Investors who are interested to grow their wealth are always on the lookout for new investment ideas. Contrary to popular belief, it is not necessary to be rich to start investing. It is possible to start investing with as little as $500. Indeed, cheap investments can make a significant difference in an investor’s portfolio. The most important part of becoming an investor is knowing yourself.
You should find out your goals and the time-frame for the investment. Why are you investing? There are countless reasons for investing such as saving up for a summer vacation or for a down-payment on a first home. How long are you investing for? The duration of the investment can be short-term or long-term, such as when you are saving up for retirement.
What amount of risk are you ready to bear? Conservative investors favor lower risk and accept lower returns while aggressive investors enjoy taking calculated risks and are not afraid of volatile investments.
Whichever type of investor you may be, let’s look at five ways to start funding small investments.
1. Opting-in for automatic deposits in the savings account
Investors can use automatic savings plans to grow their savings. Thanks to modern technology, they can opt-in to have small amounts of money deposited in their savings accounts at regular intervals, such as $500 every month or as little as $25 every paycheck. Opting-in for automatic deposits is a witty technique that enables investors to grow their wealth almost painlessly.
2. Enrolling in the employer’s retirement plan
Enrolling in the employer’s retirement plan is a good idea when investors are trying to save money long-term. Investors enroll in their company’s retirement plan when they meet the plan’s eligibility requirements. They are able to choose their contribution rate to the investment fund. The contributions are then automatically withheld from their pay, thus making such an investment virtually painless.
The selected contribution rate helps investors reach their retirement savings goal. Investors evaluate their investment options, since the default investment option may not always be the best choice for them. A good portfolio usually includes a balanced mix of investments and matches the investor’s risk appetite. Lastly, investors should review their contribution rate annually in order to ensure it is still aligned with their financial goals.
3. Investing in mutual funds
Investing in mutual funds is a well-known method that is great for investors who are just getting started. A mutual fund is an investment vehicle composed of a diversified set of securities such as stocks, bonds, money market instruments, etc. Investors participate in these professionally managed funds because the funds offer a diversified portfolio of assets they could not otherwise replicate.
Although some mutual funds require a minimum investment, others have no minimum requirements. Investors can thus have access to mutual funds for $500.
4. Getting social with peer-to-peer lending
Peer-to-peer lending, also known as P2P lending, is the practice of lending money to individuals or businesses without using a financial institution as an intermediary. P2P lending, also called social lending, is a method of debt financing that removes the middleman from the process. This method of investing is riskier than more traditional methods of investing that use a financial intermediary.
P2P lending compensates the investor for taking higher risks by offering higher potential returns. P2P lending, also known as crowdlending, allows investors to fund unsecured personal loans, such as student loans and payday loans. P2P lending also enables investors to fund secured loans that offer business assets as collateral.
5. Starting a business
Starting a business for less than $500 is possible when the venture requires very little initial capital investment. For example, starting an event planning business requires very little equipment, thus enabling the entrepreneur to direct most of the money towards marketing initiatives. Freelancing design services is also feasible for under $500. Costs include creating a portfolio and a website, as well as promoting ads for the small business. In order to start a business, investors and entrepreneurs have to think of all the possible ways they can leverage their strengths and monetize their assets.
In conclusion, it is important to remember that there are benefits and drawbacks to whichever method investors choose to adopt. Benefits obviously include the potential to earn an interesting return on investment. However, investing may represent drawbacks since all investments are subject to risk. It is possible to lose the invested sums of money and these losses can surpass the invested amounts. Past performance does not guarantee future results.
It is important to note that the financial information provided in this blog is for informational purposes and not for the purpose of providing specific investment advice. You should contact a financial advisor to obtain specific advice tailored to your financial needs. Financial advisors, along with brokers and dealers, must be registered with the securities regulator in order to sell securities or to offer investment advice.