Options of investing for beginners with little money
Everyone has a financial goal. It can be saving for a holiday or buying a house. Mostly, we put away some money into cash savings account. It is one of the options of investing for beginners with little money. Once our savings are secured and we have savings according to our near-future requirements, we think of more and bigger savings. This is generally the approach of investing for beginners with little money. At this stage, the savings turn into investment. With such low interest rates, someone saving £200 a month into a cash account, paying just 0.5% annual interest would receive £24,614 over 10 years. Out of it, the accumulated interest would be just £614. If there is an investment that would return 7% per annum, the extra return could generate £34,404.
Those with little money may think that investment opportunities such as the stock market are only for the rich and not for the small time investors, which is not true. There are opportunities for investing for beginners with little money. You can begin investing even with £50 per month.
Investing for beginners with little money: How to begin?
Start with deciding your financial goal, the reasons for investing, your timescale, and the money you will need to achieve this goal. Then think about your own risk tolerance. For example, are you comfortable that the value of your investment may be more or less with time or are you close to retirement and prefer a steady income.
Then you need to decide on the type of investment that would meet your demands and fit your attitude to risk. You can choose from a wide range of different asset classes or types of investment that would help you in putting money into the pot for the long term. Among the different types of investment types, the most common are shares and bonds.
Range of investments
Shares are the most common types of investment. Shares are simply a stake in a company, which pay regular dividend to its shareholders. Shareholders benefit from any profit, income or gains enjoyed by that company.
A bond is a loan to a company or government to raise some money. These are less risky and the time period and value of the loan are set in advance and a predetermined rate of interest is paid to the investor, who gets the money back at the end.
Investing in an individual company or bond requires considerable research and it can be costly, so it offers a good option as investing for beginners with little money. It can also be risky as you may be relying on one or two companies. So the most popular way of investing is via a fund which has a professional manager investing your money that pools your money with that of other investors and purchases a larger number of assets which are reviewed regularly and changed for achieving high performance levels.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.