Its a common misconception that you have to be well-off to be an investorbut is just not true. No matter how much up youve saved up, even if its as little as 500, there are many ways you can kick-start your investing career.
1.The first step any investor just starting out should take is to accumulate knowledge. Spend time reading and understanding the best way to investbased on your own unique circumstances. Take a portion of your 500 starting capital and use it to buy books on investing and taketimeto read as much free material online as possible. Courses on accounting and investment management would also be a great investment. At this early stage, its all about building a knowledge base to ensure you make sensible investment decisions with a long-term outlook.
2. Before you dive into the stock market, you should always have some cash savings. Investing requires a long-termoutlook, and you need to be prepared to lock you cash away for a number of years. Without a cashcushion,you could be forced to sell your investments at the worst possibletime, which could hurt long-term returns and even cost you money. If you shop around, you can find some cash savings accounts that offer interest rates of 5% per annum if you deposit a certain amount every month andpromise not to withdraw the cash for 12 months. This could be a great way to invest your cash while you research other ways of investing.
3. If youre ready to start investing in the market, a tracker fund is probably the best way to go. A low-costFTSE 100orFTSE 250tracker is a great beginners investment.However, itsimportant that you hunt for the best deal tominimisebroker fees. Most brokers will charge an account management fee alongside trading commissions for accounts with a balance under a certain amount. These fees will eat away at returns over time. But there are ways around this. For example,TD Direct Investments offers a regular investment ISA, which doesnt charge a management fee if you commit to investinga minimum of 25 every month, trading commissions are also reduced to 1.50 per monthly trade. If you dont invest on a regular basis its 12.50 to trade, and account management fees are 30 every six months.
4. The more entrepreneurial investors could use the 500 to start a business. Of course, youre not going to start the nextCoca-ColaorAppleovernight but it is possible to generate impressive returns by using very simple business models. Buying bottled water in bulk for 1 a bottle and then selling for 1.50 a bottle on a warm day would net you a 50% return for every 100 invested.
5. Rule number five is probably the most important. If you only have 500 to start investing, be sensible and remember Warren Buffetts rule one of investing, dont lose money. There are many get-rich schemes out there, but novice investors should avoid all of them. It may be tempting to use sophisticated financial products such as CFDs, spread betting and FX trading to help accelerate your returns, but more thanthree-quartersof the investors that try these products end up losing money. Its better just to stay away entirely.
All in all, earning life-changing sums of money isn’t easy. It requires time, effort and even a little sacrifice — and most people always prefer to take what seems like the easy option, only to wonder why they’re no better off years down the line.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares in Apple. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.