Investing with a small amountWith historically low-interest rates, you lose money by saving. As prices rise (inflation) you can buy less and less with the amount in your account. You can do better! Did you know that nowadays it is possible to invest small amounts: it does not matter if you have$50, $100 or $1000 ... investing is always possible!
Is it worth to invest with a small amount?
Many people decide not to invest with a small amount, because they believe this is not interesting. Nothing could be further from the truth! If ever there was a good time to start investing, it is today. Even with small amounts you can build up a large amount in the long term. This works through the so-called snowball effect.When it snows one snowflake has little effect. However, all snowflakes together can form a snowball and as soon as it starts rolling it can create an avalanche! It is the same with investing. Of course, the $10 or 50 a month is not going to make any difference on its own. However, by constantly investing a small amount, your invested capital increases automatically. In addition, you benefit from return on returns. When you reinvest the money, you earn from your investment, and your money grows even faster. You will not only receive a return on the amount you initially invested, but also on the return you reinvest. That pays off in the long run! Let us see how much money you have left when you invest a small amount for 30 years with a return of 7%:
- $10 per month turns into $11,761
- $25 per month turns into $29,402
- $50 per month turns into $58,747
- $75 per month turns into $87,293
How can you invest with small amounts?
Consequently, it can definitely be worth trading with small amounts! But what is the best way to invest with a small amount? Nowadays, you have different possibilities. In this section of the article, we will review the best ways to do so:
- Actively speculate with a small amount
- Investing in an index fund or ETF
- Buy your shares without commissions
- Invest your change every time
- Track signal providers & benefit
- Lend a small amount
- Pay off your debts
What should you look for when you invest with a small amount?
The biggest return killer for people who invest with a small amount are the cost. It is unwise to invest with a bank or an expensive broker. When you pay a minimum amount of transaction costs over each trade, it is almost impossible to achieve a good return. Therefore, take a moment to select a cheap party.It is also important to remember that your ability to diversify is more limited with a small amount of money. You will need to be more creative to minimize the risks of your investments. By using some different options in this article, you can still diversify. A fund can also help you spread your risks.
How do you get the best results?
It is important to have a realistic view of the return you will achieve. Experts often count on an annual return of 6 to 8 percent. This may not be exciting, but in the long run you can still build up great wealth. This is possible because you also get a return on your new investment. When you start with unrealistic expectations, you often take too big a risk and lose the full amount of your investment.It is wise to invest periodically. By doing so, you avoid investing a substantial amount immediately and then sitting on a loss for years. By constantly investing a small amount, you invest at both favourable and less favourable times. This gives you a nice, stable return in the long run. It is also advisable not to watch your performance too much. Research has shown that people who keep a close eye on their portfolio often achieve worse investment results. This is because, out of panic, they are more likely to close positions. The stock markets regularly go up and down, but in the long run the general direction is up. It is therefore a shame to close positions out of panic.
Automatic investingYou can automate your small amount investments. You can do this by, for example, depositing a fixed amount into your investment account each month. That way you do not have to look at your investments anymore, and you will still get a good result!
Important in trading: a strategyIt is important to invest according to a strategy. Starting investors often fail because they do not have a system or do not follow their system. Therefore, decide beforehand what you are going to do and why you are going to do it. By testing your strategy with a small amount of money, you can easily discover if the strategy will work for larger amounts and this allows you to slowly build up an income from investing. When choosing a strategy, you can choose to focus on news items or on chart analysis. A profit warning can for example be a good indication that the company is doing badly. The demand for the share drops, which can cause the price to collapse considerably. If this is the case you can decide to short sell a certain share. More and more people are also using graph analysis. Within each chart, you can recognize fixed, recurring patterns. By studying these patterns, you can automatically buy at important levels by using orders. When you make sure that with each investment you take a higher profit than the amount you risk, it can hardly go wrong.
When do you change from investing a small amount to a large amount?
By investing with a small amount, you learn what it is like to invest with real money. The principle of investing is the same with a large amount, but keep in mind that it probably feels different. Therefore, it is wise to start with a small amount. When you are completely comfortable with that amount, you can slowly build up the amount you invest with.
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