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Invest like a Poor: How to Invest $100. Here's what I Recommend.

How to start investing with $100. Photo credit: Wikipedia

In a previous post, we outlined one of the better ways a new investor can invest $50. In this article, let's take it a step further by showing you a few ways you can invest $100. In fact, I will tell you exactly what  investment types I recommend. We will focus on diversification.

​It is true that $100 is not going to turn you into the next Warren Buffet or Bill Gates, but you can accomplish much more with it than you can with $50. You have more investing power. As we already debunked, you don't need a lot of money to start investing--just knowledge and confidence. The best way to invest $100 is to put it in the stock market, where you can invest in stocks, mutual funds or exchange traded funds. Throwing it in a savings account is just an absolute waste of time!

In a post titled "Invest like a poor: how to invest $50. Here's what I recommend", we included a nice summary about stocks, index funds and mutual funds before revealing how we would invest $50. For the sake of brevity, we will not include such discussions here. Here's how I recommend you invest $100.



Since diversification is something any investor must strive for, in addition to minimizing cost, I recommend you split $100 between two new Fidelity mutual funds: Fidelity ZERO Total Market Index Fund (FZROX) and Fidelity ZERO International Index Fund (FZILX). These two mutual funds were introduced by Fidelity Investments in August 2018. Like the names imply, the expense ratios of both funds are 0.00%,  making them two completely cheap funds with no minimum investment! With Fidelity ZERO Total Market Index Fund, you get access to the entire US stock market. This single mutual fund has 2516 holdings or securities in its portfolio! The YTD return as of 2/15/2019 is +11.85%!

In addition to domestic securities, the prudent investor must also make an effort to invest in foreign equities to further achieve a diversified portfolio. With Fidelity ZERO International Index Fund, you get access to foreign developed and emerging stock markets. This single mutual fund has 2295 foreign holdings or securities! The YTD return as of 2/15/2019 is +7.98%. How should you split $100 between these two funds?

I recommend a 80/20 split: $80 towards FZROX and $20 towards FZILX. As of 02/15/2019, the net asset value (NAV) of FZROX is $9.82. So you would be able to purchase 8.146 shares of FZROX ($80/9.82 = 8.146). On the other hand, with a NAV of $9.47, you would be able to purchase 2.112 shares of FZILX ($20/9.47). 



The bottom line

As a new investor, you don't need to be wealthy to start investing. Low cost index mutual funds are great options for any new investor who has limited funds. An investor who is looking for ways to invest $100 may find the Fidelity ZERO Total Market Index Fund (FZROX) and Fidelity ZERO International Index Fund (FZILX) very appealing with their 0.00% expense ratios, zero minimum investment, and their built-in diversified characteristics. Check out the parameters I use to evaluate and select mutual funds. If you prefer to be a passive investor, micro investing with just $5 may be a good option for you. An understanding of how investors amass wealth in the stock market may convince you that investing is a very smart choice. 

Like this article? Please share and leave us your feedback in the comment section and help us improve and grow. Subscribe below to get our latest articles. Here are a few other articles you may find useful: How to invest your tax refund | How to earn free money as a micro investor | Myth debunked: you don't need a lot of money to start investing | How to invest $100 | How investors make money in the stock market | Cash is trash, not king. Invest it! | Stocks vs. index funds vs. ETFs: what's the difference?

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Monday, 14 October 2019

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