The most common excuse for not investing is the classic ‘I don’t have enough’ money, but the fact is that you don’t need a lot of money to start investing. In fact, most people are already investing in courses, books, or reading articles such as this one.
Since knowledge is the most important investment, low-budget investing also aims to broaden your horizons and learn by practicing. The below list of investments isn’t something that will make you rich quickly (avoid those), but they are methods that everyone should get to know at least once with a small amount.
Savings Account
If you don’t have a savings account, drop everything and go get one in your bank. If your bank doesn’t offer a savings account, go and open an account in another bank. I’m stressing savings accounts so much because if you keep your money in a different account, you are losing money.
A savings account is a special account that brings you a small interest (around 5% APY) from the money you keep there. Usually, it’s the first thing you do before starting to invest elsewhere. If your other investments cannot bring more interest, then it’s not worth investing in them.
The types of savings accounts differ from your bank and region, but with a few exceptions, most of them will ask you to sacrifice some liquidity. Simply put, you won’t be able to withdraw funds for a while.
Retirement Plans
Retirement plans are another low-hanging fruit that highly depends on your bank and region. It’s similar to a savings account since you lose the liquidity of your money and can only withdraw it later. In the case of retirement plans, in your old age.
However, retirement plans have one huge advantage over saving accounts – tax benefits. Programs like 401(k) contributions are deducted from your wage before it’s taxed. It creates a unique possibility to invest and earn interest with a huge tax discount.
It might sound like the most boring investing option (and it might be), but retirement plans don’t require huge savings and are low-risk. You should research this option before starting something more risky.
Forex Trading
Forex trading (FX trading, for short) is the practice of purchasing and selling currencies to gain a profit. The main skill you need to be successful here is analytical. High-earning Forex traders are constantly monitoring the value changes of the currency to bet against the market.
It might sound quite simple – you purchase currencies when they are low and sell them when they are high. However, in practice, it’s much more complicated and rather stressful if you don’t know the basics. But forex trading is my favorite option because you can start practicing even with no money at all.
There are plenty of guides on how to start trading with no money, but it’s enough to say that Forex affiliate programs and demo accounts provide ample opportunities for low-budget traders. Even if you won’t make much money, it’s a good practice for educational purposes.
Micro Investing Platforms
Not that long ago, investing was only possible in big banks. Just opening a trading account there would require you to make a huge deposit, not to mention that you’d be charged various charges for the service.
After opening an account, you’d quickly notice that popular stock, such as NVDA, can cost more than $900, and that’s before any commissions or taxes. What’s worse is that banks would not start dealing with you if you didn’t buy at least a dozen shares. Luckily, such a situation has now changed.
Micro-investing platforms like Interactive Brokers, Trading 212, Revolut, and Robinhood have changed the game by allowing common people to purchase fractional shares. These are parts of shares that you can own. Together with other small investors, you own a complete share. There are no minimum or maximum caps for investing there.
Often, these platforms provide methods of building diverse portfolios or investing small sums into popular Exchange-Traded Funds (ETFs), such as the S&P 500. The commissions can be quite high if you earn more, but this isn’t a problem, as such platforms are more about making saving a habit.
There’s much more to know about how micro-investing platforms work. However, most of them are quite user-friendly and will also provide you with guides and further reading. It’s really a great way to start investing small amounts of up to $100.
P2P Lending Platforms
If big banks can be replaced by smaller startups to provide investment opportunities, then the same can also be achieved in lending. That’s exactly what Peer-to-Peer (P2P) lending platforms aim to achieve.
These platforms allow individuals and small businesses to lend money to others for some interest. It’s advantageous for both sides. You, as a lender, can evaluate who you are lending money to, while borrowers can get better rates than banks.
Since lending fees in banks are enormous, there’s plenty of room for you to earn more than from a savings account. However, you’ll have to learn to evaluate risks. My suggestion is to never invest in an industry you aren’t familiar with.
Cryptocurrencies
Since when cryptocurrencies started to be of interest to day traders, they have been a very controversial topic. Technical details aside, it’s a virtual currency that keeps its value thanks to cryptography technology. It allows complicated calculations to be distributed among a network of computers and thus keep value.
Even if there was a time when you could make a quick profit from trading cryptocurrencies, it has long since passed. Still, it is worth learning about cryptocurrencies. Just make sure to avoid the many get-rich-quickly schemes surrounding them.
Conclusion
This article isn’t exhaustive financial advice. Rather, I have shown you what options are available for small-sum investing, while the final decision on which one to go all in is yours. It’s best to get a taste of all of them just to know the basics before investing.
