The Only Investing Guide You’ll Ever Need (Start With $0)

What’s the best way for beginners to start investing online with just $100? As a millionaire investor, this is something I get asked all the time. And because of that, four years ago, I set out to answer this question by creating a article where I invested $100 into five different things. Today, I’m going to compare the results from those five investments that you can make from your laptop and try to finally answer the question once and for all.

The Judging Criteria

We’re going to be using this grid to judge each one in these categories. First up, learning curve. This is how long it takes to learn the ins and outs of each method. Ideally, we want this to be as short as possible. Next is passive income potential, which is how much money an investment can earn for you passively while you still own it, without needing to sell it. Then, there’s tax efficiency, which refers to the specific tax advantages or benefits available for each type of investment that can help you pay less tax. After that, we have risk level, which is about how likely you are to lose money and how much the investment’s value might go up or down. And finally, we’re looking at the results. This is where I’ll reveal my percentage return over the last four years and exactly how much my $100 investment is now worth.

Before we jump in, please remember, I’m not a financial advisor. I’m just sharing my own results and strategies that have worked for me over the years. Please also do your own research.

1. Individual Stocks

Okay, first up is individual stocks. Individual stocks give you the chance to own a piece of a company you believe in. This can be really exciting because you’re directly investing in businesses that you think will grow or succeed.

Learning Curve: High

For learning curve, I’m going to say this is high. If you want to be successful picking individual stocks, then it’s not just a guessing game. You’ll need to dig into the nitty-gritty of a company’s fundamentals. This includes looking into the financials, who’s leading the company, and how well-known the brand is. When I invest in individual stocks, I look through income statements, balance sheets, and cash flow statements. So, when I invest in a stock, I’m in it for the long haul, which means at least 2 to 10 years. A great way to learn how to do this is by using an investing app with a demo account, which lets you play around with fake money until you’re confident with your strategies.

Passive Income: Good

For passive income potential, I’m going to say this is good. You see, when you own a stock, there are two ways you can make money. Firstly, if the price of the stock goes up during the time you own it, you can sell it for more than you paid. Secondly, you can receive dividends. Dividends are regular payments to shareholders. Not all stocks pay dividends, but they do. This means you can receive money without ever selling your stock. This is essentially passive income.

Tax Efficiency: Great

Now, for tax efficiency, this is great. If you use the right accounts, then you can reduce your tax burden. In the UK, these are called Stocks and Shares ISAs. You can set one up on most investing apps, and any profits you make are safe from taxes. In the USA, there’s something similar called a Roth IRA. These accounts work like a shield, protecting your profits from the taxman. While there are different rules depending on where you live, the idea is the same. Please bear in mind that I’m not a tax advisor, and you should do your own research as everyone’s circumstances are different.

Risk: High

So, what’s the risk? This is definitely high. Back in 1995, during the .com boom, I got lucky and picked a few great stocks. I sold them at the right time and made a lot of money in a short period. But when the bubble burst, some of the other companies I’d invested in, ones that cost me very little, went out of business completely. Even though I ended up making money overall, it just shows how risky investing in individual stocks can be, especially if you put all your money into just a few companies. If they fail, you could lose everything.

The Results: -32.34%

So, let’s look at how much my $100 investment is now worth. Let me refresh your memory. Here’s what I invested in. “So, I’m going to throw a dart at the board, and as you can see, I’ve randomly selected 20 different stocks, and wherever the dart lands, that’s what I’m going to invest in. Now, I’ve just got to put on a blindfold. Okay, here we go. Oh, you hit it. Right, let’s see what we got. And we’ve gone into Samsung.” That investment is now worth $67.66, but don’t forget my dividends. Over the four years, I made 10 cents. So, that leaves me with a total of $67.76. That’s a negative 32.34% return. This example perfectly shows how hit-or-miss individual stock investing really is. That dart could have just as easily landed on Apple, Microsoft, or Nvidia.

