How To Start Investing With Limited Money

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How To Start Investing With Limited Money

When I was younger, no one sat down with me and explained the world of investing to me. I remember when I was a teenager, wondering about what these things called mutual funds were, but I never actually figured it out until much later.

To further that, I figured at the time that I never had enough money when I was young to make a dent into the world of investing. This was dead wrong and the thought process a lot of people get pulled into and they shouldn’t.

I wish someone had explained investing to me because the earlier that you invest your money, even if it’s not a significant amount of money, the more compound interest you have the opportunity to earn in your lifetime.

Speaking of compound interest, I wrote a post last year called How to Get Rich & Retire By Age 50, where I show you that even setting aside $1000 a year can fill out a very nice retirement fund by the time you are 50 years old. The key to making this happen is to started investing early, even if the investment each month is not very much.

In these examples, I am only suggesting you invest a whopping $84 a month starting at the age of 18. If you do just that, at an aggressive growth stock strategy and watching what you are investing in, you could have over $2,000,000 by the age of 50.

But that is just getting started right? I’m sure you could find a way to invest $84 a month right? The key is starting early though. The longer you wait, the more and more you are going to have to find to invest, so start investing early.

Think about this. If $84 a month can get you millions of dollars in the long run, what happens when you invest more. What about $300 a month or $500 a month, maybe $1000 a month? This is when your life gets really interesting the more you invest over time.

Don’t wait to invest, make sure you are taking care of your future now. Your not alone though, a staggering number of people are not properly saving or investing for retirement. Here are some recent statistics on what people are doing out there.

This is the percentage of money that Americans are setting aside for retirement, emergencies or other financial related goals in their lives.

Researchers at Stanford Center for Longevity say that if you want to retire by a reasonable age, you should be putting 10 – 17 % of your annual household income into investments for your future.

Of course, you may wonder why Americans are not saving for their future. Here is another set of statistics on why people have just not started to save.

These are all excuses that will end up biting you in the end. You have to make sacrifices to make sure you are well funded when you get older. You don’t know what you might need to be prepared for as you age.

I often find myself feeling bad for folks who I see at a Walmart greeting store visitors or working the drive thru line at a Taco Bell, where they are most certainly in their golden years, but they had not taken the appropriate steps early on in life to put money away for retirement.

So now, rather than enjoying brunch and tea at a local establishment before heading off to meet up with some friends for a game of backgammon, they are slaving over taco meat for an 8 hour shift to make ends meat.

Don’t let this happen to you!

So as this post alludes to, what are are the steps to making all this happen if I already don’t have a lot of money to work with? Let me give you some tips!

Start Investing Early and Now

There is no time to start saving and investing than now! The best time to start investing was yesterday, but if you didn’t do that, the 2nd best time to start investing is today!

Do not wait to start investing. Don’t make excuses. I hear people all the time, well I am going to start investing when I get $1000. Nope, not a good idea. If you have $50, start there and put that into an investment. Next month, you find another $50, go ahead and put that into an investment account. Ask yourself, if you can’t do that, can you start with a dollar a day?

If you can’t do that, then you need to work on cutting your expenses or maybe increasing your income. On this blog, I go over a vast number of ways to make more money. Here are a few places to start:

Have you ever heard of the snow ball effect? Where you start with a small snow ball and throw it down the hill. It’s rather insignificant to start but as it starts down the hill and starts to pickup more snow (AKA interest, dividends, growth) and the speed increases (increasing what you invest over time), then as you make it down the hill, your snowball gets bigger and badder to a point to where its just unstoppable.

Build your snowball today!

Find A Place To Invest My Money

So once you have come up with your strategy on where you will get a few bucks to start investing, the next step is to find a place to actually invest the money.

The first place to stop and ask if to talk to your employer and when I say that, I mean your HR department. Many companies offer a 401k fund. The cool thing about a 401k fund is that a lot of times, your employer will kick in free money as part of the deal.

Bottom line, if your company has a 401k plan and you are not investing in it, then you are missing out on free money. Here is how it works.

