When we hear of “investing,” we usually picture people in suits trading millions of dollars. Nowadays, we hear about people investing all around us, and it seems like everyone is doing it, but it also seems like you’re the only one who can’t invest because you have limited capital. Let me tell you something: investing is for everyone, regardless of the size of your bank account. We have created this guide for you to understand how to make small investments starting from $20.
We know that when it comes to money, ‘small’ means something different for everyone; that’s why we will go through different small investment methods.
Make Money Fast?
I don’t want to disappoint you, but there is no such thing as making money fast when investing. Many bloggers or YouTubers promise that you can quickly become a millionaire while investing, but let me tell you that this is not true, or if it is, it is very rare.
You need to learn that investing takes time, but the rewards are worth it. Warren Buffett, for example, also started with a small amount of money, and he turned it into $30 billion.
This shows that it doesn’t matter how much money you invest, but that you have to have the knowledge to use it properly. Don’t worry about investing too little because it is best to start small if you are new to investing.
How should you invest?
The key to success is not to invest blindly, as many think that they can just pick and choose a company. Even if it’s only $20, it’s your money, and you don’t want to waste it on a miserable investment. What you need to do is invest in good companies.
Now, what makes good companies? You should look for well-established companies that are not going to be threatened by company and that is run by a competent management team. After all, you don’t want to invest in a company that is bleeding money and runs the risk of going under on a moment’s notice.
Try to look for companies that have reduced the cost of their shares. This will significantly reduce the risk of making a major loss if the investment goes bad.
It seems to be accepted knowledge that diversification is key to healthy investments, but this won’t apply to you, since you can only diversify when you have enough revenue from one investment to cover the failure of another investment – in other words, you need to make sure that one or two bad investments won’t tank your whole project.
When investing with a small amount of money, you can afford to take higher risks because it will be a little painful but probably not tragic if you lose. You have lost $500; you will earn money back and try again. If you take a little more risk, you can also win a little more.
This is the strategy I recommend to new investors because it reduces risk while maximizing returns.
For example, if you want to buy into a company worth $80 per share (posted price), you would aim for a margin of safety of $40. If the company shares can’t be bought at $40, you should put it on your watch list, update your calculations regularly as new information becomes available, and exercise patience.
Whatever strategy you choose, take the time to research, and don’t wait any longer when you’re done researching. Invest a small amount of money each month instead of letting it sit in your bank account in savings mode. Saving is good, I’m not telling you otherwise, but it’s not the best approach if you want to build generational wealth. Let us know in the comment what your starting capital for investing is…