So, let’s have a look at how much I would have made if that dart had landed a bit differently. A $100 investment in Apple four years ago would now be worth $170. The same investment in Microsoft would be $188. And, drum roll please, Nvidia would be worth $908. Those stocks have boomed in recent years, and luckily, I have some of those in my personal portfolio. But this just goes to show, you can’t just leave individual stock investing down to luck. You have to be strategic with your stock picks, and even then, the market is unpredictable. If you want to try this out, just download Trading 212. It’s a great app for beginner investors because it lets you use a demo account to practice trading with fake money. This way, you can learn how it all works without risking any real cash, just like I mentioned earlier. It also lets you set up a Stocks and Shares ISA if you’re in the UK, which protects your investment returns from taxes. But again, I’m not a tax advisor, so please do your own research as everyone’s situation is unique. Trading 212 also lets you buy fractional shares, which means you don’t have to buy a whole stock. That’s how I was able to own just 0.07 of a Samsung stock instead of having to buy an entire share.

2. Real Estate Investment Trust (REIT)

Second is a real estate investment trust, otherwise known as a REIT. I know this one sounds pretty complicated, but it’s actually quite cool. Imagine your friend collects $100 from 3,000 people, giving him $300,000. He then uses that money to buy a property, rents it out, and shares the rental income with all 3,000 people who helped him buy it. That’s a simple way to explain a REIT. It allows anyone to invest in properties without needing to buy one themselves. Think of it like you own the front door, someone else owns the window, and a few others own the bricks, which means together, everyone owns the entire property and shares in the profits.

Learning Curve: Moderate

For learning curve, I’m going to say it’s moderate, and that’s because getting started with REITs is much easier than buying physical property. It’s not like you need a huge down payment or a mortgage, and there’s no need to deal with agents or solicitors. However, you do need to understand how REITs work. They own things like offices, shopping centers, apartments, hotels, and much more, and they get their income through rent.

Passive Income: Great

For passive income potential, I’m going to say this is great. REITs are well known for paying high dividends. This is because the law says they have to pass on at least 90% of all their profits to investors. So, as long as the REIT is doing well and its properties are rented out, you can earn a steady stream of passive income. Most businesses sign long-term leases on their commercial properties. Therefore, most of the time, income is pretty stable and reliable. But, of course, just keep in mind that your earnings depend on the REIT you pick and the types of properties it owns.

Tax Efficiency: Great

For tax efficiency, I’m going to put this down as great. This is because in many countries, REITs offer great tax benefits. For example, in the UK, you can hold REITs in a Stocks and Shares ISA, which means you don’t have to pay taxes on your profits or dividends.

Risk: Medium

In terms of risk, I’d have to say this is medium. REITs are generally less risky than buying a single property because they invest in multiple properties, spreading out the risk. However, they’re not risk-free. If the real estate market takes a downturn or if the REIT struggles to keep its properties rented, you might see both a drop in dividends and the value of the investment.

The Results: +10.52%

So, what’s my investment worth now? Let’s flash back to me making the investment four years ago. “As I’m in the UK, I’m going to use the Trading 212 website to put $100 into a similar REIT. And with just a click of a button, there you go. Job done.” Ready for the moment of truth? Looking at my investment now, I can see it’s worth $98.59, so that’s a small loss of 1.41%. This shows that even though REITs are normally more stable than individual stocks, they’re not guaranteed to perform well. My REIT likely underperformed because it invested in commercial real estate, which struggled during the pandemic. But that’s not the end of the world, as I made $11.93 back in dividends, meaning I’m actually $10.52 up. So, that’s 10.52% up.

3. Cryptocurrency

Third is cryptocurrency. Imagine a form of digital money that isn’t controlled by any government or bank. That’s what cryptocurrencies like Bitcoin and Ethereum are. These currencies run on the blockchain technology, which makes them secure, transparent, and almost impossible to counterfeit. Cryptocurrencies have created massive wealth for some people, with Bitcoin being the best-performing asset of the last decade. But on the flip side, it’s highly volatile, and people have also lost fortunes. That’s why I’d describe crypto as part investment and part speculation, and not for the faint-hearted.

Learning Curve: Moderate

For learning curve, I’m going to say it’s moderate. Crypto might sound complicated, but I’ll break it down for you. First, you’ll need a wallet. This is where you store your crypto. Think of it like a digital piggy bank, and there are different types. First are online wallets. These are easy to use, but you’ll need to protect them with very strong passwords. Second are offline wallets, like hardware wallets. These are the safest because they’re not connected to the internet. Next, you’ll need to pick an exchange to buy and sell your crypto. Some popular ones are Coinbase and Binance. These platforms make it simple to trade, but make sure to choose a trustworthy exchange to avoid any issues. Then there’s tokenomics. This just means understanding how the supply and demand of a coin works. For example, Bitcoin has a limited supply, which is why it’s often called digital gold.

