He who earns and does not invest will have to work for the rest of his life. I have come across several people who are skeptical about investing primarily due to lack of enough funds. They are under the impression that investing needs a bucket load of money to begin, and it’s a myth. You can start investing with limited funds every month and earn a decent return from it.
While you will mostly hear about big investors, but there are small investors too who are thriving with limited resources. Micro-investing is a thing that exists in reality, and you should trust that you also can successfully fiddle with it. Through this article, we will try to inform you about how you can commence your investment journey with limited funds and succeed in the long run. So let’s begin without wasting any more time –
Why should you consider Investing even though you have limited funds
One of my teachers told me that money which doesn’t come to you is money spent. I was bamboozled for a while, and when I started pondering about the statement, I realized how valuable the comment was. It changed my perspective on investment.
If you too stand bamboozled after reading the statement, hold your horses till I finish my explanation. If you have $50 every month which you keep in your savings account, it will hardly give you any substantial return (say 5%). On the contrary, if you invest the same amount, the gain can be higher (say 15%).
You may say that you did not waste the extra 10%, but if we visualize from a different perspective, did we not end up spending the additional 10%? If this is not a good enough reason for you to start investing with limited funds, I don’t know what will be.
How to start investing with little money
Invest in Treasury Securities
The easiest way to earn more than interest from deposit in a bank is from Treasury Securities. These are very safe as the government backs them and the denominations start as low as $100 in the USA.
Other than the vanilla ones, they also have another variant which covers your loss due to inflation known as TIPS or Treasury Inflation Protected Securities. They compare the periodical consumer index and make changes accordingly, in addition to the regular interest that you are bound to receive.
Do not forget the Cookie Jar
We often say that the right hand of ours is where the income comes in and the left hand denotes expenses. What if the left hand did not know how much is coming in from the right hand or if it takes away $100 and informs only about the rest to the left hand?
The Cookie Jar approach is simple – save a bit more or spend a bit less than you usually would have done. The initial amount saved can be $5, but you must start soon. Skip that evening coffee from Starbucks or that yummy burger from McDonald’s. Instead of going for the movies every week, go twice a month.
Inculcating the habit of saving is more important, how much you save initially doesn’t matter! If you are incapable of doing it physically, you can do it via an online savings bank account. These accounts are not linked to your withdrawal card, and you can withdraw the amount in two days. Once you have saved enough, you can invest that amount.
Try your luck with a Robo-advisor
In the digital age, robo-advisors are considered to acquire the place of human experts. Robo-advisor is a tool which can be used by people with no prior experience of investment to take decisions on their behalf. They also demand a lesser fee than regular human experts and are considered more resourceful and intelligent at the same time.
There are many popular robo-advisors in the market, and we recommend using Wealthfront, Betterment, Acorns, and Robinhood. These are the best ones available in the market, and the fee you pay for their services is meager. Plus, the investment amount is not very high in most of the cases.
Use your Employer Retirement Plan (401(k)) wisely
In the hustle of life, we often forget the basic things. One of such basic amenities that you have is your 401(k) plan. This plan allows you to set aside a part of your paycheck every month. The set-aside amount can be a percentage of your pay or a fixed amount.
In some companies, the employer also contributes an equal amount in your account. You can hire the services of a professional to help you in deciding where to invest the money in your 401(k) account to get maximum returns.
Where there is a will, there is a way. If you have the intention to make better use of your funds, you will get a way to begin your investment journey. All you have to do is to start. The rest, as they say, is history.
You can also have a look on our other articles and we recommend you to read an article dedicated to ways in which you can use investment as a mean to achieve your short term goals.