5 Smart Ways to Invest $500 and Grow Your Wealth

how to invest $500

When you hear the word “investor,” you might imagine a gray-haired man in a tie who can gain or lose thousands of dollars on a whim. But times have changed, and today, almost anyone can begin investing on their own.

With just $500 (or even less, in many cases), you could carve out a good start for a lifetime of investing. The following investment ideas are made for beginners like you. By learning how to invest $500 today, you could see big returns in your future!

How to invest $500 for beginners

1. Get your employer’s help

The best place to start saving is with your workplace 401k or 403b plan. It’s a set-and-forget kind of investment — you decide how much is deducted from your paycheck and your employer deposits that amount.

In the best cases, your employer will match your contribution (that’s basically free money, so passing up on their offer is a big mistake). The investments are managed without you having to do a thing. Sit back and watch that $500 grow.

If you invested $500 a year for 40 years and your employer offered a 5% match, with an average 7% return you would have over $105,000 in that 401k when you retire.

The best part is that you can always change the amount you contribute with pay increases or promotions. Invest $500 now, then increase it with each year so that $105,000 moves upwards with your career.

2. Use an IRA account

In some cases, an employer-sponsored retirement plan may not be offered to you. However, you can still learn how to invest $500 through an IRA account.

There are two types of IRA accounts for new investors: traditional and Roth. A traditional IRA gives you the extra bonus of a tax deduction each year you invest that $500. A Roth IRA allows you to withdraw your money tax-free.

Invest $500 per year in a Roth IRA with a 5% return for 40 years, and you’ll have more than $60,000 saved when you retire.

Like employer retirement plans, you won’t have to do much after you set up an automatic withdrawal from your bank account. Before choosing a Roth or traditional IRA, it’s important to research any fees the investment company will charge. With only $500 invested a year, a large annual fee could eat up that return.

3. Try commission-free stocks

Maybe your plan is to become the next big stock investor. Starting early is key to getting the experience and confidence needed, but when you invest $500 initially, you won’t see much in returns because of high commission costs and fees associated with trading.

ETFs are a solution to this problem. Buying into an ETF (exchange-traded fund) is like buying into many different investments. They are traded like stocks so you’ll still get that Warren Buffet feeling, and they are a good way to diversify your investments.

However, because ETFs are traded, they often come with commissions fees. Search for a broker that offers commission-free options and little to no minimum investment starting point.

All ETFs are different, so it’s hard to predict what long-term returns you will get when you invest $500. Many stock ETFs have annual returns between 10 and 20% — though those returns can fluctuate widely from year to year.

4. Sign up with microsaving apps

Let’s say that you don’t have that $500 saved up just yet, but you still want to invest what you can. With new, inventive programs targeted to beginner investors, you can do just that.

One of the most popular options out there is Acorns. The Acorns app links to your checking account. Every time you spend money, it rounds the purchase up to the next dollar. The difference is put into an investment account based your preferred level of risk.

In the case of microsaving apps, it’s hard to predict what your investment will end up with. However, if you put $45 per month in one of these accounts with a 4% return for 40 years, you could potentially have saved right around $50,000.

5. Invest in yourself

One of the smartest places you could invest $500 is in yourself. Take a class at a community college to beef up your resume, sign up for a certificate program to further your prospects, or join a professional affiliation and attend conferences and seminars.

Think of it this way — you spend $500 a year on courses for an additional certification. In two years, you are qualified for a job that makes $10,000 more than your last.

That $1,000 investment led to $10,000 more on your paycheck in just two years — that’s way more than any investment account could get you!

Invest $500 for big payoffs

Learning how to invest 500 dollars could be the key to growing your wealth while you’re young. With returns ranging from 3 and 4% with a microsaving apps to a hundred times that if you put it towards your earning potential, there are loads of smart and safe options for small investments.

Want to see what a small investment can do for you? Use our savings calculator below to find out.

Want to get started investing?

Here are the top investing options for 2018!
NameCommissionAccount Minimum 
$4 to $79 a month$0Visit Blooom
0.5%$0Visit Future Advisor
0.15% - 0.35%$0Visit Betterment
0.49% - 0.89%$25,000Visit Personal Capital
0.25%$500Visit Wealthfront
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