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It takes money to make money.

Youve no doubt heard that phrase thrown around before. Its a phrase that unfortunately stops people from investing before they even start. The idea that you need to have a lot of money before youre able to invest (and make more) is all too common, and its simply not true. 

Years ago when you needed a financial advisor at a big brokerage firm, and you had to pay them insane commissions in order to trade this may have been true. But now, the internet is your savior! You dont need a financial advisor at all! Thanks to the internet, it doesnt matter if you have $100, $1000, or $10,000. You can invest and get your money working for you no matter who you are.

A couple of assumptions before we continue with this postIm assuming that A) you dont have a mountain of debt hanging over your head. If you do, focus on paying that off first! Paying off a credit card at 18% interest will give you more bang for your buck than investing in the market. B) Im assuming you have something resembling an emergency fund. Just some amount of cash in a savings account that you feel safe falling back on should something bad happen. 

So, with that out of the waylets get down to it.

How do I invest if I dont have much money?

Employer Sponsored Retirement Plans

I know, I know. Its not the sexiest thing in the world, but investing through your 401k or other similar type of retirement plan is the absolute easiest way to get started investing. No matter how much money you make youre able to invest in a 401k. If youre lucky you employer will match the funds you contribute and really help you to get started on your investing journey. Even if your employer doesnt match your 401k contribution  its still a good idea to contribute, simply because its the easiest and most available way for each of us to invest.

If you dont know how to get started investing in your employers retirement plan, contact your HR rep and they will be able to help you get started. Many employers are now automatically enrolling new employees into their 401k plans, so there is a chance youve contributed all along and just didnt know it!

The Game Changers: Online Brokerages 

Online brokerages have made it increasingly easy for the average joe to get started investing. With most online brokerages you can open an account with as little as $500 (sometimes you dont need any money at all!). The best part about online brokerages is that you dont have to pay a lot to buy or sell an investment. $9.99 per trade is standard these days, but there are ways to pay $0 in commission.

Commission Free ETFs  Commission free ETFs have totally changed the investing game and made it possible to invest with as little as $50 or $100.  Dont believe me? Heres an example:

Vanguards Total Stock Market ETF (VTI ) is available commission free from a number of online brokerages. This ETF invests in over 3000 stocks, representing the entire U.S. stock market. At the time of this writing it was trading for around $83/share.

That means you can take that $100 your grandma gave you for your birthday, buy a share of VTI and automatically be diversified across each size and sector of the US stock market. It really is that easy !

Have $500 you want to invest? You can have a completely diversified portfolio for $500

Buying VTI will give you all the exposure you need to the US stock market. If you want to add a little international flair to your holdings its as simple as buying VXUS  which is Vanguards Total International Stock Etf.  For $50/share (as of writing) you can gain exposure to foreign stocks across the globe. China, Brazil, Japan, Germany, India, Englandyou name it, its in there.

Next up you can add a little more stability to your portfolio with Vanguards Total Bond Market ETF (BND ) which gives you exposure to the entire market of investment-grade bonds in the United States.

To recap your balanced, totally diversified, all-encompassing $500 portfolio could look like this:

2 Shares VTI: $83 *2 = $166

3 Shares VXUS: $50*3 = $150

2 Shares BND: $83*2 = $166

See! Who says you need a lot of money to invest. You can take $500, invest in all the worlds stocks, the entire US bond market and still have $18 left over for pizza! After your initial investment you can just keep adding to your shares of those 3 investments any time you have some extra cash lying around. You never have to worry about owning anything else, just keep watching your investments grow!  You can do this in a Roth IRA, Traditional  IRA or a taxable brokerage account, the choice is yours.

Dividend Reinvestment Plans

Many people will suggest dividend reinvestment plans (DRIP) as a way to cheaply invest. It is true that DRIP plans are a great way to invest in individual stocks cheaply, I dont agree that they should be something you look at if you only have a few hundred dollars to invest. Because youre investing smaller amounts of money you wont be able to spread out your risk if you invest in individual stocks. Thats why I prefer the broad index etfs mentioned above. You diversify your holdings and spread out your risk as widely as possible with your investment. What I do recommend is that you reinvest the dividends of whichever investment you do buy.  With most online brokerages its as simple as checking a box or a one-time enrollment for your account.

Automatically reinvesting dividends will start a snowball effect with your investment very similar to how the power of compounding helps your savings grow.

What are you waiting for? Get started now!

E*Trade, TD Ameritrade, Charles Schwab, Fidelity and Vanguard are all reputable online brokerages where you can get started investing on the cheap. They all offer a large list of commission free ETFs and have super low commissions on other investments you may make.

Choose whichever broker you like the best. If you need help figuring out an asset allocation (proper mix of stocks and bonds) for yourself. Check out my post on how to do just that .

If you didnt think you had enough money to invest, or youve been dragging your feet getting started. I hope this post served as a little kick in the pants to get you investing! Time is your friend when it comes to investing and even small amounts now can add up to big bucks down the road. Stay patient, keep investing what you can, and barring a zombie apocalypseyoull make money.  Good luck!

If you have questions about getting started investing a small sum, ask away in the comments! Myself or some of the more experienced readers will be glad to help! 

Are you an experienced investor? What other advice would you give someone starting out with a small amount of money?

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Disclaimer: I own shares & am long BND. I used Vanguard EFTs in my examplesthis was for simplicity as they are among the most popular ETFs on the market. Their appearance in this post does not constitute an official recommendation. As always, do your own homework and choose your own investments. Dont trade based solely on what some guy on the internet says!