How to Start Investing with a Small Budget and Grow Your Wealth

Reasons to Go for Investment With a Limited Budget

Here are a few reasons why you should start investing despite a low budget. Do not wait to accumulate a budget for taking the first step:

1. The earlier you start better it is. The compounding magic can only show the expected result with time. The exponential growth to your portfolio results in quicker and safer wealth accumulation.
2. Small investments mean small losses, which teaches you the tricks of the trade and gives you opportunities to curb your mistakes and adapt your beliefs and attitudes towards the market.
3. Discipline in any matter results in a positive outcome. Regular savings habit inculcates a disciplined approach towards your financial journey.
4. A well-thought-out strategy can help you diversify even with limited funds and reduce risk further.

5 Simple Steps to Building Wealth

These easy and safe steps will help you understand how to begin, even with minimal funding.

Set SMART Financial Goals:

Clarity is the key to having SMART goals: Specific, Measurable, Achievable, Relevant and Time-bound. To begin with, determine your financial goals for the next 5, 10, and 30 years. Then find out the amount you will need to achieve the objective at the end of these tenures, like international travel, child's education or marriage, down payment of a home, etc. The goals depend on your disposable income and the stage you are in. If you are a new entrant in the corporate world and have just started earning, your focus would be on buying a house, car, travel and your marriage. Similarly, for a family man with dependents, it will be retirement funds, his child’s marriage, parents' health, etc.

Secure a Budget for investment:

Do not procrastinate about investing. It is well agreed upon that after EMI payments or rent payments, and other expenses, investing is often postponed. However, a little organised approach and cutting down unnecessary expenses can help build up the minimum savings you require to start investing. One existing and effective budgeting technique is the 50/30/20 rule, where 50% of your after-tax income is spent on your essentials, 30% on discretionary items (like movies, dining out, travel, etc.) and 20% on savings and debt repayment (if any).

Best Investment Plans:

Armed with your savings, start looking for investment plans suited for a limited budget.

• Systematic Investment Plans:
  This is the most popular choice if you want to start your investment journey with as small an amount as Rs. 500 per month. It harnesses the power of rupee cost averaging and long-term compounding. You buy a larger number of units when the market is down and the NAV is lower, and vice versa when the market is bullish. The cost is hence averaged out, giving you an optimum return in 10 to 15 years.
• Digital Investment Platforms:
  Online brokerage firms often offer investing in stocks, ETFs, and index funds with minimum capital. Take advantage of these to get a taste of varied investment types.
• Government Schemes:
  The Government of India has also issued safe and accessible deposit types, such as public provident funds, post office recurring deposits, and National Savings Certificates. These are safe, government-backed schemes that give you stable returns and are risk-free.

Diversification of Portfolio:

The healthiest portfolios are those which has maximum diversification across asset classes like bonds, stocks, gold, bank deposits, etc. Diversification is possible even within one asset class, like mutual funds. Spread your investments within large, mid and small cap funds to have a higher average return. This strategy can reduce risk, counter volatility and lead to better wealth creation with minimum losses. Even in the insurance sector, you can check out the Jio Insurance Broking website to compare various plans and choose a plan with a minimum premium, yet catering to your coverage requirements.

Be Diligent and Patient with Time and Amount of Investment:

An SIP calculator can show how even a small contribution like Rs.1000 per month, made diligently over time, can grow into a healthy corpus. An increase of a further 10% in investment can generate returns 2.5 times higher. But have patience, as it is not an overnight process.

Concluding Tip

Follow these steps and you will be sorted. Once you begin and experience the result, you will find yourself to be more confident in making decisions, more aware of the market scenario and check out for diversification of your corpus to keep it safe and secure your financial future. That is indeed our financial objective. Is it not?