How to start investing with minimum pocket money?

Blog | TRADING 101

If you thought that investing in equities was only for the rich and the wealthy, then you just need to think again. Investing in shares is actually a lot more democratic that you can imagine. You can start investing in them even with a small corpus in hand. The important thing is to start early and ideally start today!

Demat means you can even buy 1 share of a company

In the past, physical shares were traded in lots. A lot would be a bunch of shares of a minimum number. For example stocks like ACC or Reliance Industries would trade in lots sizes of 50 shares. You could only buy or sell in lots and/or multiples of 50. Smaller lots were traded through the odd-lot window. Demat changed all that. Now, you can even buy or sell 1 share of any stock. So, if you buy 1 share of Reliance you need to invest just Rs.1,400 and if you want to buy one share of Infosys then all that you need to invest is Rs.740. And when you buy these shares through Upstox, there is no brokerage payable. So, this is all you pay plus minimal statutory charges. If you wonder what one can create with an investment of Rs.1,000 never forget the Wipro example. Rs.1,000 invested in Wipro shares in the year 1980 would be worth Rs.60 crore today. Don’t underestimate the power of small equity investments.

You can also adopt the SIP route to equity funds

If you feel that you are uncomfortable buying equity stocks directly, then there is another option for you. You can do a Systematic Investment Plan (SIP) in diversified or multi-cap equity funds. That way you get into the discipline of investing in equity funds on a regular basis and also get the benefit of rupee cost averaging as you focus on time rather than timing. Investing in equity fund SIPs can be done with an investment as low as Rs.500 per month and requires no additional effort from your side once it is on auto mode. Remember to maintain the discipline of not missing SIP instalments and continuing this SIP for a longer period of time. That is when the power of compounding works for you.

How about getting your family active in equities?

We often tend to behave like equity investing is akin to rocket science. It is not! Equity investing is a lot of common sense teamed with a little bit of logical reasoning. Most of your family members can do it. When your wife shops in the supermarket, she gets insights on which products are moving quickly off the shelves and which products are not. Encourage her to look at these insights from an investment perspective. Even the legendary investor Peter Lynch used to say that he got better insights into stocks from the supermarket than from investment conferences. Involve your kids into equity investing? There is no reason why they should not use a part of their pocket money to buy 1 share each month. They can use a guardian account but let then have a ring-fenced portfolio of stocks and watch it grow over time. That is more powerful than all the lectures on investing.

The beauty of equity investing is that you can start small and end up with a worthwhile corpus. Get into that habit at the earliest!