Invest online: How to grow your money cheaply — without ever putting on pants

When you think about money, your biggest costs might jump to mind — there's paying down your debt, saving in an emergency fund, covering credit card expenses and maybe socking away cash for retirement, a house, a car, an engagement ring or a wedding. 

If you have anything left over to play with, even if it's just $1,000 or $100, good for you. You're ahead of the crowd.

And there's more: You can grow that small sum into more money, far faster than the 1% to 3% growth you'll see — best-case scenario — if you leave it in your bank account.

It doesn't take much to start investing. And it can all be done from your sofa.

Now here's some cautionary fine print: If you've got debt — a high-interest loan, say, or balances on any high-interest credit cards — slay that first. 

Your finite resources will be put to better use paying down the high-interest debt that's draining your paycheck. And make sure you've got something in your emergency fund should things go pear shaped — because investing is inherently risky — and your rainy day cash is not the money to invest.

"You'll want to have three to six months' living expenses set aside," said Katharine Perry, an associate financial consultant at Fort Pitt Capital Group in Pittsburgh. "You don't want to have to pull it out of your investment account, because you may take a loss."

Finally, investing with a professional financial adviser can be incredibly helpful because they know this stuff cold. But watch out for steep fees. Depending on who you invest with, one estimate found you could lose as much as 40% of your investment return in charges.

The good news about the five investments below is that they have low or no minimum requirements — and low or no fees.

Now go forth, and invest.

What is a (low-cost) brokerage?

Low-cost brokerages offer many products, but at their most fundamental level they sell stocks, which are ownership shares in individual companies.  

Some people have a knack for and enjoy the research needed to pick individual stocks.

Individual investing became a lot more accessible once discount brokerage firms like E*Trade, TDAmeritrade, Scottrade and TradeKing busted open the door for people who wanted low minimums and fees.

Before that, full-service brokers could charge a 2.5% commission for a stock trade. An example from Money magazine in 1992 was that an investor would need to pay $250 commission to trade 100 shares of a stock trading at $100 per share. 

The playing field has leveled considerably in the years since.

Today discount firms allow you to buy and trade stocks just like the big investment brokerages, but for a fraction of the price: usually $5 to $10 a trade.

Robinhood is an online broker that is new to the table and charges no commission fee — so trades are totally free.

Part of the reason discount brokers can offer a la carte trades for $5 or less is that these come without financial advice. They call this kind of investing "self-directed" — which means you should have a plan unless you're OK with parting with money.

"I try to steer people clear of doing it all on their own," Perry said. "The best thing is to ask questions of financial advisers. Don't be afraid to ask, 'Is this right for me?'"

What is a mutual fund?

When you invest in a mutual fund your money joins with other people's to buy many different stocks that are then bundled together into a fund that's managed by an investment professional.

The goal here is diversification, which is the risk management idea that you have a well-rounded mix of different holdings. It may mean that you have a diversity of companies or a diversity of asset classes (like bonds in addition to stocks) but the key is variety. A mutual fund can be an inexpensive way to achieve diversification.

"We usually recommend people start with mutual funds because you can get the diversification of a larger portfolio with a smaller amount of money to get in," Perry said.

This is a great way to get a big, diverse investment picture for a little coin: A mutual fund is a safer bet for most people than picking individual stocks since it spreads your money among dozens maybe even hundreds of stocks and collects them in one basket. If one of them craters, you're insulated a bit by the others in the basket.

Most mutual funds usually require minimum investments of thousands of dollars, plus a fee to invest. But there are a bunch of mutual funds that are open to an initial investment of $500 or less.

If you're looking for an even smaller investment, there are many mutual funds from TDAmeritrade, for example, that require a $250 minimum investment and dozens that had no minimum requirement at all.

To buy a mutual fund you need to set up an account with a discount brokerage firm, a mutual fund company or a mutual fund provider. You'll want to look for "no-load" funds — loads are fees.

