How Can I Invest with Very Little Money?

Finance Tips

Many people think you have to be extremely wealthy to invest money. But the truth is, almost anyone can invest, and investing with very little money is easier now than ever before. If you’re worried that you don’t have enough money to invest, investing is one of the best things for you to do! Read on to see why it is achievable and why you should start today:

Even if you only have a small amount of money, you still have many great investment options.
Even if you only have a small amount of money, you still have many great investment options.

Start today

Don’t delay investing just because you think you need more money. There are countless ways you can invest with just a couple of euros. If you’re saving up money and waiting to invest, you can continue to do so after making your initial investment. The most important thing you can do as someone with a smaller sum to invest is starting as soon as possible. Yesterday would be ideal, but today is the second-best time to start investing.

Eliminate bad debt first

When you think of investing, paying off debt may not be what comes to mind, but getting rid of any bad debt you might have, is an excellent investment in your future. While you might generate a 7% or 8% return in the stock market, bad debt, like credit card interest, can easily cost you 20% or more annually. So, if you want to invest with little money, starting by eliminating bad debt can be a wise choice that will save you significant sums over time.

Stay consistent

Once you take the ever-important step toward making your initial investment, your top priority should be staying consistent. Particularly if you’re investing small amounts of money, you’ll need to maintain consistency and build good habits to keep yourself on track; if you do that, your future self will thank you.

Avoid high fees

High fees can be a scourge on any investment, but this is especially true if your investment is on the smaller side. For example, a €5 monthly account fee may not seem like much if you have €5,000 in your account, but in a €200 account, that figure represents 2.5% of your entire investment every month. Though the convenience of an investment vehicle like a mutual fund may be tempting, investments like these often come with management fees. As an investor starting with a smaller amount, you’ll need to be aware of fees, exercise caution, and be hypersensitive to any high-cost investment.

Use technology to your advantage

Today, there’s a host of apps dedicated to supporting people who want to invest with very little money. Acorns and Stash are, perhaps, two very well-known micro-investing apps, though many new competitors have stolen the spotlight as of late. These apps make investing simple, giving you the power to invest with just a few clicks of a mouse.

Investors can use technology to their advantage with Bondora Go & Grow, a platform for efficiently investing in peer-to-peer lending. Bondora Go & Grow is an excellent way for investors to grow their money by up to 6.75% annually*. With no minimum amount, this is an excellent option for anyone. Best of all, there are no annual management fees and a flat withdrawal fee of just €1.

Here are a few other great ways to invest a small amount of money:

  • Low minimum, low fee exchange-traded funds (ETFs)
  • Low minimum brokerage accounts (like DEGIRO and eToro)
  • Low fee Robo-advisors
  • Low minimum real estate crowdfunding

Do your research

Regardless of the approach you take to investing, it’s essential to do your research. Take your time and choose wisely before committing to any investment. When you start with a smaller sum of money to invest, you want to be sure you do everything in your power to get it right the first time. Doing your research and weighing the pros and cons of each option will give you the comfort of knowing you’re making a conscious, thoughtful decision on how and where to invest. In some cases, you may need to run some numbers and do a bit of cost calculating to determine if an investment is feasible.

Some basic calculations can help you determine the viability of different investments.
Some basic calculations can help you determine the viability of different investments.

Automate your investments

The ‘set it and forget it’ strategy is a tried-and-tested method for staying consistent and growing your investment portfolio. You may not have much in savings right now, but automating your investment can help you regularly set aside money. Automating your investments provides a hassle-free way to make investing small increments of money a part of your lifestyle.

If you’re worried about investing at the wrong time, investors of all levels use a popular strategy: dollar-cost averaging. With dollar-cost averaging, you reduce the risk of investing when an asset is trading at a high price. The dollar-cost averaging approach consists of taking the sum of money you want to invest and dividing it into equal portions that you invest incrementally over time. With most accounts, you can leverage technology to help streamline your dollar-cost averaged investment by automating your contributions.

Reinvest dividends

Another helpful tip for investing with little money is to reinvest dividends. Reinvesting dividends instead of cashing them out can help you defer taxes and buy you more shares of an asset. You can set your account to automatically reinvest dividends which, over time, will yield a far better return than if you cashed them out. With Go & Grow, your daily returns are automatically incorporated into your current investment.

Think long-term

Giving your money time to grow is one of the keys to investing success. Focusing on how your investment performs in the long term is more important than how much you have to invest today. If you start investing now, automate your future investments, stay consistent, and reinvest dividends, you’ll be amazed by how much money you can accumulate in just a few years. The power of compounding interest is impressive, but it doesn’t work its magic overnight. A 10% annual return won’t make you rich overnight, but if you continue to invest diligently over time, that 10% return will increase because the overall size of your portfolio is increasing.

When it comes to investing a small amount of money, time is on your side.
When it comes to investing a small amount of money, time is on your side.

Keys to success

When investing a smaller amount of money, it’s essential to ignore the day-to-day changes in the market. Remember, investing is often a long-term game–think of it as a marathon instead of a sprint. Investing, especially if you start with a small amount, is all about exercising patience and being consistent in pursuing your goals. Once you find a suitable, low or no-fee investment vehicle, park your money, continually add to that investment, and let your money go to work for you.

Please share this article with someone who needs to start investing today.