Right now, if you had $500 to invest, you probably feel like the luckiest person alive. Even if it isn't a lot of money, it is better than nothing and more than enough to begin saving for the lifestyle you desire.
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| 10 Ways to Increase Your Money with $500 in Investment |
Many billionaires began investing modest amounts, simply $10 or $25 a month! The secret to growing your $500 investment is to consistently add additional money while picking an investment that fits your goals and risk tolerance.
The Top 10 Places to Put $500
But how should $500 be invested? After all, there are several areas to store $500 that might be beneficial for your objective. Here are the top 10 ways to invest, whether you have $500 or more to spare and are looking to make a purchase today.
1- Invest in the Stock Market
One of your finest possibilities with $500 is the stock market. In the past, it has often returned 10% yearly, or 6% to 7% when inflation is taken into account. Although there are definitely excellent and poor years, this is the typical return for investors that have a lengthy time horizon for their investments.
Nevertheless, you could find particular stocks intimidating, and some stocks might need a larger initial investment than your $500. Consider utilizing a software like M1 Finance in such situation.
With M1 Finance, you may invest your $500 into professionally chosen investment "pies" composed of fractional shares of stocks that can immediately help you diversify your portfolio.
To help your $500 portfolio expand over time, you can also set up automated investments to contribute to it once a week (or once a month). Additionally, M1 Finance provides a well-regarded smartphone app that allows you to monitor your investments and advancement. Read our M1 Finance review to find out more.
With M1 Finance, how much wealth can you accrue? The graph below illustrates several scenarios for how your initial $500 investment might increase over a 20-year period:
| 8% (20 Years) | 10% (20 Years) | 12% (20 Years) | |
| Invest $500 and leave it alone | $2,330.48 | $3,363.75 | $4,823.15 |
| Invest $500 and add $20 per month | $13,313.35 | $17,109.75 | $22,115.73 |
| Invest $500 and add $100 per month | $57,244.84 | $72,093.75 | $91,286.08 |
You can see that if you put $500 into an investment and leave it alone for 20 years, you will be able to multiply your money several times. However, by consistently increasing your investments, you start to see results. Compound interest kicks in if you invest $500 or more and add an additional $100 each month for 20 years.
2- Real Estate Crowdfunding
You can invest in real estate with $500, but not in the conventional sense. You no longer need to save up tens of thousands of dollars to invest in apartment complexes or single-family houses, thanks to technology and the internet. Instead, you can invest much less money through a real estate crowdfunding platform and avoid the hassles of being a landlord.
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| 10 Ways to Increase Your Money with $500 in Investment |
One of the greatest platforms for this method is Fundrise, which allows you to invest as little as $10 in both commercial and residential real estate.
You should also be aware that Fundrise investors saw gains of 7.31% in 2020 and 22.99% in 2021 if you're comparing real estate returns to those of index funds or other stock market assets. Investors have received an average dividend of 5.52% in their Fundrise accounts so far in 2022. Check out some of these Fundrise competitors or read our whole review to learn more about Fundrise.
Realty Mogul is a different real estate crowdfunding website to take into account. This platform has a $1,000 minimum commitment requirement, so you might want to think about it later in your financial journey. Realty Mogul, on the other hand, also enables you to build a diversified real estate portfolio that includes multi-family homes, self-storage, healthcare facilities, office buildings, retail, and more.
3- Start a Roth IRA (Betterment, M1 Finance, and Robinhood)
Next, if you have $500 to invest, you may think about starting a Roth IRA. You may invest in this retirement account using after-tax funds, and your money will increase tax-free over time. Another incredible Roth IRA secret is that beyond the age of 59 1/2, you can remove money from your account without having to pay income taxes.
You can create streams of tax-free income for retirement, yes!
You can also withdraw funds from a Roth IRA before retirement age without incurring penalties by withdrawing only your contributions, not your returns. If you anticipate needing to use this money for emergencies over the course of the following five to 10 years, it gives you more flexibility.
