Smart Investing for Beginners on a Tight Budget

Investing can seem complicated and overwhelming when it conjures images of the stock market, in reality, there are other opportunities to invest irrespective of your income or age bracket. If you’re living paycheck-to-paycheck, without much room in your budget, you might assume that investing isn’t something you can do right now, but you don’t need to have a lot of money to start investing. Everyone needs to start somewhere, even if you’re just beginning your investment journey, it’s a good practice to start small. There are a number of ways to get started on a tight budget, and every little bit you can save and invest now will make things easier on you down the line.

The process of building a solid portfolio does not need to start with the big buck, as you can also start with a little amount. There are a lot of investing platforms out there such as fundbae and coralstone target savings that allow you to invest with as low as N5,000 to N25,000. The key to building wealth is developing good habits like regularly putting money away every month (and also resisting the temptation to spend your investment). Once you have a little money to play with, you can start to invest.

Although, to invest requires some investment strategy as there is a learning curve to understanding the principles of investment; with the right strategy, however, starting small can be an advantage rather than a restrain. Before you invest, kindly take note of these few points.

Investment Value: Before you put your money in any investment, it is important to know and understand the investment in the first place and how to get the greatest return on your investment. One of the key principles of investment is to have a little or more understanding of the market. Warren Buffett always advises that one should never invest in an investment instrument you don’t understand. Whether you are investing with small or big money, you will still follow the same basic investing strategy which is understanding the investment value in relation to the price (cost) of the investment. The value of an investment is always a top priority. For beginners and those looking to save on a budget, a good place to start will be mutual funds and treasury bills, are perfect for small savers and has very low risk.

Automate Saving: You may want to automate your saving to invest on a regular basis, by giving an instruction to your bank to make a direct debit on your saving account on a regular basis like monthly or bi-weekly. There are various saving platforms that will allow you to automate your saving.

In case your budget is tight and you can’t afford the minimum investment then you might have to consider saving for a while before investing. Since saving can be a bit stressful to adhere to, there are various easier ways to automate your savings than the traditional way (Cookie jar). You can sign up on a savings platform such as FundBae.

Deal with your debt; In case you already found yourself in debt, and you also have the mindset to invest, it would be advisable to pay-off all your debt ahead of time before you start to invest. Also, the sooner you pay off your debt, the sooner you’ll be in a strong financial position which will indirectly boost your confidence and consistency while investing.

Investing period: There is need to match your investment to your need for cash, even though ideally, investments should not be spent until one attains some financial independence. However, there may be times when there is dire need for cash. Money that will be needed in the short term (less than a year) should be put in high interest yielding saving account for easy accessibility, while money needed in the long term (greater than a year or 2) should be invested in mutual fund or FGN bond or stock.

Consider other investment instruments: Do not Put all your eggs in one basket!!! Remember, there are always risks involved in investments (except in treasury bills hence lower returns) that have higher returns. This is why we advise you diversify your portfolio amongst both low and high returns. It is always wise to diversify your investment across different instruments, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk.

Portfolio Management: The truth is that, investing might always prove to be time consuming or hard for some people to figure out, especially those that aren’t so good with numbers. That’s what investment companies are here for, to guide and give you investment advice on how, when and where to invest your hard-earned money to protect your future and achieve financial independence.

One of the major reasons for loss of value especially in a country like Nigeria is devaluation risk, which affects the value of investments relative to other currencies especially the dollar. Hence the need to also have dollar investment. E.g. Euro notes and bonds.

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