We all want our money to grow and work for us. But for many, that’s seems so far off into the future. Investing can be the last priority on our financial checklist, below paying off debt and saving for an emergency fund.
While it’s always important to have our priorities straight when it comes to our finances, investing doesn’t always have to fall to the bottom of the list.
Investing can seem very overwhelming, especially with the large amount of money you hear about being invested in the stock markets….and the equally large amounts that people lose. However, even with as little as $500, you can start investing and making your money work for you.
Here are 4 tips that will help you get started:
Tip #1. Scared of risk? Start small
Investing requires at least some risk. The more risk you are willing the take, the higher chance you have of a higher yield. But if you’re scared of taking risk or unable to at this moment, you can still invest, but on a much smaller scale.
If you haven’t yet, open a savings account. Interest rates on these accounts are typically miniscule but it’s better than nothing. Wait until you are ready and have more saved up to invest elsewhere.
Tip #2. Invest in a certificate of deposit (CD)
Certificates of deposits or CDs are another way to invest with relatively low risk. With a CD, you have to commit to investing your money with a bank or a financial institution for a set period of time at a fixed interest rate.
The time period can last anywhere from 6 months to a few years and the longer you are willing to invest your money, the more return you’ll see. Once that time period is over, you’ll see your interest. Make sure, however, that you won’t need to withdraw your funds early. Otherwise, you’ll face a penalty.
Tip #3. Take at look at mutual funds and ETFs
Contrary to popular belief, you don’t always need a lot of money to start investing in stocks. With only a few hundred dollars, take a look at mutual funds and ETFs. These funds will spread out your money amongst different investments within it, which diversifies your portfolio and lowers your risk.
However, be careful of transactions and taxes. Your gains need to exceed your expenses to be worth it.
Tip #4. Consider a dividend reinvestment plan
You can also consider a dividend reinvestment plan. This will allow you to bypass a broker and buy shares directly from the company.
Not all companies offer dividend reinvestment plans or DRIPs so do your research. Some also charge transactions fees so account for those or look for DRIPs with no fees.
Investing isn’t for everyone but that’s not due to lack of opportunity. Depending on your financial situation, you can start investing too. However, keep in mind that the more you’re willing to risk, the more return you might see.
If you are still in debt, it might be a better idea to hold off on investing until you pay off your loans. Unless you have an investment you feel very strongly about, most yields on low-risk investments won’t offset the high interest rates you’re paying on your debt. At the end of the day, it’s all about being smart with where you put your money.