How to start investing with little money

When you've been busy with a growing family and financial goals like buying a house or paying down debt, it's understandable that you might have put off investing or felt that it's not really for you. But you and your family deserve the benefits of investing, too.

Even if you don't have a lot of disposable income left over at the end of the month, you can use what you have to set yourself on a solid financial path.

Let's look at what you need to know about how to start investing with little money—and how learning the basics of investing can pay off over time.

Even with a modest start, investing can allow you to grow your money, building your wealth beyond what you'd be able to accomplish by savings alone. Starting with small contributions now, you can build the nest egg you need for retirement or a legacy for your kids and grandkids.

Building an investment portfolio can pay off over time as your money accumulates interest or earnings. And because investment returns compound over time, even a small investment today can add up to a large amount in the years ahead. Consider how much $100 per month could grow over time. Over 25 years, it could grow to about:

• $70,000, if it earns 6% per year.
• $96,000, if it earns 8% per year.
• $134,000, if it earns 10% per year.
• $190,000, if it earns 12% per year.

Considering this is based on a total of $30,000 of your own money invested over those 25 years, that's a sizable increase. Factor in, too that while you may only be able to invest $100 per month now, salary increases or other changes to your financial situation may allow you to put away more bit by bit. The steadier you are with your investing, the greater potential you have to build a substantial balance.

Stepping into the world of investing can seem a little intimidating at first, but you don't need to be a master of complex investment strategies to get started. Instead, focus on some simple approaches that are easy to implement.

A systematic purchase means you contribute a fixed dollar amount to an investment at regular intervals. This process is great for beginners, and it ensures you're consistently growing your investment account. It also allows you to automate your contributions, so you don't have to think about it each month. Similar to setting up automatic payments for your bills, this approach makes it easy to follow through and may even reduce any feeling of monetary loss since the money is earmarked and automatically moved before you have a chance to miss it.

Another benefit is you get to take advantage of dollar-cost averaging. This means your systematic purchase fixed-dollar amount will buy more shares when the price drops and fewer when the price is high.

If you're unsure exactly where to invest in, index funds can simplify that decision. An index fund tracks the returns of a certain market index, such as the S&P 500 or the entire U.S. corporate bond market. There are index funds for virtually every market, including U.S. stocks, foreign stocks, emerging markets and government bonds.

Buying an index fund simplifies your investment decision because you don't have to analyze individual stocks or bonds to determine which ones you may want to buy. Keep in mind, though, that buying a single index fund may not address your overall portfolio needs. You may want to consider combining multiple index funds to build a portfolio with an asset allocation that meets your specific risk and return objectives.

To simplify things even further, you could buy a single diversified fund that is already allocated across different asset classes. Asset allocation funds invest your contributions into different investments to fit a target allocation, so you don't have to think about your overall portfolio. You can even buy specific asset allocation funds called target-date funds that will adjust your allocation over time.

The trade-off for that simplicity is you don't have the flexibility to customize your portfolio, and the expenses may be a little higher than building a portfolio using index funds. However, it can be a good starting place for beginning investors looking to dip a toe in the water.

Including bonds in your portfolio can be a wise move to increase diversification. You can also ease into investing with bonds if stocks seem a little scary or you don't want the volatility of the market.

Compared to stocks, bonds provide a more consistent and stable return over time. Because bonds normally make regular interest payments, many investors choose them for their consistent cash flow, which can either be spent or reinvested. The biggest downside to bonds is they tend to provide lower rates of return than stocks, especially over long time periods.

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You may want to invest in different things depending on how much you have available. Starting small can help you build your confidence and explore your investing options before committing more money.

• If you have an extra $20, you could use it to build up your savings account. A high-yield savings account can be a great option.
• With $100 per month, you may want to look into contributing to your workplace retirement account or an IRA. These accounts offer tax advantages as well as potential matching contributions to build your nest egg. You also may have the option to invest in mutual funds with the money inside your account.
• If you have $200 to $500 to invest, you might consider purchasing mutual funds or exchange-traded funds or look into getting individual stocks and bonds in a regular investment account.

Regardless of what you decide to invest in, understand that your investment values will fluctuate. The way you manage your investments through that market volatility is important. Investing is a long-term process. Instead of trying to time the market, choose investments that you'll be able to stick with. Rather than selling underperforming investments, think about rebalancing your portfolio to get it back to the target allocations you have chosen. This reduces your chances of making emotional decisions that could derail your investment performance in the long term.

You don't have to dive into investing alone. Thrivent can help you get started investing today with as little as $50 per month. An experienced financial advisor can walk you through choosing and opening your account, picking investments and investing your money. You also can explore more on your own to get started.