Many people think that starting an investment requires a lot of money, but beginning with just $500 can set you on the path to financial growth.

Whether you’re a novice investor or have some experience, there are best ways to invest with $500. This guide will explore various options that are beginner-friendly and designed to help you build wealth over time.

Invest in a Micro-Investing App

One of the best ways to invest with $500 is through micro-investing apps like Acorns and Stash. These Platforms allow you to invest small amounts of money. You can set up automatic contributions from your bank account or invest spare change from everyday purchases. Typically, these apps diversify your money across a range of ETFs to minimize risk.

How to Get Started:

• Download a micro-investing app and set up your account.
• Link your bank account or credit card to start investing spare change.
• Set up a recurring contribution to consistently grow your investment.

Learning how to save money on a tight budget can have a big impact, especially when you start early.

Buy Fractional Shares of Stocks

Another best ways to invest with $500 is by purchasing fractional shares of stocks. This allows you to own a piece of high-priced companies like Google or Amazon without needing thousands of dollars. Online brokers such as Robinhood and M1 Finance offer fractional share investing, making it easier to diversify your investments.

Steps to Invest:

• Choose an online brokerage that offers fractional shares.
• Open an account and deposit your $500.
• Select the stocks you want to invest in and buy fractional shares.

Invest in Exchange-Traded Funds (ETFs)

ETFs are a great option for those who want to invest in a broad range of stocks without buying individual shares. With $500, you can buy shares of ETFs that cover various sectors or track market indices.

How to Start:

• Research ETFs that align with your investment goals, such as an S&P 500 ETF for broad market exposure.
• Use an online brokerage to purchase ETF shares.
• Set up automatic investments to grow your portfolio over time.

Open a High-Interest Savings Account or Certificate of Deposit (CD)

For those looking for a safer investment, high-interest savings accounts or Certificates of Deposit (CDs) offer guaranteed returns. These options are perfect for conservative investors who prefer stability over high risk.

Getting Started:

• Compare interest rates from various banks and credit unions.
• Open an account and deposit your $500.
• Consider setting up additional monthly deposits to grow your savings faster.

Real Estate Investment Trusts (REITs)

Investing in real estate might seem out of reach with only $500, but REITs make it possible. REITs allow you to invest in income-generating real estate without needing to buy property. They are traded like stocks, providing an easy entry into the real estate market.

How to Get Started:

• Choose a REIT that matches your investment goals, whether it’s residential, commercial, or healthcare.
• Use an online brokerage to buy REIT shares with your $500.

Peer-to-Peer (P2P) Lending

P2P lending allows you to lend money to individuals or small businesses in exchange for interest payments. With platforms like LendingClub or Prosper, you can start with as little as $500.

How It Works:

• Sign up on a P2P lending platform and create an account.
• Review borrower profiles and select those that align with your risk tolerance.
• Invest your $500 across multiple loans to diversify risk.

P2P lending can offer higher returns compared to traditional savings accounts, but it’s important to consider the risk of borrower default. For a comprehensive overview, you might want to visit Investopedia’s Guide to P2P Lending.

Start a Roth IRA

Starting a Roth IRA is a smart move for those looking to save for retirement with tax advantages. With a Roth IRA, your investments grow tax-free, which can significantly boost your savings over time.

Steps to Open a Roth IRA:

• Choose a brokerage that offers Roth IRAs, such as Vanguard or Fidelity.
• Open an account and deposit your $500.
• Select low-cost index funds or ETFs to start investing.

Automate Your Investments with Robo-Advisors

Robo-advisors are online platforms that use algorithms to manage your investments. They provide a hands-off approach, making them ideal for beginners.

How to Start:

• Sign up with a robo-advisor platform like Betterment or Wealthfront.
• Deposit your $500 and complete a risk assessment.
• Let the robo-advisor automatically invest your funds in a diversified portfolio.

Frequently Asked Questions (FAQs)

1. What are the best ways to invest $500?
   Investing in micro-investing apps, ETFs, fractional shares, and high-interest savings accounts are great ways to start.
2. Can I invest in real estate with $500?
   Yes, investing in REITs allows you to gain exposure to the real estate market without the need to purchase property.
3. What are the safest investment options for beginners?
   High-interest savings accounts, Certificates of Deposit (CDs), and low-cost ETFs are considered safe investment options.