Perry said she recommends mutual funds because they are overseen by an actual, knowledgeable professional. This kind of investment is said to have "active management." 

There are also funds that have what is called "passive management," in which the fund is tied to an index or group of stocks. Explaining the difference between active and passive management can get complicated quickly. 

The important thing to know is that active relies on people, passive relies on algorithms. Different investors will be baldly partisan about which method gets a better return — and will cite research to back each method up. 

Long-term performance and low fees tend to favor higher returns for passive over active investment, according to Morgan Stanley.

What is an ETF?

Exchange traded funds, or ETFs, are like mutual funds in that they are baskets of stocks — but they are not mutual funds, and are traded in a different way. Millennials are big into ETFs — way more than their parents.

One of the reasons is that they are very affordable to get into.

ETFs are traded like individual stocks on a stock exchange and can be purchased for the cost of one share, making them an appealing option for someone looking for low-cost, diversified investments. 

Like with mutual funds, you can go through discount brokerages or an ETF provider like Vanguard, Fidelity or iShares.

One of Vanguard's best performing ETFs for the past 10 years, for example, is a consumer staples ETF that has earned 10.54% in average annual returns during that time. With investments in stocks like Procter and Gamble, Coca-Cola, Pepsi, CVS and Walgreens, it is priced at just $133.

You can become an investor for just that much — cheaper than the stock price of many individual stocks. 

That ETF also invests in companies such as cigarette makers like Philip Morris and Altria and Molson Coors Brewing Co. — and let's say you do not want to invest in "vice" stocks.

You're out of luck there. An ETF is a package deal.

Here's another caveat: Even though two ETFs may track the same index, the underlying composition may be different — and may perform differently. And not all ETFs are well diversified. 

But there are a couple ETFs, like Vanguard S&P 500 and Vanguard Total World Stock, that are very diversified. The S&P 500 one has an expense ratio of 0.05%, which is far lower than the average fee for funds and Total World costs only 0.14%.

What is a robo-adviser?

A robo-adviser is exactly what it sounds like — a robot. These online advisory firms emphasize automated investments and are able to cut costs and pass the savings on to investors.

A company like Betterment invests its client's money in ETFs, and says that even investors with as little as $1,000 are welcome. There is a fee to invest, though it goes down as you have more invested: It starts at 0.35% of your investment annually for accounts with balances under $10,000. You're expected to make a monthly investment of $100 — and if you don't, you are charged $3 a month.

The cost comparison with traditional brokers is compelling — robots are cheap.

WealthFront has a $500 minimum, but it is a free management service for your first $15,000. It charges a flat fee of 0.25% on the rest. 

Another option is WiseBanyan, which calls itself a fee-free financial adviser. 

The company will build a portfolio of ETFs for you and manage your investments. All you need to do is tell the adviser a few things about your investment goals — how much you have saved, what your timeline is and what your tolerance for risk is. 

The company charges no fees, requires no minimum balance and says you can invest with as little as $1.

The company makes their money by selling optional add-ons like tax-loss harvesting, or as the company calls it, "wise harvesting." This is when a portfolio manger combs through your investments finding the tax benefits in losses.

What is peer-to-peer lending?

First, a caveat: Peer-to-peer lending is not quite like other types of investments on this list. Through companies like Lending Club and Prosper you can become a lender and earn interest on loans repaid to you.

But there are plenty of risks.

Investors are attracted because so-called P2P lending can broaden your portfolio beyond stocks and bonds, and historically has a high rate of return.

Returns are high because the risk of lending to people directly is high and so are their interest rates. 

Critics of P2P lending say the practice is much closer to gambling than investing. As with all investments, you should read up before wading in.

Finally, it can't be emphasized enough that you should make sure any money you put towards the investments on this list is money you are willing to lose — completely. Because it can happen.

If you want your money to grow without risk, stick to an FDIC-insured bank account.