money·4 min read

You Don't Need to Be Rich to Invest

money rule to break get rich investing
Design: theSkimm | Photo: Getty Images
Apr 22, 2022

What's one thing all the wealthiest people in the world do? Invest. Whether it's in stocks, crypto, real estate, or other assets, their money is usually somewhere making more money for them. But they didn't have to be wealthy in order to start investing. And neither do you.

Okay, I don’t need to be MacKenzie Scott to invest…but why should I anyway?

Because it's an important move if you want to build your wealth. And women are already playing catch-up to men on the investment front. Reminder: Historically lower wages have led to women holding an average of just two-thirds of what men have in their retirement accounts.

The good news is women are increasingly interested in investing. According to one survey, 42% of female investors got started in 2020 or 2021. (Thanks, pandemic.)

I don’t need to be a billionaire. But how much money do I need to start investing?

Not a lot. Especially with today’s investing apps making it easy for just about anyone with a bank account to get into the stock market. Brand new investors can get started with as little as $5 on platforms like Ellevest, Robinhood, and Acorns. Apps like Acorns and Stash even let you round up your purchases and invest that spare change in ETFs or other assets.

And it's smart to start ASAP. Because no matter how much (or little) you’re investing, time will help it grow (hi, compounding returns).

Money turning into more money. I like the sound of that. How do I start investing?

First, let’s talk big (financial) picture. You can start investing with very little, but you also want to invest as much as you can. 

To figure out that amount for you, check in with your budget. Read: Think about your other money priorities, like saving for emergencies or paying off debts, to see what you can afford to put away for the future. Hint: Experts say to only invest money you don't expect to need in the next five years or so.

Next, follow these steps to start investing. And keep contributing to your investment accounts until you reach your goals. When you get a tax refund, bonus at work, or other cash windfall, consider investing it

And what should I invest in? 

A well-diversified portfolio. As in, a healthy mix of different types of investments to up the chances that you're holding a winner at all times. 

And if you want your investments to do good while they're (hopefully) doing well, consider sustainable or impact investing. Aka building a portfolio to support causes you care about (and go against those you disagree with). Think of it like voting with your investment dollars. Because you don’t need a lot of money to make an impact, either.

How do I know if an investment matches my values?

There are two major criteria categories to look for so you can understand a company's or fund's morals: 

Environmental, social, and governance standards

ESG standards help you (aka a potential investor) evaluate a company, fund, or other investment’s values and practices. A company’s positive ESG features might include environmentally conscious production, community involvement, or diverse leadership. 

Psst…one survey says women are twice as likely as men to say it’s important for the companies they invest in to incorporate ESG policies. And some research has found stronger gains for ESG funds.

Socially responsible investments

Socially responsible investments (SRI) seek to make an impact with or without financial gain for investors. While investing pros often consider SRIs through an ESG lens, the two function a little differently. Community investing is one example of SRIs where the return on investment is a direct impact on the community like affordable housing. 

A few resources that can help you vet investments based on the above criteria: Adasina Social Capital, As You Sow, Ethos, and investigate.AFSC.org.

theSkimm

You don’t need a lot of money to start investing. You can even honor your values through impact investing with just a little seed money. It's most important that you get started ASAP. Because investing even a little can pay off a lot — in time. 


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