There are plenty of ways to start investing with little money, with many online and app-based platforms making it easier than ever. All you have to do is start somewhere. Once you do, it will get easier as time goes on, and your future self will love you for it.
For many people, the word “investing” conjures up images of men in suits, monitoring the exchange of millions of rupees on a stock ticker. You don’t need to be the Wolf of Wall Street to start investing. It’s okay if you’re more of a mouse of Main Street. Even if you only have a few rupeess to spare, your money will grow with compound interest. The key to building wealth is developing good habits—like regularly putting money away every month. Swap out the barista-made cappuccinos for coffee at home and you could already be saving more than Rs.50 a month.
Once you have a little money to play with, you can start to invest. In 2020, you can get a date, a ride or a pizza with the swipe of a smartphone screen. Investing is no different. If you can automate your bills, why not your investments? It’s just as easy. With a robo-advisor or savings account, you can make your money work while you play. With a stock trading app, you can play with a little money and learn valuable investing lessons at the same time. Just like Halloween costumes, investing comes in many different forms. It shouldn’t be a scary word. With so many different options, investing for beginners is simpler and more straightforward than ever before. Soon you’ll see how addictive growing your money can be.
Here are seven simple ways to get there:
Try the cookie jar approach:
Saving money and investing it are closely connected. In order to invest money, you first have to save some up. That will take a lot less time than you think, and you can do it in very small steps. If you’ve never been a saver, you can start by putting away just Rs.10 per week. That may not seem like a lot, but over the course of a year, it comes to over Rs.500. Try putting Rs.10 into an envelope, shoebox, a small safe, or even that legendary bank of first resort, the cookie jar. Though this may sound silly, it’s often a necessary first step. Get yourself into the habit of living on a little bit less than you earn, and stash the savings away in a safe place.
Let a robo-advisor invest your money for you: Robo-advisors entered the investing scene about a decade ago and make investing as simple and accessible as possible. You don’t need any prior investing experience, as robo-advisors take all of the guesswork out of investing. Robo-advisors work by asking a few simple questions to determine your goal and risk tolerance and then investing your money in a highly-diversified low-cost portfolio of stocks and bonds. Robo-advisors then use algorithms to continually rebalance your portfolio and optimize it for taxes. It’s important to note that robo-advisors fees are on top of the fees charged by the exchange-traded funds (ETFs) that robo-advisors buy to make up your portfolio. You can avoid paying the robo-advisor fees by building your own portfolio of ETFs or mutual funds. For the vast majority of investors, however, that’s a lot of additional work and responsibility.
Start investing in the stock market with little money: When it comes to investing in the stock market, cost is often the barrier to entry. It takes money to make money, right? Not anymore. The internet has made it easy for consumers to get started with very little upfront money. That means you can put a few rupeess in to familiarize yourself with investing before making a bigger commitment. It’s a great way to learn about investing while putting very little money at risk.
Dip your toe in the real estate market: Believe it or not, you no longer need a lot of money (or even good credit) to invest in real estate. A new category of investment known familiarly as “real estate crowdfunding” makes it possible to own fractional shares of large commercial properties without the headache of being a landlord. Crowdfunded real estate investments require larger minimum investments than robo-advisors (for example, Rs.5,000 instead of Rs.500). They’re also riskier investments because you’ll be putting that entire Rs.5,000 into one property rather than a diversified portfolio of hundreds of individual investments.
Enroll in your employer’s retirement plan: If you’re on a tight budget, even the simple step of enrolling in your 401(k) or other employer retirement plan may seem beyond your reach. But you can begin investing in an employer-sponsored retirement plan with amounts so small you won’t even notice them. This is one step that everybody should take!
Put your money in low-initial-investment mutual funds: Mutual funds are investment securities that allow you to invest in a portfolio of stocks and bonds with a single transaction, making them perfect for new investors. The trouble is many mutual fund companies require initial minimum investments of between Rs.500 and Rs.5,000. If you’re a first-time investor with little money to invest, those minimums can be out of reach. But some mutual fund companies will waive the account minimums if you agree to automatic monthly investments of between Rs.50 and Rs.100. Automatic investing is a common feature with mutual fund and ETF IRA accounts.
Play it safe with Treasury securities: Not many small investors begin their investment journey with US Treasury securities, but you can. You’ll never get rich with these securities, but it is an extremely safe place to park your money—and earn at least some interest—until you are ready to go into higher risk/higher return investments. Treasury securities, also known as savings bonds, are easy to buy through the US Treasury’s bond portal Treasury Direct. There you can buy fixed-income US government securities with maturities of anywhere from 30 days to 30 years in denominations as low as Rs.100. You can also use Treasury Direct to buy Treasury Inflation Protected Securities, or TIPS. These not only pay interest, but they also make periodic principal adjustments to account for inflation based on changes in the consumer price index.