Tips on Investing Small Amounts of Money

Investing is critical to improve one’s financial health and attain financial stability. Working full-time in an established company might enable you to earn money every month, but more often than not, it’ll be challenging for you to pay for emergencies if you don’t have any investments. One single emergency can even become the reason you’ll acquire too many debts and experience long-term financial stress. 

There are many different suggestions about how you should invest your money. Most of the advice that is given is based on professional experience and opinion. If you are new to investing, and if you have only a small amount of money to invest, then you need to select an investment strategy that will maximize the value of your small investment capital and that will also minimize your risk.

If you’re clueless on where and how to start, take note of these tips when investing with small amounts of money:

Diversify Your Portfolio

One of the most commonly given piece of advice about investing is to diversify your portfolio. Diversification helps to reduce the risks of losing all of your money if a single industry takes a turn for the worse, or if a single company takes a turn for the worse. The easiest way to diversify your portfolio when investing in small amounts is to buy mutual funds. Mutual funds come pre-diversified.

Aside from mutual funds, you can also try out real estate crowdfunding, or get into the stock market. Investments don’t have to be expensive today – you just have to know what your options are, and research so that you’ll know how certain types of investments work. 

Know Your Investment Style

Knowing your investment style is another important factor that you will want to take into consideration when investing your small investment capital. If you want to play it safe then you may want to consider investing in bonds. On the other hand, if you want to take more risks with your investment capital then you may want to try investing in penny stocks.

Make Use Of Advisors

You can still invest even if you have small amounts of money, but you have to be careful because the consequences of the risks you’ll take can be significant. If you invest in real estate crowdfunding and ended up losing your money, you might suffer from reoccurring debts just to make up for the money you lost.

Another tip to follow when investing with small amounts of money is to utilize the services of an advisor. Investing with Ellevest, for example, is a great option as you’ll have access to advisor services that can provide customized portfolio options to help you meet your financial goals. 

Making use of advisors as you’re investing will eventually be worth it as you can come up with better decisions and minimize risks during the process. 

Find Affordable Investment Methods

In addition to taking into consideration the type of investment that you should make, small time investors also need to find an affordable method of investing. Most brokers and online investment services require minimum orders and charge commissions or per trade fees that exceed $15 per trade. These fees can really cut into your investment capital, especially when you may only have $100 to work with at any one time. If you will be investing in small amounts then you will want to use an online investment service like Sharebuilder that doesn’t require a minimum account balance, and that also charges a reasonable per trade fee.

In Conclusion

You can still invest even if you don’t have millions of dollars in your bank account. But, regardless of the amount of money you’re planning to use for investments, make sure that you’re careful with your decisions. Only invest in endeavors that you’re familiar with so that you can properly set your expectations and assess if that investment is, indeed, legitimate or not.