Budget investing is here to stay.
Have a few bucks in hand and want to invest? For many of us, we wouldn’t even know where to begin. The traditional thinking is that you need thousands of dollars to begin your investing journey. The fact is, you can start your investment with as little as $50! This is called “Budget Investing”. Investments in even very small amounts can potentially reap big rewards.
Budget Investing requires wise decisions, selections, and planning of the investment. It becomes a more critical affair when youngsters want to build a portfolio out of their small savings. However, you’d be surprised how much you can save when put even a small percentage aside each month.
In order to take the first steps in investment, you have to know where to start. This can be the most intimidating part of the process. To ease the pain, we’ve put together the list below to help you get started.
Before Investing, evaluate Your Debts, if any.
Before you kick-start investment, assess your debts. Things like credit card debt, student loans, etc. should be paid off first so you aren’t burdened in the future. This is especially true if the debt is unsecured, or carries a high interest rate.
Realize the Compounding superpower.
At an early age, you have the advantage of time on your side which creates a ‘Compounding Superpower’. The earlier you start investing, the higher your earning potential will be. Eventually, this can lead to saving handsome figures for retirement. Investing for short gains can be effective, but we’re talking about long term investments currently.
Tips to start as a new investor at $1000 or less:
As a young adult, you likely won’t have much to invest. So, with a little money, it’s more important that you invest it wisely.
Kick-start investing with an interest yielding savings account.
Spend less, save more and cut down over-spending. Start by creating a budget. Chalk out all your monthly expenses and any irregular expenses. Once you’ve determined how much you can afford to save, seek out a high interest savings account.
Automate the Savings.
Plan savings from your monthly salary. If you use direct deposit, you can usually split your check into multiple accounts. This is a great way to automate your savings. They say 10% is the magic number to route to savings. This may not be possible for everyone, but it’s a good goal. In the meantime, you should save whatever percentage of your income you can. The key is to be consistent with whatever amount you choose.
Investment in Stocks.
Since you have time on your side, one wise decision would be to get involved in the stock market, even though it is highly volatile and is subjected to market risks. On and off, you can simply invest the money in the stocks and react only when there is a boom to harness the full rewards.
Index funds.
The index does not involve stock picking but it mimics different market indices. It also charges only low maintenance fees. Statistics show that these Index funds almost always outperform the actively managed funds. An index is a group of stocks that are bought and sold together.
Investing with online assistance.
There’s some great new technology out there to help with investing. Many of these new services even specialize in micro investments; with their marketing geared towards average consumers investing small amounts.
Fundrise – Invest money into a real-estate portfolio. It pays returns ranging from 8.7% to 12.4% in their various fund options. You can choose between income-oriented or growth-oriented investments.
ETrade – Offers a full suite of investment tools from small to large. Build your own portfolio or use their core service to have recommendations made for you.
ALLY – Another full suite of tools to invest from the comfort of your own home.
With increasing technology, more online apps and platforms which require little investment or knowledge will appear. The yield can be beyond expectation if the right nerve is hit.
Final Word
As a young person, you’re in a particularly strong position to get a head start on wealth building. While your peers are spending every penny on luxuries and going out every night, you can start building a fortune for yourself.