Generally, you invest pre-tax money from your paycheck automatically into a series of mutual funds that are available through the plan. When it’s pre-tax you are essentially investing a larger sum of money than if you just took the money as part of your paycheck.

When the money gets pushed into your investment account, your employer will kick in a percentage of whatever you invest up to a designated dollar limit. This is completely free money to you. Don’t miss out on it!

In addition to your 401k, you may want to just open up a standard mutual fund account with one of the leading brokerage firms out there. Here are a few that you may want to check out to see which one best suits your needs.

All of these will allow you to invest in good growth stock mutual funds and many of them will allow you to do this at very little or zero code. So, you won’t go wrong with selecting any of these companies.

If you are having a hard time decided, just pick one and go with it. You can always switch this out at a later date if you want to try a different broker.

Automate Your Investments

One of the biggest challenges of humans is that we forget and a lot of times are unpredictable. I mean to our defense, we all have a lot going on in our lives and remembering to pull that investment trigger can we challenging.

This is why we highly recommend that once you decide how much you are going to invest, that you setup an automatic withdrawal from your checking account to invest that amount of money every single period. Whether that is daily, weekly, monthly or yearly. Make it automatic so you don’t forget, and let that computer that never forgets do that investing for you.

Decide Where To Invest

So you got your money into a place to where you can click a button and make an investment. Now what?

Generally, you will want to be on the lookout for what is called a good growth stock mutual fund. You generally don’t want to be invested in a single stock like Apple, Amazon, Google or Microsoft. There is a higher degree of risk when you invest in companies like that because you never know what one company might do or what they might run into and here is a quick story close to my heart to give example to.

My mom had worked for a national bank for her entire career. As part of an inventive for working for this company, she was able to earn stock in the company. Well she worked at this company for decades through out her career and she had earned well over $100,000 worth of this stock.

Given that she had spent her career at this company, just having the stock meant more to her than even the money that was held within the investment. She was proud of the company she worked for and enjoyed her time there, so letting go of that stock really wasn’t a pleasant thought to her.

Well bring on the unexpected financial turmoil of 2008. What happens next, that bank, one that had been in business over 100 years, quickly fell to its knees. In an attempt to save it, the bank was gobbled up by another bank. The shares plummeted and what once was a really nice nest egg, the next minute was a mere fraction of what it once was.

Instead of $100k+, my parents now had couple thousand dollars. No one expected this to happen and it is the sole reason why you shouldn’t invest your money in single stocks.

Depending on the brokerage company that you select, each one does make available tools to select good mutual funds. Generally they do this based on a rating system, but you will want to inspect them yourselves to make sure they have had a strong past performance.

The other thing you are going to want to look for is to make sure your mutual funds don’t overlap, so let’s say you have a mutual fund that invests in Google, Apple and Amazon. Well, there is no reason to pickup a 2nd mutual fund that invests in the same companies.

The other tip in relation to that, is to diversify. Don’t put all your money in big tech stocks, spread it around. Put your money in big companies, but put some more of your money in smaller companies and international companies. Diversifying will allow you to fend off the risk that exists somewhere in the market.

Monitor Your Investment

Although, I told you to put your investment on auto-pilot earlier, you will want to make sure that the funds that you put your money in today, still perform a year later. People change, companies change and you want to make sure your dollars are still working as hard as they were a year ago.

Thankfully, your broker will be your friends in this matter. Each of these brokers have a way for you to login electronically to view the investments that you have active.

Some of the brokers will even offer various degrees of advice to help you place your investments appropriately. Do think carefully on whether a fee is worth it, if they charge.

A cool app that’s free that I found useful is called Personal Capital. The tool allows you to see all of your investments in one place, so you can easily see if everything is going well or if you need to make adjustments.

They even offer free advice one on one, so that could come in handy as well.

Sign up for a free account at Personal Capital. It doesn’t cost anything to give it a try.

Rinse and Repeat

So once you have all this investment and automation in place, just sit back and let the engine keeping turning away at your bright future.

Learning how to invest will pay dividends to you in the future. You will be less stressed and more fulfilled out of your future life. Do it today, you can make it happen and your future self will thank you tomorrow.

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