Only rich people can afford to invest, right? Wrong! Even if you can only spare a tenner a month you can invest and grow your money.
The idea that you have to have a lot of cash before you even think of investing is one of the big myths that stops millions of people becoming rich.
Don’t be one of them!
Here are five steps you can take NOW to invest like the big boys even if you only have a small amount of cash to spare each month:
- Give yourself a savings safety net first. Make sure you have enough money in an easy-access savings account that’s your ‘rainy-day’ fund – money you can dip into if everything goes pear-shaped. With this money to hand, if you lose your job or something happens that stops the money coming in, you won’t have to sell investments to fund yourself.
- Set up a standing order. In fact, you could set up a few standing orders from your current account into investments each month. Set it up at the beginning of the month, or whenever your salary comes in, so that the money goes out before you start to pay the shops, the restaurants, the travel agencies and so on. To start with it may feel odd to have less money to play with but you will soon get used to living on less each month.
- Invest in easy, cheap index-tracking funds. I am regularly asked what products people should start with when they begin investing and really you can’t do better than a nice, cheap index-tracking fund. These are run by computer algorithms and invest a small amount of your money into every company in a particular index (like the FTSE100 or the FTSE All Share or the S&P500 for example). The charges are low and the fund just goes up and down with the index. Companies like Vanguard, L&G, Fidelity and M&G offer index-tracking funds among others.
- Make sure you do it in an ISA. You can put up to £20,000 per tax year into an ISA-wrapped investment and it’s best to put that money into a stocks and shares (equities) ISA. So, when you set up your index-tracking fund, do it in an ISA so that you don’t have to pay tax on the gains.
- Ignore the ups and downs of the stock market. The stock market goes up and down on a daily basis and at the end of the year it could be anywhere. However, long-term history shows that it tends to go up so once you have put your money in (and ideally you are doing that on a regular basis) just take no notice other than checking your numbers once a year or so. If the market tanks don’t be spooked, it’s likely to be a ‘buy’ opportunity. If it goes up tremendously don’t be excited as it could easily crash after a while. Take a long-term view, invest small amounts at regular intervals and don’t check your holdings too often and you will grow richer and stay sane!
It’s also very helpful to get a bit of knowledge of investing news and techniques here and there. One great, FREE way to do this is to sign up to the MoneyMagpie.com fortnightly investing newsletter. It’s written for people who are starting to invest and those who are trying to build up their knowledge. Join the MoneyMagpie investing community for free by signing up now.
This should not be considered as financial advice.
Written by Jasmine Birtles
Images courtesy of unsplash.com