As you learn more about this choice, keep in mind that you may create a Roth IRA in a variety of locations, including websites like M1 Finance and Robinhood. There are Robinhood alternatives to take into account if you don't like the latter.
You may utilize a robo-advisor like Betterment if you need more help designing your strategy. When picking investments with Betterment, you may receive individualized guidance for the first $500 you deposit into your account. Additionally, you can gain from extra benefits and features like portfolio rebalancing and tax loss harvesting.
When you create an investing account with Betterment, take note that a 0.25% yearly management fee will be charged. However, there is no minimum balance requirement, which makes it a great platform for novice investors.
The following table compares these options for your Roth IRA in terms of investment choices, costs, and necessary minimum balances.
| Betterment | M1 Finance | Robinhood | |
| Annual Management Fees | 0.25% to 0.40% | No account management fees | No account management fees |
| Minimum Balance Requirement | $0 | $100 for investment accounts$500 for retirement accounts | $0 |
| Investment Options | Stocks, bonds, ETFs, cryptocurrency, and more | Investment “pies” with fractional shares | Stocks, bonds, ETFs, cryptocurrency, and more |
| Reviews | Betterment Review | M1 Finance Review | Robinhood Review |
4- High-Yield Savings Account
Consider placing your $500 in a high-yield savings account that pays interest while you decide what to do with it if you want it to be quickly accessible.
While there are many excellent choices for online savings accounts, UFB Direct Bank is presently providing the highest interest rates.
You can earn 2.61% on your savings with a UFB Direct high-interest savings account without any maintenance costs or minimum balance requirements. You even get free access to online banking tools and an ATM card.
5- Certificates of Deposit with a High Yield
High-yield certificates of deposit (CDs) have some of the same advantages as high-yield savings accounts in that they allow you to receive a guaranteed return while maintaining access to your money in case of need. You must consent to "lock up" your funds for a predetermined amount of time, often from one month to many years. However, you receive a stable interest rate you can rely on, and your money is insured by the FDIC.
The best CD rates are now rather high as well. Even better, CIT Bank offers an 11-month no-penalty CD that pays 2.15% APY. Additionally, Discover provides CDs with outstanding rates and no account fees.
6- Purchase online businesses
You might be surprised to learn that you can use your $500 to invest in a variety of digital properties, commonly known as online businesses. Several instances include:
- Authority websites
- eCommerce store
- Digital products like eBooks and courses
- Domain names you can buy and sell
- Email lists you can build and sell to others
- Subscription sites that require monthly or annual fees
- Mobile apps
- YouTube channels that are ultimately monetized
- Social media channels that are monetized over time
My premium digital real estate is the website you're reading right now, GoodFinancialCents.com. Over the past ten years, blogging has allowed me to earn millions of dollars, yet I started the first iteration of this site with just $500!
Keep in mind that making money with digital real estate takes time, and you could not get your money back for several months or even years. It also takes time to get the feel of it because there is a lot to learn when you first start.
Check out the following blog post if you're interested in learning how to launch a website that will allow you to generate passive income:
7- Dividend Stocks
You may also think about stepping into the realm of dividend stocks after you have $500 to invest. Unlike other stocks, dividend stocks regularly pay dividends over time, which many investors utilize as passive income to support their standard of living.
Leading dividend stock investment resource is Motley Fool. They provide top dividend stock recommendations, in-depth company analyses, model portfolios, live streaming of events, and more. Although $500 may not be enough to purchase every well-known dividend stock, it is sufficient to get started.
8- Invest in income-boosting strategies
I just recorded a YouTube video about "income accelerators," simple investments that can help you gradually increase your income and revenue.
Income Accelerators are a little unusual, but they may help you accomplish your objectives!
Income accelerators are what? You could use the following accelerators to 5X or even 100X your income:
- Accelerated learning (i.e., reading books, taking an online course, attending conferences, etc.)
