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Money Minute: How to invest with $5 or less


Even the most basic investment accounts today have minimum requirements of at least $500. But a new crop of cheap and simple apps is now making it much easier (and cheaper) for novice investors to get started.

Acorns: You connect your credit or debit card to the app, and when you make a purchase that doesn't come out to a round number, Acorns takes the leftover change and saves it for you. Once you’ve accumulated $5, it will deposit the money in one of five investment accounts of your choosing, ranging from conservative to super aggressive investments. The best part? Acorns charges ZERO fees for students under 24. For the rest of us, it’s $1 a month and that changes to 0.25% of your total assets per year once you’ve saved $5,000.There are no fees if you decide to withdraw funds.

Source: Acorns

More about Acorns’ investment approach: Based on personal information you input -- Acorns asks about your income, net worth and investment goals — it will recommend one of its investment portfolios, which range from conservative to aggressive. The portfolios are made up of low-cost ETFs, which are chosen and rebalanced by the Acorns team. You can see exactly how each portfolio is invested beforehand here.

Stash: Stash is the new kid on the block and it’s pretty cool. You can start investing in ETFs and stocks for as little as $5. That’s because Stash lets you buy a fraction of a share if you can’t afford the whole thing. No other investing app does this yet. Like Acorns, Stash charges you $1 a month (which comes out of your bank account, not your investments) until you hit $5,000. After that, you’ll get charged 0.25% per year. 

Source: Stash

More about Stash: To help you pick the right investments, Stash asks you some questions about what kind of investor you are to gauge how much risk you should take and how much you’re comfortable with. Then it recommends a conservative, moderate or aggressive portfolio. There are only 30 funds to choose from, so you’re less likely to feel overwhelmed. The funds share a common thread that makes it easy for you to pick based on your interests (for example, their “Internet Titans” fund is invested in companies that do the majority of their business online).

Definitely peruse the app’s FAQs before signing up.

Move on when you’re ready.

These apps make it fun, cheap and simple to start investing. But are they the best way to save for long-term goals like retirement? Probably not. If you’re only saving a few bucks each month, a $1 fee could eat up a big chunk of your potential earnings. You also may find a cheaper and larger variety of investment options by going through your employer’s 401(k) plan or opening an IRA on your own.

The good news is neither Acorns nor Stash charges fees for withdrawals, so you can move your money anytime you’re ready.

Mandi Woodruff is a reporter for Yahoo Finance and host of Brown Ambition, a weekly podcast about career and finance. Follow her on Tumblr or Facebook.