Smart Investing on a Small Budget

Aug 9, 2022

Smart Investing on a Small Budget

While having a sizable bank balance may indicate liquidity, you are prone to lose it rapidly if you don’t have other sources of income or job security. Given the rising inflation, mere saving of money is not enough to give you financial freedom or even a lifestyle. You need to make smart investments. 

To recognize a solid investing opportunity, you don’t have to be a financial wizard. Additionally, you don’t need a large volume of money in your account to invest. Small but wise investments can provide you with more consistent returns than large sums of money.

Investments are an excellent (yes, safe!) method to increase your income, regardless of your age, whether you’ve recently obtained your first job or are well into your fifties.

Innovative Investment Options for a Small Budget

Invest in ETFs

An exchange-traded fund (ETF) is a good choice to start small. The majority of these ETFs do not have a minimum investment requirement. In addition, ETFs often have a passive management structure, which equates to lower recurring costs, in contrast to most mutual funds.

However, one disadvantage of ETFs is that you must pay transaction costs. Consider getting help from a bargain broker who doesn’t charge a commission to reduce these costs. You can also make fewer investments, such as making larger quarterly investments rather than smaller monthly ones.

Invest in Peer-to-Peer Lending

P2P lending platforms link money lenders with people who are in various types of endeavors. An entrepreneur can borrow money to fund his new business. A filmmaker can be looking for money to fund his independent film. With P2P lending, you get a chance to contribute to the growing aspects of the economy. And, it also has the potential to pay dividends. They can fetch high returns for investors who are prepared to take a huge risk or are simply fortunate enough to support a profitable newcomer.

Investing in peer-to-peer lending is a more recent investment option that has been gaining momentum. LenDenClub is one P2P lending platform that allows you to sign up as an investor even if you have a very small amount of money. One can become a money lender even if he has just ₹10,000 to spare for the investment. The platform offers a low-risk, high-yield investment option for investors. It is supported by artificial intelligence and machine learning in mitigating risk. LenDenClub has introduced a Fixed-Maturity Peer-to-Peer Plan (FMPP). Investors can invest their money in this plan with different tenures, ranging from one to five years. They can earn returns of up to 10 to 12% p.a.*

Mutual Funds

If you are keen on directly investing in equities, mutual funds are a more secure way to invest in the stock market. While we advise that you educate yourself about the market and how to invest in particular businesses, a small- or mid-cap mutual fund is a fantastic place to start.

Your stock portfolio will be highly diversified if you invest in a mutual fund. However, if you’re a novice investor, it is advised that you choose a SIP (systematic investment plan) to balance your dividend and yields across market swings.

Fixed Deposits

FDs are not an attractive investment option for young investors with a high risk appetite. However, they can be beneficial immediately before you take other types of debt. They offer better interest rates than savings accounts and are a more secure way of saving money than market-linked asset classes. They are very easy to invest in. You just need to deposit your money in a fixed deposit with a bank and let it remain invested without having to do anything else. 

Before making any investment, you must consider your bills, retirement savings, and emergency cash. More essentially, make sure your investments are pretty diverse to prevent losses due to volatility in one investment. Do not put all your eggs in one basket! 

Sovereign Gold Bonds

India loves gold. Indians treat gold as a great investment opportunity. However, you are no longer required to scramble to acquire a storage locker to store your gold. Instead, you can put money into gold bonds. Purchasing sovereign gold bonds is more cost-effective than buying physical gold. When you buy gold jewelry you incur an additional cost in the form of making charges. Even if you purchase gold in the form of bars or coins, there is an additional expense involved in storing the metal. 

Sovereign gold bonds also pay annual interest to investors. Furthermore, all sovereign gold bonds are by the Government of India, ensuring the security of your investment.

Insurance and Government Schemes

The government offers numerous investment opportunities. You may already be investing in some of these through your job like the employee provident fund (EPF). PPF (public provident fund) investing is among the most well-known government schemes for investment. The National Pension System (NPS) and National Savings Certificate (NCS) are other choices. These work well for your retirement savings and are perfect if your investment contribution is relatively small.

Conclusion

Investing can be challenging, but the fundamentals are straightforward. Maximize your savings. Reduce taxes and other costs. Utilize your limited resources wisely. Nevertheless, creating a portfolio can also pose challenges in figuring out how to optimize the trade-off between the risk of a particular investment and its prospective profits. Consider seeking assistance from a financial advisor.

Thanks to technology, many resources are available now. Options include fee-only financial advisors who do not rely on commissions from the financial plans they sell you. These virtual assistants can assist you in building a balanced portfolio at a minimal cost. Getting a start is the hardest part of investing. But, the sooner you do, the more money you will make. 

On top of that, online marketplaces like LenDenClub further simplify the process for investors. Let us see how –

  • A family of more than 2 million people
  • AI-powered Auto investment
  • Allows diversification and reduces risk
  • Screens borrower’s profile through 200+ data points to reduce the risk of default.
  • Provides returns of up to 10 to 12% p.a.*
  • Market-risk free returns
  • Safe and Secure transactions using the ESCROW mechanism.

Hop on the bandwagon with 2 million+ investors. Register now!

*P2P investment is subject to risks. And investment decisions taken by a lender on the basis of this information are at the discretion of the lender, and LenDenClub does not guarantee that the loan amount will be recovered from the borrower.

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