Since the industrial revolution in the 18th century, the world has continually embraced consumerism. Today, people think of buying fancy gadgets, clothes, accessories, cars, etc., as soon as money reaches their account.
Show-off culture and lavish lifestyle will not help us in an emergency or when the inflow of cash begins to stop. Thus, living paycheque to paycheque is detrimental to financial fitness.
Saving, setting aside a part of the income as an emergency fund, and learning to grow wealth are the essential practices for today’s branded generation.
One need not have a fat paycheque to start investing. The earlier you start, the better is your understanding of various investment options. Moreover, at a young age, people have fewer responsibilities and could experiment in different ways. Below we explain the methods of investing for beginners with small amounts.
1. Open an Investment Account:
People need to pay bills, repay loan amounts, and spend on daily requirements such as groceries, eatables, etc. A part of the money goes back to the bank as savings.
But do people have saving goals? Many youths let their credit card bills inflate and are not able to pay the dues. With an investment account, you create goals and track them regularly.
Nowadays, most of us have retirement policies, but money withdrawal from retirement funds has various restrictions. It is also not possible to tweak it as per convenience.
With an investment account, you can accommodate different financial instruments such as stocks, mutual funds, ETFs, etc. You will have to pay taxes for the increased value of money earned. It is also possible to open an account for kids, but they need a custodian till the child turns 18 or 21 as per the local law.
2. Equity and Mutual Funds:
Stocks and mutual funds are the most common investment instruments. People buy stocks from publicly traded companies in the hope that their prices will go up. Earlier, stockbrokers charged commissions, and equities were not available for a lesser amount.
Now the commissioning concept has almost gone, and you could buy stocks for a very few dollars. One can also get stocks under DPP (direct purchase plan) from reputed companies.
You can also opt for partial or fractional shares and get shares from different companies with your small investment plans. It reduces the risk involved. One can sign up with online brokers and use investment apps that help in building a stock portfolio.
With mutual funds, it is possible to minimize the risk associated with market fluctuations. Here you have diversified investments in one bundle, and a professional company manages it, or it follows the stock market index. So, you do not scratch your head for the various options available.
People who prefer to keep the investment amount minimum can go for exchange-traded funds (ETFs). Retirement plans like 401(k) also offer mutual or index fund options.
3. Online Business:
Whether you wish to be an entrepreneur or like to add a source of additional income, taking up an online business is the easiest and most inexpensive method. You need not have an office, pricey retail shops, or employ people at different locations. There is no need for stocking up inventory also.
You will be getting only those products that sell fast. Moreover, when you have a website or register in an e-commerce portal, then you have a worldwide audience. People also trust products that have quality assurance from e-commerce giants.
When you invest in Amazon FBA, you just have to select the right product and ship them to the Amazon warehouse. The remaining logistics are carried out by the company. There is no storage cost, and the firm will deduct the FBA fee only from the total earnings.
Similarly, many professionals like programmers, graphic designers, photographers, and educationists create online portfolios to get into a freelance business.
You May Like to Read: Building an Emergency Fund
4. Invest in Real Estate:
Realty assets do not depreciate much. Studies suggest that since the 1960s, property values appreciated at least six percent per year. People mostly do not purchase land or houses without borrowing loans.
With a long duration for mortgage repayment and low-interest rates, the return on investment is high. Those who cannot afford to buy property at present need not stay away from investing in real estate. You can purchase real estate investment trusts (REITs).
Companies owning office buildings, malls, apartments, and hotel chains sell REIT mutual funds. They provide high dividends, and you could reinvest too. You can also use online investing platforms specifically for real estate such as Fundrise, Crowdstreet, RealtyMogul, etc.
Gold is one commodity that has not lost its value for ages. In the olden days, there was a practice to bury gold in the graveyards of royal people and aristocrats.
Today, of all the investments, gold is the safest investment, and you can quickly convert gold into cash. Thus, it is helpful in case of emergencies. It is possible to buy gold coins and bullion that are approved by the government. Similarly, you can opt for gold bonds, ETFs, funds, and saving schemes too.
You May Like to Read: Diversify Your Portfolio with Gold
To Sum Up:
Investments are not for the super-rich alone. It should start as soon as a person begins to earn money. Those who start early can invest in risky yet high-yielding ventures too.
It will help you later when there is more capital in your hand. You become more aware of your spending habits and could avoid impulsive buying. Every small amount that you save contributes to the compounding of money. It helps live a secure retirement life.