Q&A: Small Investment Options

When you have a little extra cash on hand, it’s important to weigh your options and figure out the best way to use those funds. In this Question and Answer session, we are diving into the idea of what to do when you have some money to invest. Even if you are just getting started investing, there are some options for small investments that can potentially make money. Jason Romero, a Raymond James Financial Advisor for Desert Financial Wealth Management, provided some quick advice on options to consider for small investments.

Q. If I only have a couple thousand dollars or less, what investment options do I have?

A. There are several different ways to invest smaller amounts with the potential for a return on your money. First, you can start with saving your money by opening a savings account. You won’t earn that much on your investment since most savings accounts do not have very high interest rates, but if this is a long term investment for you, your money can definitely grow. A savings account has multiple benefits because you can typically deposit a small amount of money, still earn a little bit of interest and (the best part!) have minimal risk compared to the investment options I’ll discuss later in this article. Savings accounts may not be the most exciting way to use your extra cash, but they allow you to accumulate capital that you may consider using for higher risk/higher reward investments down the road.

Second, you can invest in your employer-sponsored retirement plan. This is probably the easiest way to invest small amounts of money since it is set up as a payroll deduction that comes directly out of your paycheck. Retirement plans typically do not have any investment minimums and will allow you to designate as little as 1% of your paycheck to be deducted. Also, most retirement plans will offer a multitude of investment options ranging from low risk to high risk, which allows you to allocate your funds based upon your goals and objectives.

Third, you can invest in mutual funds. Different mutual funds have different investment minimums, but many start at just $1,000. Most of the large mutual fund organizations will even waive the account minimum if you setup a systematic investment plan of $50 or $100 per month. However, unlike a savings account, mutual funds do have risk and are not guaranteed against loss.

Fourth, you can invest in an online brokerage account. Many online brokerage firms will allow you to open an account with $1,000 or less, and some will even waive the minimum balance if you setup an automatic monthly direct deposit into the account. The advantage of investing through an online brokerage account is that it will provide you with the opportunity to put your money in different investment vehicles, such as individual stocks, ETFs, bonds, mutual funds, etc.

It is easy to see that even if you don’t have a large sum to start with, there are still ways to invest money. There is nothing stopping you from investing in something, you just need to decide what option is best for you. As your balance and investments get larger over time, other investment opportunities may become available to you, such as working with a Financial Advisor to help grow and manage your wealth. Investing really is an activity where the most important step is getting started!

Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Securities offered through Raymond James Financial Services, Inc., Member FINRA/SIPC, and are not insured by credit union insurance, the NCUA or any other government agency, are not deposits or obligations of the credit union, are not guaranteed by the credit union, and are subject to risks, including the possible loss of principal. Desert Financial Federal Credit Union and Desert Financial Wealth Management are not registered broker/dealers and are independent of Raymond James Financial Services, Inc.

Any opinions expressed are those of the Jason Romero and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and investors may incur a profit or a loss. Investors should carefully consider the investment objectives, risks, charges and expenses of mutual funds and exchange traded products carefully before investing. The prospectus contains this and other information about mutual funds. The prospectus is available from our office [or from the fund company] and should be read carefully. Minimums mentioned may vary. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

The material presented here is for educational purposes only, and is not intended to be used as financial, investment, or legal advice.