Investing $500 A Month Is A Simple And Easy Process To Build Wealth
If you have $500 left over at the end of every month, you can easily achieve millionaire status with a simple investing approach and a little bit of patience. If you simply match the historic stock market returns over the past 90 years — returns that averaged 10% per year — investing $500 per month will net you over $1 million in 30 years.
But it’s one thing to understand the power of compound growth and dollar-cost averaging it’s another to develop a plan for how to take advantage of them. In this article, you’ll learn some strategies for investing $500 a month and becoming a millionaire by the time you’re ready to retire.
Some Ideas For Fund Choices To Start Off With
For your own specific situation, our experts have made a number of suggestions about what might make a good selection of starting funds.
Adrian Lowcock says: ‘Given your age and potential for long term growth, I have suggested a couple of longer term and riskier investments which to consider investing in.
‘Merian UK Smaller Companies R– Merian have one of the most highly regarded small and mid-cap teams, headed by Dan Nickols who is the manager of this fund.
‘Companies must demonstrate one or more of the following characteristics: the ability to grow earnings faster than the market average for an extended period of time the scope to generate a positive surprise or the potential to be re-rated relative to the market.
‘A pragmatic approach is taken to valuation, with various ratios and timescales used depending upon the situation. This flexible approach allows growth, value, and recovery companies to be held, but the portfolio has tended to show a growth bias.
‘Baillie Gifford Global Alpha – Partners Malcolm MacColl, Spencer Adair, and Charles Plowden have an equal say in portfolio decisions. They target companies that offer sustainable above-average earnings and cashflow growth.
‘The team relies on detailed company research and favour businesses with competitive advantages, superior business models, strong financials, good management and attractive valuations.
The managers’ approach is patient, so once they buy they tend to hold on for the long term.
Retirement Plans For Teenagers And Minors
Retirement plans are a great way to save for your future. No matter what, if you are investing for a teenager or an adult, it’s never too early to start planning for retirement. The earlier you begin planning, the better off you will be. This is thanks to something called compound interest!
There are many different types of retirement accounts, but the most popular are the Traditional IRA or the Roth IRA.
The Traditional IRA is a tax-deferred retirement account. Meaning you contribute to the account with pre-tax dollars. When you take distributions in retirement from a Traditional IRA, you will pay ordinary income taxes.
Roth IRAs are slightly different, as contributions are after-tax. This means the account grows tax-free and when you take distributions in retirement they will be completely tax-free.
For both Traditional and Roth IRAs you cannot take a qualified distribution until age 59 ½. If you take an early distribution, you will be subject to a 10% penalty and income taxes. However, there are certain exceptions to the early withdrawal penalty. You can read more about these exceptions here.
Typically, younger people tend to gravitate toward Roth IRAs because they assume that they are in a lower tax bracket now than they will be in the future. For example, if you’re currently paying 12% in taxes and assume that in the future you’ll be in a 25% tax bracket, you’d be better off to pay the 12% now instead of 25% later.
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I’m 18 How Should I Start Investing
For young investors, experimentation is the name of the game.
Editor’s note: Ask TheStreet is designed to answer questions about the market, terms, strategies and investment methods. Please email us to ask a question, but keep in mind that we cannot offer specific investment- or stock-related advice.
The following is a composite of several questions that have recently been submitted to Ask TheStreet.
I’m 18 and I made about $1,000 last year. My parents would like to open an IRA for me, but I want to invest in individual stocks. What options are available for this small amount? How and where do I start investing? How little can I start with?
So you’re young and have a wad of cash burning a hole in your pocket. Time to start investing? Definitely. The younger you are when you begin your investment education, the better your chances are of gaining the understanding to find success in the market. But with all of the options available to investors today, that first step just might be the biggest.
Know Your Purpose
portfolio as a means of understanding more about the way your decisions affect your investments, you’ll be a much more competent investor in no time.
Invest, Learn, Repeat
That’s not to say that making money shouldn’t be a priority for a young investor. It just means that you should stick to making repeatable decisions that have measurable consequences as much as possible.
How Much Is Enough?
Factors To Consider When Making Investment Decisions
Before putting your money into any investment option its important to make sure you understand, and are comfortable with, the level of risk involved, the investment timeframe, any potential costs involved, and how the product could help you reach your financial goals.
Its also important to look into any potential legal and tax implications, as these can vary depending on the type of investment you make.
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He Invested $17 In Shiba Inu Now He Has Almost $6m
Dog meme tokens have captured the attention of crypto market participants most recently Shiba Inu token took the spotlight after gaining 1479% in seven days.
