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How To Invest $20, $100 and $1,000+ Got only $20 to put away right now?

You can use it to buy shares in Pfizer, Pepsi, Exxon Mobil, Johnson & Johnson or Paychex to name a few of more than a thousand options available. What about $100 or $1,000? Your options are even greater.

We are not here to tell you where to invest your money. We will not lay out a handful of stocks on a "buy" list, bit what we can tell you is how you can invest your money -- the mechanics of investing small, large, and medium amounts of cash. We can even help you choose a broker.

How to invest $20
Let's start with $20. We are going to assume that you have already paid off any high-interest debt and that you have some money stashed in a safe place (like a savings or money market account) that you can get to quickly in case of an emergency expense. Now you find yourself with a little extra dough and you want to begin investing for your future.

Is it even worth it to invest such a small sum?

Of course! One of the best ways to invest small amounts of money cheaply is through Dividend Reinvestment Plans (DRPs), also known as Drips. They and their cousins, Direct Stock Purchase Plans (DSPs), allow you to bypass brokers (and their commissions) by buying stock directly from the companies or their agents.

More than 1,000 major corporations offer these types of stock plans, many of them with fees low enough (or free) to make it worthwhile to invest as little as $20 or $30 at a time. Drips are ideal for those who are starting out with small amounts to invest and want to make frequent purchases (dollar-cost averaging). Once you are in the plan, you can set up an automatic payment plan, and you do not even have to buy a full share each time you make a contribution.

While you have to keep good records for tax purposes, Drips may be one of the surest, steadiest ways to build wealth over your lifetime. (For more details on Drips, see "What if I can only invest small amounts of money every month?"

How to invest a couple of hundred bucks
After rummaging through your spare change jar you have tallied up a few hundred bucks. Consider investing it in an index fund. An index fund that tracks the S&P 500 is your entry into an investment that has traditionally returned 11% a year.

There are some index funds that require as little as $250 for you to call yourself an owner. This low minimum is usually restricted to IRAs (Individual Retirement Accounts). After your initial investment, you can add as much money as frequently as you like for no additional costs or commissions. You purchase index funds directly from mutual fund companies, so there are no commissions to pay to a middleman.

If you have a few hundred dollars to start with, then this is a great, low-cost way to establish an instant, widely diversified portfolio.

How to invest $500
Once you are up to $500, your investment options open up a bit more. You can still buy an index fund, and will now have your pick of fund companies that have higher minimum initial investment requirements. This freedom will enable you to shop around for a fund with the lowest expense ratio.

You should also put some serious consideration into opening a discount brokerage account. You will want to focus on the account option that best serves your needs -- an account that has a minimum initial deposit, or even none at all. That means you can open up an account with whatever investing money you have available, and start researching and perhaps purchasing individual companies.

The key here is to keep your costs of investing (including brokerage fees) to less than 2% of the transaction value. So if you are planning to add to your position in stocks a few times a month, a Drip or an index fund may still be the way to go.

How to invest $1,000+
Obviously, with $1,000 you can open up a discount brokerage account, but look at the rewards if you can scrape up an additional $1,000 a year to add to your original investment:

Say you have got 40 years until retirement. If you start with $1,000 and invest an additional $1,000 each year, and your money earns 10% annually, then when you are ready to retire at age 65, you will have $532,111.07. That seems worth it to us. If you have earned income, you can set up a Roth IRA, and you will not even pay any taxes on that $532K when you withdraw it. Your case may vary, so use our handy savings calculator section to play with the figures.

Again, even at this level, the key is to keep fees from eating up your earnings. So make sure that the costs of investing (including brokerage commissions, stamps to mail in checks, and books that help you learn to invest) are less than 2% of your account's overall worth. Nowadays, with such low commissions being offered by discount brokers, it is easy to manage your account for much less than 2% of your assets annually.

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