Passive Income: Moderate

For passive income potential, I’m going to also say this is moderate. Unlike stocks or REITs, crypto doesn’t pay dividends, but there are ways to earn passive income. The first is called staking. This is when you lock up your crypto, like Ethereum, to help the system work and process transactions. In return, you get paid rewards, kind of like earning points for helping out. The second is yield farming. This is when you lend your crypto out to others and earn interest on it, similar to how a bank pays you interest when you save money with them. These methods can generate decent returns, but they do come with higher risks. If the coin’s value drops or the platform you’re using gets hacked, your income could disappear along with your crypto. That’s why I personally don’t mess with any of this and just hold mine on a Ledger wallet.

Tax Efficiency: Poor

For tax efficiency, I’m going to have to say this one is poor. Taxes are a tricky part of crypto investing. In many countries, even swapping one cryptocurrency for another counts as a taxable event. And if you earn staking rewards, those are also taxed as income. You also can’t hold crypto in tax-advantaged accounts like ISAs or Roth IRAs, which makes it less tax-efficient than stocks or REITs.

Risk: Very High

In terms of risk, I’d have to say it’s very high. Crypto is one of the most volatile investments out there. Prices can soar 1,000% in a year, but they can also crash just as fast. Personally, I just invest in Bitcoin and Ethereum, as they’re more established and often referred to as blue-chip cryptocurrencies. Smaller altcoins can be far more risky. You’ve also got to be cautious of scams. Since crypto isn’t regulated, if someone hacks your wallet or tricks you into sending your coins, there’s no way to get them back. So, keeping your crypto safe is just as important as learning how to invest in it.

The Results: +552.24%

So, what’s my investment worth now? Let’s rewind to when I made this investment four years ago. “So, I’m going to jump onto the most popular Bitcoin app, which is called Coinbase, and invest my $100 in Bitcoin and forget about it.” Ready for the reveal? The $100 I invested in Bitcoin is now worth $652.24. That’s a return of 552.24%. Now, I know what you’re thinking: that’s insane, and it is. But I have to stress that this kind of growth isn’t typical. Bitcoin has been the best-performing asset of the last decade, but most cryptocurrencies don’t see these kinds of returns. Many lose their value entirely. In my opinion, crypto is exciting, and the technology behind it has the potential to transform industries. However, it’s not for everyone. It’s highly volatile, speculative, and requires a strong stomach to handle the wild price swings. Just remember, crypto is all about high risk and high reward. So, if you’re going to dive in, make sure you’re doing your research and investing wisely.

4. Gold

Fourth is gold. This is one of the oldest and most trusted ways to store and protect wealth. Gold is often called a safe haven because it’s a great way to protect your wealth during uncertain times, like when inflation is rising or the economy is struggling.

Learning Curve: Low

For learning curve, I’m going to have to say it’s low. Learning how to invest in gold is pretty simple. You have two main options. First, physical gold. This includes gold bars and coins. Many people also think you can buy gold jewelry as investments, but you’ll often pay more than the gold is actually worth because sellers add a markup for their craftsmanship. For this reason, I personally stick to gold coins. Just bear in mind, if you pick this option, then you’d have to store it somewhere safe. Second is gold ETFs. These are funds that let you invest in gold without physically owning it. For example, in the UK, you can use Trading 212 to buy shares in something like the iShares Physical Gold ETF. It’s quick, easy, and you can buy or sell it with just a few clicks.

Passive Income: Zero

Passive income potential is absolutely zero. Unlike stocks, REITs, or crypto, gold doesn’t pay any passive income. It’s not an income-generating asset; it’s purely a store of value.

Tax Efficiency: Good

For tax efficiency, I’m going to put this as good. If you buy physical gold like gold coins or bars, the tax rules can be a little tricky. For example, in some countries, certain gold coins like the UK’s Gold Britannias are considered legal tender, which means you don’t pay capital gains tax when you sell them. However, this doesn’t apply to all gold coins or bars, so you’ll need to check the specific rules in your country. For gold ETFs, they’re generally more straightforward. In countries like the UK, you can hold them in a Stocks and Shares ISA, which makes any profits completely tax-free. Interestingly, physical gold has another unique advantage: it can be used to transport wealth across borders discreetly. That said, this approach comes with risks, such as theft or legal restrictions on transporting large amounts of gold across borders. While it’s not something I’d necessarily recommend, it’s worth mentioning as a unique aspect of owning physical gold.

