How to start investing with little money

It is a popular belief that the most difficult part of the investing journey is – ‘beginning it’. Once you start and stay consistent, there might be no looking back.

Often, investors get intimidated by the idea of investing because of the lack of spare funds. Many are also not aware of how to start investing with little money. Though it’s believed that investments can be started with a sizable amount, there are several avenues where you can start small investments.

Wealth creation is more about consistency, discipline and an early start rather than the quantum of money being invested could be helpful in building a corpus fund.

So, all you need to do is start investing with the little money you have and stay consistent to successfully build a solid portfolio for the future. This practice is also known as micro-investing, which essentially means low-cost investments.

Here are some affordable investment strategies that will give you an idea on how to invest small amounts and the factors you need to take into account when you make such small investments.

Prepare a budget and fix a monthly investment amount

The most important step is to calculate how much money you can invest every month. You should be prepared to invest with little money in hand regularly over several years. This will ensure consistency and help you accumulate a sizable amount in the long run. It’s better to avoid an ambitious target that can’t be met and left unachieved.

Investors should assess their income and expenses elaborately and establish a budget before fixing a monthly investment amount. You should not divert the money needed to cover day-to-day expenses or debt repayments for the purpose of investments. This will ensure that the cycle of investment doesn’t break.

Invest in low-fee products

The other thing to remember when you invest a little money is to always prefer low-cost investments. Choose products that have minimal investment fees or commission charges, and make sure that you are getting the most from your investment amount.

For example, if you want to invest in mutual funds, opt for funds that are passively managed and attract low investment fees. Exchange-traded funds (ETFs), too, charge low fees.

Take the SIP route

A systematic investment plan (SIP) is an investment route mostly offered by mutual funds wherein an investor can start investing with little money by gradually investing a fixed amount month after month. The minimum amount to invest in an SIP varies from fund house to fund house, but it can start from as low as ₹100 per month.

This gives a fair chance to investors to participate in the stock markets with small investments and build a corpus over a time.

Less risky portfolio

Small investors should ideally prefer a balanced and less risky portfolio when they are micro-investing, as volatile assets can create a lot of anxiety among such investors and can cause panic selloff at the worst possible time.

One can add low-risk investment products like government’s savings schemes or high-yield savings accounts to earn higher returns compared with usual savings accounts. Staying invested in such products for a longer duration of time will not just lend stability to your portfolio but also create attractive returns.

To conclude, small investors who are beginning their investment journey with little money should first ensure that they have taken care of their immediate financial needs before they start investing. Then, they can choose low-cost products, small savings schemes, and SIP schemes to build wealth in the long term.