What’s even more impressive is the tokens overall returns to early holders who purchased SHIB in October 2020.
What Happened: According to Etherscan, one token holder turned $17.53 into over $5.8 million after holding onto his initial investment for just 197 days.
The token holders wallet address also reveals more recent purchases of Papa Elon tokens and StarElon tokens approximately 17 days ago. According to transaction details, PLONs value has also doubled since his purchase.
Why It Matters: The recent surge in SHIBs price has made even its more recent buyers sizeable gains in a short period of time.
The hype surrounding the Shiba Inu-themed cryptocurrency has also led to major crypto exchanges listing the token.
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A few days ago, Binance announced that it would list SHIB, causing its price to surge 150%. Today, another major crypto exchange OKEx listed SHIB on its platform.
“We are pleased to welcome Shiba Inu to the OKEx platform. I appreciate their experimental spirit, which is exactly what the blockchain and crypto space needs, said OKEx CEO Jay Hao.
Price Action: At press time, SHIB was trading at $0.00002915, down 10.41% overnight. The coins 24-hour trading volume was also down over 60% to $8.64 billion.
The Best Investments For Teens And How To Start
Let’s talk bout investments for teens! Often we think of investing as something we start doing later in life. We think about putting money into a 401 when we join the workforce or opening a brokerage account when we have some disposable income. But you can actually get started a lot earlier than that.
Families can seek out investments for teens to help pay for college, get a head start on saving for retirement, and more. And in addition to helping save for a teens future, it has the added benefit of instilling financial literacy at a younger age.
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Consider Taxes & Fees
Your account will not be tax-exempt. But it will be taxed at your tax rate. This is usually a good thing since you’ll probably have a much lower rate than your parents.
Here’s the tax liability if you’re under 19 years of age:
- The first $1,050 of investment income is tax-free.
- The next $1,050 is taxed at 10%.
- Any income in excess of $2,100 is taxed at your parent’s marginal tax rate, which could be as high as 37%. This is what is often referred to as the kiddie tax.
Are Gics The Right Investment For Me
GICs never give you the highest investment return compared to something riskier, like exchange-traded funds or individual stocks, but they are a safe way to ensure your principal and interest are protected. Depending on the GIC purchased, it can also lock away money you may need for some time, so its important to pick the correct term to ensure you can access your money when you need it and shop around for a competitive interest rate. Keep in mind that if a GICs return is lower than the rate of inflation, your money could end up having less purchasing power at the end of your term than at the beginning.
Big banks dont tend to offer great rates, so its critical to research across other issuers and brokerages, as well as ensure proper insurance is provided. Bottom line, GICs can be a great complement within a diversified investment portfolio to balance out some of the higher-risk products. But if you can tolerate a little more risk, there may be better products on the market for you.
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Who Pays Taxes On Custodial Accounts
Because the assets in a custodial account legally belong to the child, theyre subject to the tax rules that govern childrens unearned income .
Under the kiddie tax, the first, $1,100 of a childs unearned income is exempt from federal taxes. The next $1,100 is taxed at the childs tax rate, which, assuming the child has little to no income, will likely be the lowest tax bracket. Finally, any earnings above $2,200 are taxed at the parents’ tax rate.
Mutual Funds For Little Cash
I’m 18 years old and want to start investing in mutual funds, but I don’t have a lot of money. Are there funds that will let me invest just a few hundred dollars? I want one with a good return that only needs to sit around for a year or two.
I can suggest several funds, but let me first say that investing in any mutual fund is a long-term commitment. Don’t expect a quick profit. And if you’ll need your money in less than five years, keep it somewhere safer than the stock market, such as a high-yield bank account or CD.
For longer-term investments, here are some good candidates:
AARP Aggressive . This fund, which invests in a mix of U.S. and foreign stocks plus bonds, requires only $100 for entry.
Just $250 gets you into the Hodges fund , which is run by a father-and-son team and invests in companies of all sizes, or Pax World Balanced , a socially conscious fund that avoids companies that derive revenue from alcohol, gambling or weapons.
For $500, you can invest in either Homestead Value , which owns mostly large companies, or Excelsior Value Restructuring , which invests in companies that are being restructured or are in industries that are undergoing consolidation.
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Invest In Mutual Funds
You will also want to consider investing in mutual funds. Mutual funds combine investors money to purchase several types of investments, such as stocks, bonds, real estate, and more.
