Everyone knows that financial investments build wealth faster than jobs and businesses. However, few people invest because they feel they don’t have enough. Fortunately, you don’t need an inheritance to start investing; you can start building your wealth by investing with low capital. In this article, you’ll learn how to invest in the stock and real estate markets even with low capital. Consider these seven options with investing tips to find your best fit:
- Mutual Funds
A mutual fund is an investment medium where multiple investors pool their funds to build a portfolio of investments. Mutual funds often contain a diversified portfolio of investment securities, including bonds and stocks.
This investment portfolio is usually managed by a professional fund manager. They determine how the investment funds are diversified across industries and sectors based on the fund strategy.
When you invest in a mutual fund, you buy shares in the fund and gain part ownership of the fund’s assets. You profit when your shares increase in value as the assets increase in value.
Mutual funds allow young investors to learn from professional portfolio management. It also mitigates risk by spreading risks across multiple investments and sharing liability with all funders.
- Exchange-Traded Funds
If you’re not comfortable with an investment portfolio spread across multiple industries, consider buying shares in exchange-traded funds (ETFs). EFTs with low expense ratios allow investors with tight budgets to pool their resources to invest in funds that can be traded on a stock exchange.
These funds also encourage a diversified portfolio, but are narrowed to a specific industry or asset type. This narrow diversification allows your basket of securities to be traded as an individual stock on an exchange. ETFs allow investors with low capital to invest with a large portfolio while sharing risks and liabilities with fellow investors.
- Geared Share Funds
The geared share fund, also known as a leveraged fund, is another exciting investment opportunity for young investors. This investment vehicle allows investors to increase their stock market exposure while increasing potential returns.
In this investment strategy, the fund manager pools money from investors and still borrows money to invest with the investors’ pooled capital. The idea is to increase stock market exposure by increasing the pooled capital with borrowed funds.
Usually, the manager secures the borrowed funds using the pooled funds from the investors. When you invest in a geared share fund, your liability is limited to the amount you invest. This is an effective way to invest in the stock market with limited risk and amplifies potential returns. It is popularly called the Australian geared share fund because it predominantly invests in Australian companies and does not hedge currency risks.
- Fractional Shares
You mustn’t pool your resources to start investing in the stock market with low capital. If you’re interested in investing alone, you start by buying fractional shares on the exchange market. The best-performing stocks are often pricey, leaving them for investors with large capital. However, with limited capital, you can purchase fractional shares of such stocks.
While a fractional share only allows partial ownership of a stock, it allows you to build a customized portfolio with a limited budget. This way, you can start your stock market investment journey standing on your own.
- Robo-Advisors
Young investors with little capital and market experience can start their investment journeys with robo-advisors. These are automated financial planning platforms powered by algorithms.
Robo-advisors are designed to simplify investments for investors with limited knowledge and financial capital. They collect users’ financial information and targets, offer helpful advice, and automatically invest your assets, all for a lower fee.
You’ll find many robo-advisors online. Some offer optimized portfolios for socially responsible investing and even halal investing. With minimal or no human contact, some can perform more complex tasks, from investment selection to retirement planning and tax-loss harvesting.
When choosing a platform, research well to find one that offers robust planning and portfolio management, low fees, comprehensive education, and updated security features.
- Micro-Investing
The internet now offers many micro-investment applications that allow you to invest small amounts of money to buy fractional shares of stocks. Some of these apps let you start investing with as little as $5.
While your dividends and returns may not change your financial status, these apps lower the investment entry barrier to allow you to start investing. You can also use this to build capital by pooling back your dividends and increasing your investment one dollar at a time.
Micro-investment apps are easy to use; many work like an automatic savings account. You may also find this feature on many Fintech applications. Nevertheless, every app works differently. Some automatically round up your purchases or balance and invest the change. Others allow you to fully control your investment parameters, including funding.
However, when choosing a platform for micro-investments, verify its security features to ensure that your money is safe. If possible it should be protected with the FDIC insurance.
- Real Estate Crowdfunding
The real estate market is another lucrative investment industry. Real estate crowdfunding allows you to tap into this industry with low capital. It is an investment entity where a large group of investors pool their resources together online to acquire real estate or implement projects.
You can join real estate crowdfunding through crowdfunding companies online. These companies gather investors, pool their funds, invest in real estate projects and properties, and share investment returns and dividends.
With real estate crowdfunding or syndication, you can start investing in the competitive real estate market with low capital. It allows you to enjoy the benefits of real estate investment while eliminating the issues and large expenses involved in property ownership and management.
Endnote
You don’t need an inheritance or a huge capital to start investing. Even on a tight budget, you can explore low-capital investments like mutual funds, exchange-traded funds, geared share funds, fractional shares, robo-advisors, micro-investing, or real estate crowdfunding to start building your wealth today.
