Investment opportunities open up for low-income and households with small savings
Photo by Andre Taissin on Unsplash
Investment has always been considered the domain of those who already have money to play with and invest. The saying “you have to spend money to make money” only furthers this conception. In many ways, it’s still partially true.
Large investments such as real estate, some stocks in huge companies, and many cryptocurrencies require a great deal of starting capital. However, investment has become far more accessible to households with less money to play with.
Adults with limited yet relatively secure savings can improve their wealth by investing in smaller options and building up their portfolios. Even purchasing rental properties can be attainable by finding appropriate mortgage lenders. Here are some of the different options available for small-scale investments.
The risks of investing
The first thing potential investors should understand is that every investment carries a degree of risk. There’s no such thing as a “sure thing”. Some investment opportunities are more stable than others and are more likely to earn a profit, but there is always a measure of risk and the possibility of losing the money you invested.
Because of this, it is always recommended to only invest money you can afford to lose. In a small-income household, this amount of money is far less than that of a financial mogul.
Low-risk investments tend to produce less money, but it is a more stable investment. Over time, those smaller profits can be put into short-term, riskier investments that have the potential to earn more money.
Investors say that if you treat investing like a game or gambling, you will often lose more money than you earn. Profitable investment involves doing research, following trends, and making intelligent choices, not just going with your gut or following what your friend is telling you.
Fractional investment
One of the best ways to invest as a beginner with limited funds is to use fractional investment. Stocks and real estate investments can be expensive, and it’s rarely a good idea to go into debt for an investment.
However, factional investment (or ownership) allows you to invest smaller amounts of money into a property or stock. As the name suggests, you become a partial owner of what you buy. Unlike a timeshare, where you don’t own any part of the property or physical asset, fractional ownership means you partially own the property itself.
This way, you still benefit from any rent or profits from a sale, but with lower costs in regard to purchasing and maintaining a property. In a similar sense, fractional investments into shares allow you to still invest, but with fewer funds. The downside is that you have to collaborate with other investors.
Investment apps
Investment apps, particularly those that use robo-advisors, can be a great way for beginners to start investing. Apps will help you to keep track of your investments and your portfolio, as well as any potential investments.
Some apps even automatically invest your money according to an algorithm. This essentially means that you can invest your money wisely without a great deal of experience or research. However, there is still a measure of risk involved and robo-advisers will take some of the profits off the top.
This is a good option for people who are able to regularly invest small amounts of money and don’t want to spend a great deal of time exploring their options.
Stocks and bonds
While buying stocks in big companies like Amazon or Apple is out of the question for a lot of people, there are always different classes of stocks to invest in. Smaller companies might also need investments, and you may find an affordable option near you.
Investing in startups can be very profitable, but it can also be very risky. New companies can fail spectacularly, meaning that your investment doesn’t go anywhere. It’s always a good idea to research these startups and new companies thoroughly before investing any capital.
Typically, a company that can create and present a solid business plan, including a plan to make a profit is more trustworthy than a company that simply flashes a great idea and grand yet vague aspirations at you.
Physical assets
One of the benefits of physical capital is that, at the end of the day, you have something for your investment. But an even more important benefit is that physical asset investment is often very accessible and there are options for a wide range of investments.
One of the most common physical assets is gold. Gold is valuable and holds its value well, making it a relatively stable asset. You can also find gold in different forms quite easily, allowing you to sell them to a collector or a gold investor. For example, if you have a gold coin collection, you can look into the current value of those coins and find somewhere to sell gold coins for a profit.
Households have also found that they can make money by selling other assets, such as clothing and collectibles. Some people even invest in things like whisky, as it appreciates in value over time.
Building your portfolio
Households with limited funds often have to start small, but it is possible to gradually build a portfolio through regular small investments. Over time, especially if you’re able to make a profit through these investments, you can start to collect dividends and grow your wealth.
Unfortunately, this requires patience. A varied portfolio is always a good option, as it allows you to reduce the risk of losing your funds.
High-yield saving
Finally, another investment option if you have savings is to move the money into a high-yield account. Many common savings accounts have low interest rates, so the money doesn’t do anything or can even depreciate in value.
High-yield accounts can generate far more money, but they do mean locking the savings away for an extended period. Essentially, this gives the bank time to invest your money for a profit.
