Less than 50 percent of Americans currently invest in the stock market.
Are you part of the majority that’s wary of investing their hard-earned money? If so, what’s holding you back?
There are lots of reasons why people opt out of investing. Often, though, it’s because they’re not sure how to get started or they think they don’t have enough money to be an investor.
If you’re not sure how to start investing or are worried about your limited budget, keep reading. Listed below are some tips that will help you get started no matter how much money you have.
Reasons to Start Investing
Some people also hesitate to start investing because they don’t understand all the benefits that it has to offer.
There are lots of reasons to invest in the stock market, including the following:
- Grow wealth faster with higher interest rates
- Start saving for retirement
- Reduce your tax bill
- Support businesses you believe in
- Be part of something new and innovative
Now is also a great time to start investing because it’s easier than ever. You definitely don’t have to work on Wall Street to invest in the stock market.
How to Start Investing While on a Budget
If you’re looking to invest in the stock market but don’t have a lot of money to spare, don’t worry. The following are some tips that will help you begin investing even if you’re working with a very limited budget:
Start With a High-Interest Savings Account
A great way to dip your toe into the investment pool is to open a high-interest savings account.
There are lots of accounts, such as CDs, that have higher-than-average interest rates. Invest whatever you can spare — even if it’s only $5 dollars — in this account and watch it grow.
Use a Roboadvisor
If you don’t want to worry about managing your investments yourself, a roboadvisor is a great option. Roboadvisors make it easy for you to start investing even if you have no prior experience.
There are lots of low-cost online roboadvisors that will manage your money and provide you with the education you need to continue making good investment choices in the future.
Enroll in a Retirement Plan
In addition to opening a high-interest savings account, enrolling in a retirement plan is another great first-step to take when getting into the world of investing.
Everyone ought to have at least one retirement plan to which they contribute on a regular basis. Enroll in your employer’s 401(k) plan or open a traditional or Roth IRA if you’re self-employed.
Invest in Mutual Funds
Mutual funds make it easy for you to invest in a variety of stocks and bonds with one simple transaction. They’re perfect for people who want to start investing but don’t want to spend too much time thinking about the investment process.
Mutual funds often require higher minimum investments (between $500 and $1500). Some will waive the account minimums if you agree to make an automatic investment each month, though.
Use a Micro-investing App
If your budget is very limited, another good option is a micro-investing app.
Apps like Robinhood and Acorns make it easy for you to invest your spare change in stocks and index funds.
These apps lower the barrier to entry for many new investors, and they often have very low (or no) minimum balance requirements.
Common Investment Mistakes to Avoid
As you can see, there are tons of options out there no matter how tight your budget is. If you want to profit from any of these investment options, though, you need to make sure you’re avoiding these common investment mistakes:
Not Trusting Your Gut
It’s easy to let yourself be swayed by people who seem to know more about investing than you do.
There’s nothing wrong with taking advice from others, but don’t let them talk you into making an investment that feels wrong to you. Trust your gut and use caution when investing in a new venture or taking a risk.
Investing in Businesses You Don’t Understand
Be wary of investing in businesses of which you don’t have a thorough understanding.
It doesn’t matter if it’s supposed to be a hot new enterprise or is on track to become a billion-dollar company. If you don’t get it, your investment might come back to bite you later.
Not Staying Informed
Make sure you stay informed on how your investments are performing. Check in with them on a regular basis to make sure you’re on track to reach your financial goals.
Pay attention to stock market news as well. This will help you keep up with the trends and get an idea of whether you should invest in specific businesses or not.
Making Emotional Decisions
It’s important to stay informed. At the same time, though, it’s important to maintain a cool head when doing your research.
Don’t let fear cause you to make emotional decisions. Just because you see in the news one day that a company isn’t doing too well, that doesn’t mean you ought to go out and sell your stocks right away.
You also shouldn’t go out and drop a ton of money buying stock in a particular business just because they’re doing well right now.
Finally, don’t be impatient.
New investors often become obsessive over watching their money grow. Remember, though, that it takes time to build wealth.
If you’re patient, you’ll see much more significant returns that if you’re always obsessing over the markets and trying to move things along at a faster pace.
Start Investing Today
There are tons of benefits that come with being an investor.
The sooner you get started, the better off you’ll be later on. Even if you only have a small amount of money to spare, you can benefit from investing those funds.
Now that you know how to start investing, it’s time to get to work!
Keep these tips in mind so you can start growing wealth and making your money work for you, no matter how tight your budget is.
If you want to learn more about wise investing, we’ve got plenty of resources available. Check out some of our other investment-focused articles today for additional advice.