Have you ever asked yourself, “How do I start investing”? Many people love to invest, but because they do not know where to start, they do not end up starting at all.
Some people believe that they do not have enough money to start investing, while others do not know what assets they should begin investing in. After all, there are so many investment types to choose from and so many choices to make that it can be intimidating.
Here are some basic tips for anyone wanting to begin investing with only small amounts of money to get you started.
How Do I Start Investing with Only a Small Deposit?
Perhaps the easiest option for beginning investors with only a small deposit is to look into investing in mutual funds. There are funds available that allow you to start investing without a lump sum deposit to get you started. They ask you to pay an agreed amount using monthly withdrawals from your checking account. You might agree to withdraw $25 or $50 or even $100. Decide how much you want to invest every month and then stick to a figure that is comfortable for your budget.
Each month, the mutual fund managers withdraw your money and invest it for you. Your money forms a part of a much larger pool of money made up of the cash of lots of investors.
Recently, the company I partnered with for asset management, Charles Schwab, started “Slices” where you can purchase stocks in fractional shares for as little as $5 for up to ten different stocks at the same time. This is a tremendous opportunity to start investing with small sums and build a portfolio of S&P 500 companies. For more information on this, contact me directly, and I will help you get set up.
How Do I Choose the Right Investment?
Choosing the right investment platform to suit you is a lot more involved than just sticking your money in the bank and earning interest. While this may give you some return on your money, it is not exactly a long-term investment strategy.
Your investment goals should be tailored to your specific reasons for wanting to invest in the first place. If you are trying to find a way to save extra money for a home down payment or to pay for college education, then consider how long you want to hold onto the investment. This can help to determine what type of investment you choose and how long you need to stay with your plan to see the returns you desire.
Should I Start Investing in the Stock Market?
When you buy shares, you are buying little pieces of ownership in one company. If that company performs poorly and the value of your stock drops, then you have put your investment at risk. Perhaps a less risky option to get started would be stock mutual funds or Exchange Traded Funds. These fund managers will invest the pooled funds from lots of investors into many company stocks, which diversifies the portfolio overall and spreads out the risk significantly. Even if one company performs badly, the total fund may still offer good returns simply because the investment is spread across a diverse selection of stocks.
How Do I Get Started Investing in Funds?
If you think you are ready to begin investing, then you should spend some time researching different types of funds available. There are quite a few websites that offer fund ratings and searchable parameters that can give you results of funds that meet your criteria.
You might search for funds that do not require an initial investment deposit and will allow you to begin investing using only monthly withdrawals from your checking account. When the database returns your results, you can narrow down your search into further categories, such as how much the administrative fees will cost, the return the fund has posted for the current year, and other aspects.
Exchange-Traded Funds act similarly at mutual funds but tend to have lower expenses associated with them, and they trade throughout the day just as stocks. These are ideal investment vehicles as they are tax efficient and rarely have taxable events such as capital gains. And with lower expenses when compared to mutual funds, they may provide a better return over the long run.
If you need any assistance or have any questions, feel free to reach out to me directly. Any advice provided in this post is general in nature and should be considered with the assistance of a fee-only Registered Financial Consultant who can guide you to the best fit for your unique situation.
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