- Personal coaching (i.e., hiring an expert coach in your field or industry)
- Mastermind group
- Hiring a mentor
- Building relationships by investing in other people
Check out my YouTube video where I go over everything you need to know if you're interested in learning how income boosters may help you increase your wealth.
9- Work with a Robo-Advisor
Robo-advisors are ideal if you want to start investing but are intimidated by the thought of studying your alternatives and constructing your portfolio. These online resources do the same tasks as conventional financial counselors, but at far cheaper costs and with an entirely digital interface.
Betterment, M1 Finance, SoFi Money, Personal Capital, and Wealthfront are a few of the top robo-advisors available. Although each of these robo-advisors operates a little bit differently, they all assist their clients in building diverse portfolios that enable them to accumulate money over time. Additionally, they provide supplementary instruments that facilitate investment processes and reduce tax obligations.
The following graph provides information on the leading robo-advisors and how they each operate:
| Betterment | M1 Finance | Personal Capital | SoFi Money | Wealthfront | |
| Annual Management Fees | 0.25% to 0.40% | No account management fees | 0.49% to 0.89% | No account management fees | 0.25% |
| Minimum Balance Requirement | $0 | $100 for investment accounts$500 for retirement accounts | $100,000 | $0 | $500 |
10- Savings Bonds, Series I
Another approach to expand your initial $500 investment with high returns is through Series I Savings Bonds (I Bonds). Individuals may invest up to $10,000 annually in this government-backed bond option, and the current rate for I Bonds is set at 9.62%. The rate does fluctuate over time in response to market circumstances, and interest is compounded every half-year.
Additionally, you should be aware that Series I Savings Bonds require you to hold your investment for a minimum of 12 months. Additionally, you will lose three months of interest if you redeem your I-Bond before five years have passed.
It is simple to understand why Series I Savings Bonds can be a wise choice for investors who are confident they will not require access to their funds for at least a year. After all, unlike stocks and other investments that may experience short-term value decline, the yield offered is guaranteed.
Do’s and Don’ts of Investing $500
All of the investing possibilities on this list are viable, but you must first identify your objectives. You should make an effort to be realistic about expanding your $500 in a responsible and reasonable manner in the interim.
You can accomplish your goals without taking on too much risk or getting into over your head by using the following advice:
Investing $500 Do’s:
- Keep in mind when you need to access your money. Don’t lock away cash you may need to access in the short term. Try to build an emergency fund that you can use to cover unexpected expenses or if your income drops suddenly.
- Look for options with low fees or no fees. This is important because you don’t want your investment principal depleted by hidden charges.
- Try to add to your investment every month. Investing $500 gives you a great start, but you’ll grow wealth faster if you can invest more every month. Consider setting up automated investments so your cash is invested on your behalf, even if you can only set aside $10 or $20 per month at first.
- Get help if you need it. If you are uncomfortable managing your investments, don’t be afraid to use a robo-advisor. Some options, including M1 Finance, even let you invest without long-term management fees.
Investing $500 Don’ts:
- Lock up money you may need in the next few months. If you know that you’ll need your $500 within the year, consider putting your money in a safe place, like a high-yield savings account, that will let you access your cash when you need it.
- Expect to make quick and easy money. “Get rich quick” stories may be popular on the internet, but they’re far from common. Remember that turning $500 or more into real wealth takes time, so you need to be in it for the long haul.
- Invest without considering your long-term goals. Make sure you know for sure what you’re trying to accomplish with your initial $500 before you dive in. Not only should you consider your investment timeline, but your risk tolerance as well.
- Forget to set up an investment plan. $500 will grow much faster if you add to it monthly. Consider automating your contributions to make saving that much easier.
The Bottom Line on $500 Investing
It feels amazing to have $500 to invest, especially after months or years of getting up to this position. Before selecting a platform or investing plan for your money, you should think about all the greatest possibilities. Always keep in mind that the optimal course of action will depend on where you are in your financial path.