The fund manager is in charge of trading the funds underlying securities. Typically, mutual funds are safer than investing in individual stocks because the risk is spread out among many investments.
You can also benefit from the wisdom of expert fund managers. If youre underage, you can have an adult open you one of the mutual fund accounts for minors to buy shares in these investments.
Youll also be able to buy other investments in this account as well, not just mutual funds. Consider opening a custodial brokerage account with a company like Firstrade.
Alternatively, you can often save money on trade commissions if you purchase funds directly through a mutual fund company.
Opening An Investment Account For Teens
If your child is under 18 years old, the most effective way to start investing for or with them is to open a custodial account. With this type of account, an adult custodian opens an account and can save and invest money on behalf of the child. Then, when the child reaches adulthoodeither 18 or 21, depending on the statetheyll take full control of the account.
Keep in mind, assets in a custodial account legally belong to the childthe account beneficiary, Jessee said. The parent or custodian is merely a placeholder until the child reaches legal adulthood. This means that if a parent puts money in a custodial account for a child, it is considered an irrevocable gift and cannot be taken back. In other words, that money now belongs to your child.
There are two common types of custodial accounts: Uniform Gifts to Minors Act accounts and Uniform Transfers to Minors Act accounts. The two are almost identical but vary in the types of assets they can hold. UGMA accounts can hold financial assets like stocks, bonds, mutual funds, and cash, while UTMA accounts can hold all of those same assets as well as physical assets like real estate.
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How To Invest As A Minor Or Teenager
Investing is one of the most exciting topics, especially if you are a teenager and the world ahead of you is wide open.
Learning how to invest as a minor can give you a tremendous head start for your financial future.
Early investing can have huge benefits and teens who learn responsible money habits can have a huge advantage over their peers.
If you are a teenager and want to learn more about finances, you can start with the basics and gradually learn the art of financial planning, saving, and investing.
Teenagers who are serious about their future should learn about smart money habits and investing is a crucial skill everyone should learn if they want to live out their dreams.
Take it from the expert, Warren Buffett. He once said, the best time to plant a tree was 20 years ago, the second-best time is now.
Here are a few ways to start investing as a minor.
Start An Rrsp With Just $25
CIBC RRSP Daily Interest Savings Account is an ideal RRSP starter account or a short-term alternative for your funds while you decide how you want to invest.
A pool of funds managed by investment experts.
- Include savings, income, growth, and sustainable funds.
- Diversified to manage risk.
Investment suites managed and monitored by a team of specialized professionals.
- Offer freedom from making day-to-day investment decisions
- Suit your investment objectives and risk tolerance via a choice of portfolios
Stable investments that protect your principal while earning competitive interest.
- Short- or long-term investments
Combine protection and growth potential.
- Guarantee your full principal amount
- Interest tied to equity or commodity markets
- Offer flexible fixed terms, from 2 to 6 years
You can also diversify your portfolio with many CIBC investment products through CIBC Investors Edge and CIBC Wood Gundy, such as:
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How Parents Can Start Investing For Their Teens
Parents can play a vital role in helping their teens to start investing. The best way they can do that is to encourage them during every step of the process. If you’re already an experienced investor, show them the ropes. If not, learn alongside them.
Guide them in discovering their investing identity, which might be quite different from your own. Your teen has decades of investing ahead of them, while you have a shorter remaining investing time horizon. They can afford to take on more risk, including investing in some individual stocks that pique their interest, even if it might be a bumpier road. Encourage them to find what interests them the most so that they’ll stick with investing when times get tough, which we all know eventually happens.
Help them set up their brokerage account, but don’t do it for them. You want them to take ownership and initiative so that they continue investing. Also, it wouldn’t hurt to get them started with a gift deposit in their brokerage account. You could even offer to match a portion of their future deposits for a few years, much like a 401 company match.
The role time plays in compounding gives teens an advantage, so parents should encourage their teens to get started as soon as possible. They might complain at first, but they’ll eventually thank you for helping to get them on the path toward financial freedom.
Do I Need To Fill In A Tax Form
Yes, if you havent already done so. Ask your discount broker about the W-8BEN form the Certificate of Foreign Status of Beneficial Owner of the United States Tax Withholding and Reporting form from the Internal Revenue Service.
You will need to keep your completed form on file with your broker. If you dont provide one, it could lead to an increase in the withholding tax to 30 per cent. All non-U.S. persons need to complete the form to certify your country of tax residence and to establish whether you qualify for a reduced withholding rate when opening an account.
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