6 Tips For A Small Budget Investors

tips for a small budget investor

6 Tips For A Small Budget Investors

Many of us are living from paycheck to paycheck. That makes us assume that investing is not something we can do right now. Did you know you can start with as little as $50 per month? Even if you can’t open an online trading account on trading platforms with Bernstein Bank or any other brokerage platform, you can still invest.

Ask any successful investor and they will tell you that the key to building wealth is to first develop good habits. As you continue to make progress, you’ll be in a much stronger financial position.

There are several ways you can invest the modest amount that you have, make it grow, and then reinvest it to gain further returns. Here are 6 ways people with a small budget for investment can get started:

Start with the cookie-jar approach

You can only invest if you have some savings. Before you say “I don’t make enough to save”, evaluate your spending. You can probably set aside $10 each week. For that, you may have to hold off on ordering pizza or going out to the movies for a while, but trust me, it’ll be worth it.

Start putting that money in a cookie jar. By the end of the month, you’ll have $40 saved. You can also save funds in an online savings account. Keep it separate from your checking account to make sure you don’t spend it. When you think you have enough stashed away, invest that money into an actual investment vehicle.

Invest in mutual funds

Mutual funds allow you to invest in a portfolio of stocks and bonds with a single transaction. The problem is that most mutual fund companies require an initial minimum investment between $500 and $5,000, which might be out of your reach. If you have $500 to invest, that’s great, but if not, there’s another way forward. With an automatic investment, plenty of companies are willing to waive the account minimum. An automatic investment plan usually ranges between $50 and $100 per month. In most cases, you can easily set up an automatic deposit via online banking.

Buy treasury securities

Small investors don’t usually begin their investment journey with treasury securities, but you can. They aren’t meant to make you rich quick, but they are an excellent place to invest your money and earn some interest until you’re ready for a bigger investment.

Treasury securities are savings bonds that mature in 30 days to even 30 years. They are available in denominations as low as $100. You don’t just earn interest on them; some adjustments are made to the principal the Consumer Price Index to account for inflation. It’s a nice way to help your investment grow.

Go for peer-to-peer lending

Peer-to-peer lending, also known as social lending, is a method of debt financing. There is no financial institution involved. You can lend money to people who want to make home improvements, consolidate their debt, pay for medical expenses, and more. The principal plus interest will be returned to you in monthly payments. You’ll also feel good about investing in and improving the lives of people just like you.

Consider exchange-traded funds (ETFs)

This investment is a sound option for those who have just started investing. ETFs are similar to mutual funds. They are a mix of different investments but there is one thing that sets ETFs apart. They are traded like common stocks on the stock exchange.

The added benefit is that they offer a low cost of entry. You can purchase ETFs one share at a time. This is an appealing option for those looking for easy investment. By spending as little as $150, you can become an investor.

Invest in individual stocks

Individual stocks let you step up your investment game with little money. Lots of discount brokerage firms let you buy individual stocks for a $5 or $10 fee per trade. Suppose you have $500 to invest and you are interested in a stock that is being sold at $25 per share. After paying the $10 fee, you can buy 19 shares and become an owner in that particular company. Instead of investing all your money in one company, you could also buy shares in different companies.

Experts often advise against investing in individual stocks because it is almost impossible for an average person to beat the market in the long-run. Unless you are willing to invest your time in researching the company and following the market closely, you shouldn’t go for individual stocks.

Summing up

Regardless of how much money you have to invest, there are plenty of small investment options out there. You just have to look for them. Before putting your money in the market, make sure it is something you have a good understanding of or at are least familiar with.

Make a plan and start saving now. Once your savings reach the $500 threshold, go ahead and invest that money in the market. Start with something small and once you get a hang of how it’s done, you can reach out for bigger investing options like CFD stock trading. The key is to start investing as soon as you can because time could either be your greatest asset or liability. Get yourself a mentor, too. They can recommend you better investment opportunities.