Found an extra $20 in your washing machine? If you’re wondering how to invest $20, you’re already thinking like a smart investor.
What many people don’t realize is that you can start investing with just a few dollars. While $20 might seem modest, it could launch a successful, lifelong investment journey.
Here are the best strategies for investing your $20 wisely!
Choosing How to Invest $20
Before deciding where to invest your $20, consider these important factors.
Consider Your Goals and Timeline
What’s your endgame? Are you building funds for retirement three decades from now? Maybe this is money you’d like to grow for something special, like a vacation or luxury purchase?
Your intended use for these funds will shape your investment strategy. If you plan to access this money within five years, equities like stocks aren’t your best bet—their volatility makes it risky to potentially withdraw when the market’s experiencing a downturn.
What Are Your Circumstances?
Your financial situation matters. Is $20 pocket change, or does it represent a meaningful sum for your budget? This will shape your risk tolerance and guide your investment choices. If losing this money would hurt, stick with safer options like savings investment accounts rather than high-risk individual stocks.
Fees
Minimize fees when investing your $20. With such a small starting amount, even one or two percent in fees can significantly impact your returns. Use a fees calculator to see how much these charges might erode your investment over time.
Passive or Active Investing
Passive investing works perfectly for investors who prefer a hands-off approach. By choosing passive investment options like those we’ll explore below, you can watch your money grow without constantly managing your portfolio.
What Should I Invest $20 In?
Here are several smart ways to put your $20 to work.
The Stock Market
Stock market investing remains one of the most straightforward ways to deploy your $20. Historical returns average around 7% annually—significantly better than letting your money languish in a savings account!
Your investment options include individual stocks, ETFs, mutual funds, and index funds (we’ll detail many of these options below).
You can also choose from various account types, including traditional brokerage accounts, 401(k)s, or Roth IRAs.
Remember that individual stocks carry the highest risk in stock market investing. Company performance fluctuates dramatically from quarter to quarter, causing stock prices to swing wildly within a single trading day.
Investment Accounts
Several investment account types can house your $20. Both RRSPs and TFSAs provide tax benefits (they’re tax-advantaged accounts), essentially giving you “free money” through tax incentives.
These accounts excel at retirement savings while helping you avoid hefty tax bills from the IRS.
Bonds
Bonds function like loans—you lend money with a guarantee of future repayment plus interest. Your $20 can go toward various bond types, including government and municipal bonds. These investments typically carry lower risk than stocks.
Mutual Funds
Mutual funds bundle stocks and other investments together. Their diversification makes them superior to individual stocks for long-term investors seeking growth without excessive risk.
Exchange-Traded Funds
ETFs resemble mutual funds by combining multiple stocks and investments. They feature low fees, though many require more than $20 to start. However, exceptions exist, so research thoroughly—ETFs rank among the safest stock market investments.
Pay Off Debt
Here’s a straightforward solution: apply your extra cash toward existing debt. Whether you’re tackling student loans or credit card balances, using $20 to reduce outstanding debt might deliver better returns than opening a new investment account.
Real Estate
Real estate investment options are limited with just $20.
But it’s not impossible.
Consider investing in a REIT (real estate investment trust). REITs own income-generating real estate like warehouses, office buildings, apartments, shopping centers, and hotels. You contribute a small amount and receive potential payouts later.
Most quality publicly traded REITs require more than $20, though exceptions exist.
Real estate crowdfunding offers another option. This approach lets you invest in specific portfolios or properties without becoming a property manager or landlord. While most platforms require $500 minimums, Groundfloor stands out as an exception.
Groundfloor requires just $10 to start. You can invest in high-yield, short-term real estate debt investments with returns possible in as little as six months.
Cryptocurrency
While cryptocurrency carries speculative risk, it offers accessible entry points for small investments. Crypto markets are notoriously volatile—your investment might surge 10-20% one day, then plummet 30% the next.
Popular options include Bitcoin, Bitcoin Cash, and Ethereum.
Peer to Peer Lending
Peer-to-peer lending mirrors bond investing—you loan money to others and earn returns through interest. Numerous platforms facilitate these transactions.
Invest in Your Education
Consider this alternative: invest in yourself. While the returns aren’t immediate or tangible, education investment can yield significant long-term benefits.
Platforms like Udemy offer courses that fit your budget.
Udemy courses provide lifetime access without deadlines. With thousands of topics available, you can easily find classes that build valuable skills without breaking your budget.
Invest $20 with Investment Apps
Modern investment apps offer unique opportunities that didn’t exist in previous decades.
Fractional share investing lets you purchase small portions of expensive stocks, making investing accessible with limited funds. This micro-investing approach provides an excellent entry point for new investors.
Here are three excellent apps to consider.
Public
Public transforms investing into a social experience! Share your investments with family and friends while encouraging mutual wealth building. The platform requires an extremely low minimum investment.
Click Here To Get StartedWebull
Webull enables portfolio expansion through fractional ownership of top companies. The excellent news? You need just $5 to begin!
Click Here To Get StartedAcorns
Acorns operates as a robo-investing app that rounds up purchases for automatic investment. While the app charges small management fees, Acorns offers incredible convenience for anyone seeking “free money” through automated investing!
Click Here To Get StartedStash
The Stash Investing App excels for small-amount investing and beginner investors. Stash combines low account minimums with modest monthly management fees—all while providing passive investment management!
Choose from diverse investment options and receive a free $5 bonus when you start—a significant boost when you’re only investing $20 initially.
Click Here To Get StartedTry a High Yield Savings Account
High yield savings accounts provide superior interest rates compared to traditional bank accounts.
You’ll typically need to open these accounts online for the best rates—local financial institutions rarely match these returns. Using a high yield savings account for your $20 also creates an excellent foundation for an emergency fund to handle unexpected expenses.
Final Tips on How to Invest $20 Wisely
Whether you choose direct stock market investing, high yield savings accounts, or other methods, follow these guidelines to invest wisely.
Diversification is crucial for your investment portfolio. Ultimately, your earning potential depends on spreading money across multiple assets. This strategy reduces overall risk and creates safer investing conditions.
If you’re currently focused on stocks, consider adding real estate. Been investing solely in commercial real estate? Try robo advisors or other passive investing approaches. The key principle: never put all your eggs in one basket, regardless of your investment amount.
Seek low-risk opportunities with minimal fees and low minimum investments. If you’re uncertain about placement or investment strategy, consult financial advisors who can provide personalized guidance for your situation.
Finally, commit to the long term. Unfortunately, $20 won’t generate substantial short-term profits.
However, $20 makes an excellent investment starting point—over time, small amounts can grow significantly. Stay patient and embrace the investment journey!
