The COVID 19 pandemic has become a major game-changer when it comes to making investments. The uncertainty has pushed people even with a small income to rejig their financial portfolio to attain long-term security. In this rattled market, there are many investment avenues even for people who don’t have much income. Here are 6 easy ways to start investing with little money.
6 Easy Ways to Start Investing with Little Money
1. Cryptocurrency
People today are shedding inhibitions and are considering Bitcoin as a good idea for investment.
With the growing popularity of cryptocurrency, high yields have persuaded buyers towards it.
However, there are certain rules to follow, while investing in it, it is important to have pre-decided entry and exit points. This protects you from sudden shocks.
The crypto market is still not mature and is marked by sudden fluctuations, so the best way to grow your portfolio is to create a long-term investment strategy.
You will not be able to reap the benefits if you invest in a shorter period.
Also, you should select a reliable and trustworthy platform for a safe and stress-free investment journey.
Related – How to Start a Career in Cryptocurrency: 6 Things to do
2. Mutual Funds
As the market is witnessing volatility, investors have become conscious and don’t know where to invest. The last few years have been unkind to the investors.
However, the mutual fund route is safe and worth pursuing but don’t forget there is an element of risk involved in it. Debt mutual funds are less risky than equity mutual funds.
If you wish to invest to meet short-term goals that can be achieved in 5 years, investing in a debt mutual fund is the best alternative.
For long-term goals to be achieved, investing in equity mutual funds is the safe option. It is important to buy a fund based on your investment and risk profile.
If you don’t understand how to invest in mutual funds, you should seek the help of an investment advisor.
3. Employee Retirement Plans
If you are on a shoestring budget, even a simple step like enrolling yourself in a 401(k) or other kinds of employee retirement plan will see you out of your reach.
But investment in employer-sponsored plans may help you to reap high returns. For instance, you can invest 1% of your salary in the employee retirement plan.
It is a small amount that will be deducted from the salary, however, it will make generate a lot of wealth once you retire.
You can even change the contribution when you get a raise.
In the second year, you can contribute 2% of your salary and in the third year, you can increase the contribution to 3%.
4. IRA and Roth IRA
IRA is an investment option that will help you to save for retirement in a tax-free way. The 2 main kinds of IRA where you can invest in
Traditional IRA
You can make contributions and get deductions for the same. Any earnings can be potentially withdrawn at retirement.
Roth IRA
In this, individuals will make contributions after paying taxes. The money will get accumulated in your account and you can withdraw it at retirement.
Whether to select Roth IRA or traditional IRA, depends upon the tax bracket of the individual.
Individuals with a higher tax bracket may find Roth IRA more beneficial since the total tax deducted in retirement will be greater than the income tax.
Therefore, young workers should prefer Roth IRA.
Investors should start saving in IRA from early life to reap the compounding interest.
Your investment and earnings will be reinvested to get more earnings.
5. Invest in Bank
The banks offer various investment options to small investors.
They can easily open recurring deposit account that allows you to save money by making regular monthly contributions for a pre-determined time.
You can even use the net banking option to open the RD account.
However, if the depositor does not pay the instalments on time for three months, the account can be terminated and the service penalty will be levied.
The penalty for late payment may vary from bank to bank, depending upon the case of delay, RD instalment, and when the account was opened.
The banks also charge a penalty for pre-mature withdrawals.
There are many other deposit schemes that have been launched by the government in the interest of the investors.
6. Stock Market
It is yet another alternative to investing money, however little it is.
The researchers have proved that in the long time investment will fetch good returns and will help you to ride off the losses made during the short time.
The idea is not to panic during the changing market cycles. The corrections happen and the stock market recovers.
Creating a strong and sound portfolio will help you to seek returns in uncertain times. Buying high and selling low is the biggest mistake to make.
Investors should block noise from the outside to avoid making rash decisions.
The best solution is to make regular and planned investments-no matter when the market is low or high.
Conclusion: Start Investing with Little Money
The ballooning inflation, and the pandemic have prompted us to think about investment seriously.
These are some investment options for individuals to start investing with little money who are on a tight budget.
There are many others where they can invest like gold, and the real estate market, depending upon individual capacity.
