How to Invest with Little Money : A Quick Guide - by BI Tips

Investing has always been thought as the prerogative of the rich and fortunate, but actually one can start building wealth even from the smallest funds. If you ever were interested in knowing how to invest money, then you've come to the right place. This guide will show you how to make smart investments even if your budget is tight. Whether you have just started to become an investor or are on a journey to increase your saving, these "Beginner Investing Tips - BI Tips" can prove helpful to you as you start off by showing you small investments with high returns.

Why Begin With Small Investments?

Most investors believe that they need a huge amount to invest, and that scares them from ever starting. However, one of the biggest advantages is that you can learn the ropes without risking large amounts of money. Furthermore, the sooner you begin, the more time your money has to grow through the power of compound interest.

That means in addition to earning returns in your investment you continue earning returns on those returns. So, starting small allows this effect to work for you.

1. Start with Robo-Advisors

One of the easiest means of starting a small investment is robo-investing. This low-cost investment through an online platform will automate much of the process for a novice. Robo-investing just so happens to be a product wherein algorithms will construct and monitor a diversified portfolio with your goals and levels of risk tolerance in mind.

Popular Robo-Advisors for Beginners

• Betterment : No minimum investment required and offers personalized portfolios.

• Wealthfront : Extremely low expense fees, but you need a minimum of $500 to get started.

• Acorns : Invests your spare change by rounding up your everyday purchases. Very good for people with very little to invest.

You don't have to choose individual stocks or check the market daily with robo-advisors. The heavier lifting is done by the platforms, freeing you up to keep focusing on the consistent contributions.

2. Test Micro-Investing Apps

Another great choice is the micro-investing apps for low-budget people. These apps make it easy for you to get going investing with only a few dollars.

The best micro-investing apps

• Acorns : As stated earlier, Acorns rounds up your purchases and invests the spare change. It's simple as well as hassle-free if you want to invest without much fuss.

• Stash : This allows you to invest a little in some stocks and ETFs using fractional shares. You can start with $5.

• Robinhood : There is no commission on trades, and no account minimums at all. You could buy fractional shares of your favorite companies for investing in high value stocks with an inch of money.

These applications enable individuals to start investing in an easily accessible manner without needing an opening deposit of much magnitude. They also keep investing on schedule.

3. Investing in Index Funds and ETFs

Both low-risk investment options that are very welcoming to beginners. The access of asset classes, offered by index funds and ETFs, lowers risks associated with single stocks.

Why Index Funds or ETFs?

• Diversification : You essentially have invested in multiple companies when you invest in a fund. The risk is spread out.

• Low Costs : Many index funds and ETFs have low expense ratios. You get more of your money growing your investment rather than fees.

• Accessibility : Vanguard, for example, and Fidelity let you start putting money into these funds with very small amounts.

Other excellent features that make index funds and ETFs suitable for beginners include the fact that they are simple, low-cost methods of beginning to invest with a little money and managing risk.

4. Contribute to a Retirement Account

One of the best ways to invest for the future is through a retirement account, such as a 401(k) or IRA, and this is especially true for those working with limited funds. Through many employers' 401(k) matching contributions, the company will match a portion of what you invest in the account; this is essentially free money that can accumulate in your benefit account over time.

If you're not offered a 401(k) by your employer, you have the opportunity to open your own Individual Retirement Account. Most financial institutions, including Vanguard and Fidelity, enable you to begin an IRA with very low minimums.

5. Invest using Dollar-Cost Averaging

Dollar-cost averaging is an investment strategy where a fixed amount of money is continuously invested at fixed intervals, irrespective of the market conditions. It is very effective for those people who may not have enough money to invest upfront but can invest some small amounts regularly.

Consistent investing, you will buy more shares when prices are low and fewer when prices are high, which can actually help to smooth out the effects of market volatility.

6. Check out High Yield Savings Accounts and CDs

High yield savings accounts and CDs, not technically an investment, these are a great low-risk way to grow your savings as you learn more about investing.

High-Yield Savings Account

• Earnings that are higher than a traditional savings account.

• Liquid, so that your money will be available anytime you want.

Certificates of Deposit (CDs)

• Fixed interest rates over a specified period

• There are penalties in withdrawing prior to the agreed term; however, this does provide greater yields than other savings accounts.

Perfect for one who wants to start saving but is not yet ready to take on the higher risks associated with the stock market.

Final Thoughts: Start Small, Stay Consistent

You don't need thousands of dollars to get started building wealth. With today's micro-investing apps, robo-advisors, index funds, and retirement accounts, you have many options to get started with just a little money. Just be sure to start early, then stay the course.

So, here are some beginner investing tips that will guide you toward financial freedom. Whether it's spare change or a few hundred dollars, I know it's never too late to start building your wealth.