You don’t need millions in your bank account to start investing. You can always start small. Various funds can give you exposure to multiple assets with a small amount of capital. There are various investment plans and schemes that allow you to start investing with small amounts of capital.
This article explores some of the best investment suggestions for low budget investing.
Save as much as you can
If you want to invest with limited capital, you must save as much money as possible. You might need to find out where you are spending more than necessary and try to lower your expenses in that area. Nowadays, there are various ways to track and manage your expenses.
A money-saving plan can be anything from using Excel or Google Sheets to using expense tracking apps like ETMoney, Mint, Goodbudget, and You Need a Budget (YNAB). As long as you are able to recognise where you are overspending and are able to cut down such expenses, your money-saving plan should work.
Invest your bonuses
Typically, people don’t rely on their bonuses to pay for necessary expenses. So, if possible, you should commit to investing your bonus. It is important to invest your bonus wisely in long term investments` instead of experimenting with trading (short term) activities. Trading requires a lot of experience and might be challenging for beginners.
Where to invest your bonus?
For beginners, the best way to invest your bonus might be investments in funds (mutual funds and ETFs), that can give them diversification benefits at a smaller investment size, than direct investments.
Invest your tax refunds
Your tax refunds are another form of non-recurring income you can invest. If you do not have any urgent needs, you should consider investing your tax refund. If you are a beginner and unsure where to invest, investing in index funds, ETFs, mutual funds, and WealthBaskets are some ways you can park your tax refund in order to gain long term benefits.
Invest in index funds
Index funds are funds that try to track the returns of an index. Investing in index funds allows you to diversify at a low investment size and get returns close to the index’s returns. Additionally, Index funds generally have a lower expense ratio, in comparison to actively managed mutual funds. There are various index funds in India tracking market indices and sectoral indices.
Some of the Indian indices tracked by index funds:
|Index||ETF ticker on NSE – Example|
Systematic Investment Plans (SIPs)
Systematic Investment Plans involve investing a fixed amount of money periodically into an asset of your choice. SIPs allow you to start investing in small amounts. Another benefit of SIPs is that you do not have to bother about timing the market.
A common misconception is that the SIP strategy can only be used in mutual funds. You can set up SIPs in stocks, ETFs, WealthBaskets and other assets.
Invest in government schemes
Investing in stocks or even funds can be unattractive for investors with a low tolerance for risk. Government schemes are considered safer investment alternatives to stock market investments. While the rewards from investing in government schemes can be lower, they are considered less risky as a government is less likely to default on its obligations. It should be noted that although government defaults are rare, they are not nonexistent. However, the Indian government has never defaulted on its obligations.
There are various Indian government schemes. Some of the best-known government investment schemes are:
- Fixed Deposits (FD)
- Public Provident Fund (PPF)
- Government Securities (G-Secs)
- Sovereign Gold Bonds (SGBs)
- National Savings Certificate (NSC)
- National Pension Scheme (NPS)
- Post Office Monthly Income Scheme (POMIS)
Choose an investment plan
There are various investment plans offered by private companies. Private investment plans carry a higher level of risk than government schemes as they might sometimes be aimed at higher returns.
Different ways to invest money in investment plans by private companies:
- Monthly Income Plans
- Tax saving Fixed Deposits
Invest in budget WealthBaskets
Financial markets are lucrative and confusing at the same time. This is why many investors like to invest in actively managed mutual funds. However, a mutual fund is not completely transparent. A WealthBasket is. All stocks and ETFs in a WealthBasket are transferred to your Demat account, giving your complete control over your portfolio. You can invest in WealthBaskets with as little as ₹10,000.
WealthBaskets, a WealthDesk product, are managed by SEBI-registered professionals.
Investing can be difficult. There are various things you need to learn to invest effectively. But it is a misconception that you need a lot of capital to get started. With the right plan, you can start investing even on a shoestring budget. Various funds, investment schemes, and strategies are available for investing on a budget.
Investing in funds, tracking and minimizing your costs, and investing your non-recurring incomes (tax refunds, bonuses, etc.) are things you need to do to make money on a shoestring budget.
To invest on a tight budget, you must maximize your savings, invest all of your non-recurring incomes (tax refunds, bonuses, etc.), and consider investing in mutual funds and exchange-traded funds (ETFs).
Beginners might find it difficult to invest in stocks on their own. So, they may invest indirectly through mutual funds and exchange-traded funds (ETFs).
Due to inflation, saving money is less attractive than investing. High inflation can erode the value of your savings faster than the bank account adds value through interest rates. Investors have to aim for a portfolio that has inflation-beating returns.