Risk: Medium

In terms of risk, I’d say this is a medium. Gold is one of the safest investments you can make. It’s been used as a form of money for thousands of years, and it’s known to hold its value during times of inflation or economic uncertainty. However, the opportunity cost of investing in gold can be a downside. While it’s great for protecting your wealth, it doesn’t have the same growth potential as other investments like stocks or crypto.

The Results: +40.1%

So, what’s my investment worth now? Let’s flash back to when I made this investment four years ago. “I’m going to invest using Trading 212 in a similar share. And with just a click of a button, there you go. Job done. I’m now Mr. Goldman.” So, what’s Mr. Goldman’s investment worth today? Well, it’s currently sitting at $140.10. That’s a return of 40.1%. Now, that’s not as exciting as Bitcoin’s performance, but it’s solid, steady growth. This shows how gold is better for protecting your wealth rather than rapidly growing it.

5. Index Funds

Fifth is index funds. Imagine owning a tiny piece of the largest companies like Apple, Microsoft, and Amazon all at once. That’s exactly what an index fund allows you to do. It’s a basket of stocks that mirrors the performance of a specific index like the S&P 500. So, you’re investing in the overall market rather than betting on individual companies.

Learning Curve: Low

For learning curve, I’m going to have to say this one is low. Unlike individual stocks, where you need to dig into the financial statements and company performance, index funds are passive investments. You don’t have to pick and choose stocks, as they’re already bundled together for you. Getting started is simple, too. Platforms like Trading 212 let you buy index funds with just a few clicks. Once you’ve invested, all you need to do is sit back and let the market do the work.

Passive Income: Moderate

For passive income potential, I’m going to say this is moderate. Index funds don’t directly pay high dividends like REITs, but they still provide some income. Many companies in the fund pay dividends, and those are automatically distributed to you or reinvested back into the fund, depending on your choice. While the main focus of index funds is long-term growth, the dividend income can be a nice bonus, especially if you’re investing in funds that focus on dividend-paying companies.

Tax Efficiency: Great

For tax efficiency, I’m going to say this one is great. If you hold index funds in a Stocks and Shares ISA in the UK or a Roth IRA in the USA, you can avoid paying taxes on dividends and capital gains altogether. This means you get to keep more of your profits over time, which can make a huge difference when you’re investing for the long haul.

Risk: Low

In terms of risks, I’d say it’s pretty low. Index funds are much less risky than investing in individual stocks because they’re diversified. Instead of putting all your money into a few companies, you’re spreading it across hundreds or even thousands of stocks in different industries. Historically, the S&P 500 has delivered average annual returns of around 8 to 10% over the long term. While the market can go up and down in the short term, if you hold on to an index fund for 10, 20, or even 30 years, it’s one of the safest ways to grow your wealth. However, of course, there are still risks like with any investment.

The Results: +79.57%

So, what’s my investment worth now? Let’s rewind to when I made this investment four years ago. “If we head over to Vanguard’s website now and we find the S&P 500 and deposit some money and then click, there you go. Job done.” Right, so time for the reveal. Today, that investment is worth $179.57. That’s a return of 79.57%. This result shows why index funds are such a great option for most investors. They’re simple, low-cost, and consistently deliver solid returns over time. Personally, index funds are my favorite investment, which is why I’ve allocated the majority of my money there. However, I also understand the importance of diversification, so I’ve spread smaller percentages across all the other investments we’ve discussed today. This way, I can balance growth, stability, and risk in my portfolio.

Final Comparison & Conclusion

So, whether you’re diving into individual stocks, buying some REITs, exploring crypto, getting into gold, or sticking with the steady reliability of index funds, each investment has its pros and cons. Some are better for growing your wealth quickly, while others are designed to protect it over the long term. The most important lesson is to start early. Even small amounts like the $100 we’ve been working with can grow into something significant thanks to the power of compounding. Time is your best friend when it comes to investing, so don’t wait to get started.