and underwriting software program strategically identifies borrowers who are more likely to pay back their debts than others.
The algorithm identifies so-called, “future prime,” borrowers. The employment and academic history of applicants, debt-to-income ratio, and thousands of other data variables are considered along with credit histories.
After these automated evaluations, qualifying Upstart borrowers are assigned data-centric interest rates based in their potential for default.
Upstart claims that due to this exacting qualifying process, the company experiences 75% less defaults relative to a traditional bank loan.
The company also claims that they approve over 173% more applicants relative to traditional banks.
It is also worth mentioning that Upstart makes money from origination fees and that you, as an investor, do not pay any fees.
If an applicant defaults on their loan, Upstart will pay you, the investor, back via the origination fees the company collects.
Upstart loses big if they approve the wrong applicants, which is they invested heavily in their applicant qualifying algorithm.
Investing in Upstart is one of the smarter ways to invest $100 to $5,000.
Fundrise
One the best ways to invest $100 to $5,000 is to consider the Fundrise online real estate investment platform.
Many aspire to invest in and own real estate. However, the real estate market is notoriously expensive to buy into and extremely volatile.
How much money you need to invest in real estate is proportional to the property in question and other factors.
For example, you will need money for closing costs, repairs, renovations, and so on.
Some experts say that if you wanted to invest in a property worth $100,000, you would need at least $20,000 as a down payment.
Are you interested in investing in real estate but feel you could never afford it? Crowdfund investing with Fundrise may be the answer for you.
Fundrise enables you to crowdfund invest in real estate in a budget-conscious manner while creating a diversified portfolio.
Fundrise investors use advanced real estate market algorithms to offer reduced fees and maximize optimal ROI potential.
Over 130,000 investors have registered online with Fundrise. The company has reportedly facilitated over $4.9 billion in transactions.
Fundrise investors have also reportedly earned almost $80 million in net dividends. Most Fundrise investors also experience average annual returns ranging between 8.7% and 12.4%.
Fundrise combines its professional network of real estate experts, crowdfunding investors, and proprietary evaluation technology to help you acquire foreclosed, residential, and commercial properties and more.
Your Fundrise real estate portfolio is automatically diversified. Additionally, you can check on your diversified portfolio anytime you want via the Fundrise app.
Fundrise is a simplified buy-in into real estate and one of the best ways to invest $100 to $5,000.
Get a Savings Account
I think I may have gone a bit overboard with the idea that it is easy to find ways to invest $100 to $5,000.
While investing in the right P2P loan or real estate crowdfunding platforms are great ideas, you may need more than $100 to get started.
You should also have to have a good to intermediate understanding of those business markets. Just investing in such endeavors does not automatically mean you will profit.
When it comes to investing, sometimes its best to start small. And sometimes, the best idea that you can invest in is yourself.
One of the best ways to invest $100 to $5,000 is to just open a savings account. This is a concept that many Americans have yet to learn.
Almost 70% of Americans have less than $1,000 in their savings accounts. Over 54% of adults aged 45 to 54 have absolutely no savings at all.
The point is that the earlier you begin regularly saving money, the more you could have in the long term.
Opening a savings account is not as exciting or as sexy as investing in a P2P or real estate crowdfunding platform.
But it is the easiest method by which to begin investing in you.
The interest rates for most savings accounts are not very high. If you open a savings account, you can expect interest rates in the range of 0.60% to 0.90%.
That may not sound like a lot, but it can add up over years if save money regularly.
Pay Off Your Debts
You can’t buy anything or invest if you are mired in debts.
And the only way to get out of a debt hole is to stop digging.
Develop a budget. Save money. Develop a strategic repayment plan and repayments dates to calculate how long it will take you to pay off your debts.
Becoming debt free may be one of the greatest ways to invest $100 to $5,000.
Once you are out of that debt hole, you can go anywhere.
Start Planning Today
When it comes to investing, you don’t win big money by buying, selling, or religiously watching investment expert tips on cable news.
You may get back your investment by learning to recognize value, research, plan, and wait.
Whether you invest in P2P lending, real estate crowdfunding, your savings account, or paying down debt, be realistic about returns.
It may take you years to realize appreciable returns.
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.