When the talk turns to investing, many people shut down. “I can’t invest, I don’t have enough money,” is a common refrain.
The good news is that you don’t need a large chunk of capital to start investing. Thanks to today’s resources, it’s possible to start investing when you have as little as $25. There are even brokerages that will let you invest what amounts to your pocket change.
For some, the idea that it’s possible to invest with a small amount of money isn’t enough to get started. Another regular excuse I hear about investing is this: “Does investing such a small amount really matter? What difference will it make to invest a few dollars a day?”
Once you understand the power of compound interest, and what’s available, you can start to understand that the important thing is getting started — and that consistency over time can lead to a substantial return.
How Much Could You Save Over Time By Investing Now?
It’s hard to imagine how a small amount can benefit you over time. Calculate My Wealth created this infographic that describes what you can expect when you start investing your money early on, even if you don’t have a lot to invest to start.
Infographic Courtesy of CalculateMyWealth.com
I like this example because it shows how a relatively small amount — $6 per day — can turn into turn into more than $3 million over the course of 45 years. Even if you invest conservatively, you can end up with close to $1 million without every increase that $6 per day investment.
You don’t even have to give up your daily coffee (or other pleasure) in order to make this work. Instead, consider what you might be spending money on that you don’t actually care about very much. Cut that out of your budget and start investing. The idea is to think about where you are spending your money, and how you use it today, and then devote at least the same amount of money toward your future.
Keep Investing and Increase the Amount You Contribute
Once you start investing, the key is to maintain consistency. Make it a point to invest regularly. Most online brokers let you set up an automatic investment plan that allows you to contribute twice a month or once each month. Take advantage of these plans to help you set your investing on automatic, and earmark the money for investing so you don’t wind up spending it on other things. Make investing a priority to start.
After you are comfortable with the amount you are investing, and after your financial situation has improved, start increasing the amount that you set aside. Make it a habit to boost your investing contribution when you get a raise, or when something else happens to improve your finances. If you automatically default to boosting your investment amount in relation to a higher amount of money. If you get a 3% raise, increase your investing by 3%. If you get a windfall, make sure at least part of it is invested.
Consistency over time can change the numbers you see for your nest egg, and it can also change how long you have to keep investing to reach your goals. Calculate My Wealth based their numbers on 45 years of investing. If you increase your contributions over time, there is a good chance that you could hit your goal of $1 million or $2 million without taking nearly so long.
I think so many of us get lost when looking at small numbers. It’s so hard to believe that 6 dollars a day can turn into such a vast sum. Thanks so much for this article. We need to get going on this.
It’s amazing how investments can and will grow if you give the gift of time…lots of time! My husband and I are in our early thirties and have been aggressively saving and investing since our mid-twenties. It’s so satisfying to see the growth in our investments. Starting early is such a huge help and I would recommend it too!
I think consistency is also important because changing investment styles can really hurt you. I’ve stuck with heavy international, EM , and oil positions and got clobbered. If I change now to heavy US weightings, I might be getting hit with a double whammy! Need to be patient
A great reminder that every fortune starts small.
I would humbly add that small-scale investors should be especially aware of transactions costs when buying securities. A high number of low-dollar transactions incurs much greater brokerage fees than a small number of larger-value purchases.
For instance, investing $25 with a $7/trade transaction cost means that at least 28% of the money gets eaten in brokerage fees right off the top. Investing in slightly larger periodic increments can be beneficial for this reason.
Starting off small is always a good approach to investing at any level. You will see a higher percentage return on your investment over the period and most importantly at a lower risk level. When you are ready to cash-out – just repeat the process and maintain the same percentages of investment.
Andrew L., Director
https://UkraineInvestors.com
Definitely planning to invest within this year. Just saving up a bit for emergency funds and then will make my money grow. I have been faced with several situations wherein it’s really difficult to not have the amount of money need to cover unexpected expenses and now I want to bounce back and have some peace of mind. I don’t drink coffee but tea is my vice. The figures shown here makes me re-consider on purchasing my next cup of tea. Thanks for the article!
Boring doesn’t sound that great, but it can lead to better financial results than the pros get. Just make sure to make small and steady investments and be “boring” like investing in an index fund. You just have to start somewhere and let the power of compounding take over. You don’t always have to try to beat the market.
That is exactly the point! One should start early and start small. Starting small helps to avoid big losses, but it motivates to learn more. I would suggest for the beginners also not to jump from one investment style or strategy to another. From very beginning the best method is to increase ownership in financially stable large global dividend paying companies. This will ensure that the portfolio is stable. And if the investor feels already comfortable in stock market, then he or she may go step further and start searching another areas – looking different industries, different stages of companies etc.
I would humbly add that small-scale traders should be especially aware of dealings costs when buying investments. A large variety of low-dollar dealings happens upon much greater broker charges than some larger-value buys.