In the world of investing, $200 just isn’t a lot of money. Compound this with the fact that commissions on trading can be upwards of $20.00, and you may think its not worth it to invest that money at all! But fear not, friends, you can put this money to work for you without commissions eating away at your profits. Here are some ideal ways to utilize your money:
High-Yield Savings Accounts
If you’re a risk-adverse investor, or (important here) you don’t have an emergency reserve fund setup with (most people say 6 months, but I think thats a bit much) 3 months living expenses, this is the place for your money. You can’t get much more liquid than this, as your money is always accessible and FDIC insured, which protects you from loss if the bank folds. ING Direct is the bank of choice for me, but there are plenty of other choices out there as well. The interest rate isn’t stellar, but your money is safe and will grow as well as a moderate pace
Discount Brokerages
Want to try your hand at the market? With such low amounts, you may want to consider buying into an index fund (My personal favorite is a dividend-paying index like DVY). This way you won’t be buying and selling enough for commissions to eat at your money. Simply invest it, forget about it, and let it grow at the market’s pace. To do this, you’ll need a brokerage account and as suggested before, Sharebuilder is one of the cheapest you can come by at 4$ per trade. Zecco.com also recently brought their minimum investing amount to $0, and offers free trades every month! Please keep in mind that when investing in small amounts, a buy and hold strategy is likely your best bet.
Prosper
If you want a better return than a savings account but aren’t too sure if you want to put your money in equities, prosper is the place for you. Here you can invest in increments of $50, not pay trading fees, and lend your money out to others for just about any cause you can think of. Help someone consolidate their debt, start a new business, or pay off student loans. On prosper you can make a positive impact on someones life and still help your money grow in the process.
No matter what investment vehicle you choose, I wish you the best of luck!