Hey Rose - Glad to hear you’re getting an early jump on investing. At 20 years old, $100/month will really start to add up as the years go by.
There are a lot of good ways to invest your money, so you need to think about what will be personally fulfilling while still getting the job done. When I say personally fulfilling, I mean what types of investments will keep you interested so you don’t get impatient and move your money or do something foolish. Some people love watching the stock market jump around, and they have no problem buying a bunch of shares and never get the itch to sell and buy something else. Other people need to see what their money is doing, and shares of companies don’t quite accomplish that.
If you are someone who likes the idea of buying stocks, earning dividends, and trusting that the market will continue to climb, I’d save that $100 for about a year and then make one big purchase of stock in a company you like. That might mean you buy something that’s $80 per share or something that’s around $5 per share, as long as it’s a company with a proven track record and a product you appreciate.
If that doesn’t float your boat, you can look into something like peer-to-peer lending, where you help sponsor personal and business loans and then get reimbursed along with interest. This makes the lending process a little more real and can produce pretty solid returns. You also don’t need a huge amount of money to get started because you’re part of a crowdsourcing effort.
As you look at investing options, keep service fees in mind. Ideally, you want to invest enough that you’re not losing too big a percentage of your funds to trading fees. Some companies take a percentage of your investment, while others charge per transaction. If you’re buying $100 worth of shares each month and getting charged $9.99 per trade, you’re losing 10% of your investment capital, which is a good chunk. Trading less regularly and in bigger amounts will help offset these costs. Whatever platform you end up using, don’t overlook the expenses you may be charged.
The most important thing is putting aside that $100 each month. If you keep doing that, you’re already investing in cash, and with a solid cash reserve a lot of investing options become available. Keep at it and good luck!