You’re probably wondering that to start investing you need to have a big budget or an account from which you can spare a huge amount of money. But smart investing is all about planning the best tactics for you to grow in the market even without a big budget. For a solid smart investment plan, you need not worry about assorting capital or anything.
If you’re bothered by questions like how to get started or what’s the best way to begin or what advice to follow to kick start investment programs with little money, then you’ve come to the right place.
In this article, we’ll tell you how you can turn your couple hundred dollars into serious money with the best smart investment strategy.
An important tip in the business of investment and returns is to start as possible. This is recommended because the earlier you start investing, then the more beneficial it’s going to be later in your life. You’ll be able to take advantage of compounding which Einstein said is the ninth wonder of the world. You also develop high-risk tolerance if you start early and if you’re starting with a low budget, your risk factor is minimal.
Now let’s go over some healthy strategies for smart investing.
Smart Investing Strategies To Begin With
Once you start investing, you don’t want to lose, right? So be sure to stay on the right track. We’ll chalk out which ones are safe bets and which are high-risk gambles.
Now is the time to start saving. You must have tried to keep aside an amount every month, but it doesn’t go according to your plan, isn’t it? But with a little diligence, you can start saving a little portion every month. If you seriously keep doing this every month, you’ll have a lump sum figure at your disposal in no time. Moreover, if you are a person thinking of going into investing, it’s always good to have a little backup. So, if you haven’t started saving, now is the time to go for it. It’s a test of willpower but if you practice this small tactic, you’ll reap its benefits for a long time.
If you find it difficult to do it manually, then technology is there to the rescue. There are many apps that can ease the process for you. You can keep a tab on your expenses and transactions and the app will do the rest. It’ll round it off from your card and keep the excess as savings. You can also use your bank apps to get you a better saving plan.
Few Key Tips For Smart Investing:
- Set aside your Savings money regularly.
- Keep a tab on your book of transactions.
- Pay off debts with high interest rates first.
- Think about retirement plans.
- Decide the amount of risk you’re comfortable or willing to take.
- Keep checking your strategy from time to time to update according to your suitability.
- Don’t be afraid to increase your investment a notch when you’re steady.
Deal With Debts
Before you dive into investments, try to deal with your debts and decide on a process to get rid of them in a short span. Your debts might hold you back from smart investing, or hamper your strategy, or even cloud your judgment. Moreover, these loans have higher interest rates like 20 or 10% which is way more than your expected return from stock market investments.
Thus, it makes sense to pay them off before you kick start your smart investment strategy or at least have a plan to go about it without depending on your investment returns.
Consider Retirement Plans
This seems to be a long way off, doesn’t it? But trust me, you don’t want to dive into the market without having a clear idea of how you picture yourself after you stop working. What I mean by that is, the main idea is to have a comfortable retirement, so you have to take full advantage of government-induced retirement benefit plans.
In other words, if your company provides a 401(k) retirement plan, then don’t leave it as a matter of the future. You need to keep a tab because say for instance you earn $55, 000 per month and contribute $3000 to your retirement plan 401(k), then your employer might also contribute an extra $3000. Now some employers might not be so generous. But your target is to invest enough so that you receive the entire amount of your employer’s match. If you don’t focus on such details, you’re losing out on a lot of money for no reason at all.
You can check out more on the 401(k) strategy as they are powerful vehicles in your smart investment plans because of their favorable tax benefits.
Invest Your Tax Refund
If monthly savings become hard to bear, you can go for other smart investment strategies as well. Rather than setting aside money every month, you can choose to keep all or even a portion of your tax refund. You can use this lump sum to kick start your investment. This will not burden you with monthly savings. But give the necessary break in your investment career that you were seeking for a long time.
Recommendations As Per Investment Amount
An important tip before we get into the specifics is to remember to spend the minimum amount of money on investment fees. It’s a crucial factor in any kind of investment especially when you’re budget-investing. Let’s work with an example: for a $1 million investment capital, a $100 investment fee annually is a trivial figure. But if you have a $5000 account, then a $100 investment fee can be a lot to bear.
If you don’t keep a check on these, you’ll be taking the wrong turns in your smart investment plans.
Another thing to keep in mind is that you’ll need to weigh the return on investment against the amount of risk you’re taking depending upon your age. The goal is to steady your account, i.e., reduce your level of risk as you approach your retirement age.
You may think that this is a small amount, but with smart investment plans you can do wonders with only $500. Just as we mentioned in the beginning, it doesn’t take a lot to open with your investment portfolio.
If you’re new in the game, then you have to understand the market first. With $500, your goal will be to minimize risk and maximize benefits. Keeping both these factors in mind, you can either invest your money in CDs (certificate deposit) or even buy Treasury bills. These are risk-free options to warm your best until you make enough capital to invest in bigger deals. You can deposit in CDs in a bank or even a lender. For T bills, you can go for an online broker. You’ll earn little money in this way but it’s a good place to start with $500.
For investors willing to take more risk with $500, there are other options available as well. One such option is the DRIP (dividend reinvestment plan). Here, you buy some shares of a stock and the dividends automatically get invested in other shares. This way you create a web of investment and your return will always keep rolling and maximizing.
Another option is the ETF (exchange-traded fund). While this runs on a passive structure of management, you might have to pay transaction fees. You can use discount brokers working on commission plans to reduce these bills.
The more you drift away from Treasury bills and CDs, you’re driving towards higher risk zones. So if you’re open to high risks, you can also go for peer-to-peer lending or crowdfunding. If it fails then you’re headed towards loss, but successful crowdfunding may give you high returns. So, if you want to try out your luck with a $500, you can give this a shot.
If you’re starting early, you’ve time to wait for returns with minimum risks. So if you have a plan to get a house in the distant future, you can plan your investment accordingly with target-date funds. This is a smart investment strategy with low fees and low risk. You set a target date. Your investments are then automatically spread over that span of time. As your fund gets ripe with time, your risk reduces.
You can also go for individual stock shares. But these run on riskier grounds. You can earn dividends in cash and you have the liberty to choose whether to invest it further or not.
With this amount of money, you easily have a lot of options. But to recommend, you can consider investing in an index fund. This is a type of mutual fund that has lower fees than others. They have a passive management structure so you’ll have the added benefit of a low expense ratio.
As you climb the ladder, you’ll have more and more options to explore. With $5000, you can invest in real estate investment trust (REIT) for a continuous flow of money. You won’t be able to own a property but you’ll have a share in it.
The next available option is real estate crowdfunding. You can either be an accredited or a non-accredited investor to invest in this.
As a smart investment strategy, you can also go for debt and equity investment in properties. These have a high-yield promise like 8 – 12% per annum. However, these carry higher risks as well.
These might sound confusing, but the hardest part is to begin. So, straighten your plans and start smart investing.