Smart Investing on a Small Budget

  • June 30, 2020

A common myth about investing is that a big fat bank account is required just to get started. In reality, the process of building a solid portfolio can begin with a few thousand—or even a few hundred—dollars.

This story offers specific advice, organized by the amount you may have available to begin your investments. First, however, it covers some smart moves low-rollers can make to kickstart a savings and investment program.

Strategies to Start

Whether you’re planning to invest a little or quite a lot, in safe bets or high-risk gambles, these steps should help GSBM get your plans off on the right track.

Automate Savings

The diligence to dependably set aside a certain amount in savings every month will reap rewards in the long run. If you lack the willpower or organization to do that alone, technological help is available via various smartphone and computer applications.

The apps that make saving the least painless are those that simply round up your purchases and other transactions to the nearest dollar and put aside the “savings.” Acorns, Qapital, and Chime all round up transactions from your credit and/or debit cards and return the money to you in savings-friendly vehicles.

Acorns puts the money into one of several low-cost ETF portfolios;1 these are good vehicles for small savers, as we cover below. Qapital adds the option to automatically transfer money, based on rules you choose, to an FDIC-insured partner bank account.2 Chime, which is an online bank as well as an app, offers a savings account that automatically sets aside a percentage of every paycheck you deposit, among other features.3

Short of using these apps, check with your bank about its own apps and other ways you might automatically transfer funds from non-savings accounts to those better suited to savings and investment.

Deal With Your Debts

Before you begin to save, analyze what it’s costing you to carry debts you already have, and consider how rapidly you might discharge those. After all, high-interest credit cards can carry rates of 20% or more, and some student loans have interest rates over 10%. Those rates far eclipse the average annual earnings of 7% or so that the U.S. stock market has returned over time.

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