Does investing require a large sum?
“I am too poor. Investing is for the rich Wall Street types. I simply just don’t have enough money.”
These are some of the most common utterances from individuals with misconceptions about investing, and who maintain the belief that investing is best left for the wealthy.
Champagne wishes and caviar dreams may appear unfathomable for those living from paycheque to paycheque, and when you think of the bills — mortgages, car loans and the like — investing in the stock market might be so far down your list of priorities that the last person you think you need to speak with is an investment advisor.
So the question is: How do you invest if you believe you don’t have enough money?
Investing cannot wait until you get old
Let’s face it, if you do not invest now for when you retire, you will face a devastating situation in later years. Someday you will no longer be collecting that paycheque and your pension cheque may not be enough to live on. Starting young and diversifying through a variety of financial instruments is the best way to secure one’s financial future.
So what can you do when you need money to spend now?
The power of compounding
The idea of cutting out or reducing something in your life to make it more possible to save is not revolutionary — but it works. How often do you visit the nearest fast food restaurant for lunch? How many times during the month do you visit the club to blow off a little steam but then you end up blowing away more cash than you had anticipated? What if you cut those expenses by half, allowing you to save an extra $5,000 per month? At the end of the year you could have $60,000 to invest. Over 30 years that $60,000 could grow in excess of $1.8 million if you remain disciplined, which could make a significant impact in your life.
Choosing the right investment fund(s)
Unit trusts and mutual funds allow you to invest small amounts of money at higher returns when compared to saving in a traditional savings account. Investors with low-risk tolerance can select funds comprising money market, government and corporate securities. Equity-based funds are more suitable for investors with a higher-risk tolerance which promise higher-reward potential for taking aggressive positions.
Stock it up
Stocks/shares/equities (the names are interchangeable) allow you to invest small amount of funds into stocks by purchasing ownership in a company. Blue chip, value and income stocks like Sagicor, Lasco Manufacturing and Carreras, respectively, are just a few of the companies that you could add to your portfolio. If you are uncertain about which stocks to purchase, speak to your wealth advisor who may also suggest investing in an equity fund that gives exposure to a diverse range of stocks.
The bottom line
It is essential to bear in mind that investing does not always have to involve large sums. Most individuals who are willing to make a few sacrifices should be able to invest for retirement. Some of the strategies outlined may require the help of a wealth advisor, so why not speak with one today?
