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Making money takes money. When you're broke, that's difficult to do. Here are some tips on how to invest with a handful of cash.

Investment Tips for When You’re Broke

You need to make money to spend money — that’s the first rule of wealth management. Unfortunately, the second rule is that you need to spend money to make money, which makes accruing wealth quite a bit more difficult when you are flat-out broke.

Fortunately, there are some ways to take advantage of the lucrative gains available through investments even if you don’t have much money to spare. Here are some ways to start investing with just a handful of dollar bills every month.

Cut Expenses

If you don’t have even a dollar to spare for investing, you should take a hard look at where your money is currently going. Using a budgeting tool, you should work to trim any unnecessary expenses to free up some cash for investment. For example, you might eliminate one of your streaming services or give up ordering coffee for a few months. You should be able to find at least one regular expense that you can live without for a short period of time.

Start Small

You don’t need thousands of dollars to invest and see success — which is why cutting small expenses out of your budget can be enough to get you started. Large investments provide larger returns, but small investments are less risky and can give you more flexibility to gain investing skills without threatening your livelihood. Technically, you can start buying penny stocks for under $5, but you might find greater fulfillment by starting with a slightly higher sum, between $20 and $50 per month.

Use Investing Tools

As an investing novice, you should expect to make some bad bets in your first few months — but that doesn’t mean you should resign yourself to throwing money away forever. In fact, you can gain knowledge and skill much faster if you take advantage of certain tools, which make managing your investment portfolio much simpler. To start, you need an investment tracking tool which will help you see the performance of different investments over time. You might also invest in a tool that comes with a financial advisor, robot or otherwise, to give you tips that improve your portfolio.

Consider These Investments

Once you have the capital, the tools and the gumption to get started, you should look into these beginner-friendly investments:

DRIPs. Dividend reinvestment plans (DRIPs) let you invest small amounts of money into a dividend-paying stock by purchasing directly from the company; then, you can reinvest the dividends as you accrue them. This allows you to increase your investment over time, thereby increasing your gains.

ETFs. Exchange-traded funds (ETFs) are financial products that track the performance of a sector within the investment market, like the stock market, the bond market and others. You can buy as little as one share and see massive growth of your investment.

Mutual funds. Mutual funds are some of the most fool-proof investments. Instead of investing in individual stocks, you are investing in a fund filled with stocks, which is typically diversified to provide some safety. Most mutual funds have a higher initial minimum investment, but you can find some companies that allow you to start with as little as $50 — as long as you set up automatic monthly investments.

Target-date funds. If you are investing to boost your retirement savings, you might take advantage of target-date funds, which adjust your portfolio to keep your money safe as you approach retirement age.

Crowdfunding real estate. Conventional crowdfunding provides you with perks like T-shirts, but a new type of real estate investment allows you to buy shares of large commercial properties and reap the benefits. Because the property is a real physical asset, its performance will be independent of the stock market, making it slightly safer.

Treasury securities. Treasury securities are also known as savings bonds. They are sold through the U.S. Treasury’s bond portal, and they can mature in almost any period, from 30 days to 30 years. Treasury securities are some of the safest investments out there; though they aren’t terribly lucrative, they will pay you interest and adjust the principal to account for inflation.

You don’t need to wait until you are wealthy to start investing. As long as you understand the risks of different investments and use your money wisely, you can start building your wealth today.

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