How to start investing with GEL 300 a month or less
In the modern world, managing one’s wealth while preparing for the future has become one of the most relevant aspects of our lives. The sudden arrival of coronavirus has tested many people’s financial well-being and highlighted the absolute necessity of having a contingency fund just in case.
The vast global financial market that has always been a great choice for growing one’s monthly savings through investing is often portrayed as a rich man’s luxury, contrary to the belief that anyone can dive into the market which always grants outstanding opportunities.
The earlier one begins, the better the results!
Investing is a numbers game where time is a crucial resource for increasing wealth, the more one stays in the market the greater the long-term results will be.
Investing GEL 300 in Apple stock in 2000 would have made money worth 6,900 today; meanwhile investing in Amazon at that time would have increased in value from GEL 300 to 3,000; and had you invested 300 a month since 2000? The money would be worth well over 60,000 today, so the earlier one gets started the better!
How to begin?
The first step is to open a trading account operated by a trusted brokerage firm. Do not let the term scare you! Brokerage firms are quite similar to banks, except they focus on holding investments. After registering on the platform you are free to begin.
Once the account is set up, take your time to do some research. There are many types of investments and it all depends on how much risk an investor is willing to take. There are several credit rating companies such as Moody’s or Fitch that analyze and rate investment opportunities from speculative to the world’s safest, so make sure to learn more and find out the meaning behind their estimations.
The most popular investment opportunities to consider
Stocks are one of the most popular investment opportunities and while the culture of stock-investing is still under development in Georgia, the 2020 Gallup polls show that around 55% of the American population, in fact, owns savings in stocks.
Index Funds
Instead of purchasing the stocks of an individual corporation, there are thousands of established investment funds that are offering a diversified bundle of companies, concentrated in a single stock. This means that by investing in these funds, you automatically own a small portion of a diverse set of companies under a single stock, which can often be one of the safest financial activities to pursue. Usually, the bundled companies are picked in such a way that the losses of a few are balanced by the profits of the many.
These stock bundles, offered by respected funds, are created by the world’s leading professionals and have been showing a consistently increasing trend since the 80s.
Having invested a monthly amount of GEL 300 at a conservative 6% annual return rate in the funds, the contribution would reach approximately 53,460 in a decade. Continue for another 10 years and the savings grow to GEL 149,040, an investment of 77,760 eventually being doubled in 20 years and continuing to grow exponentially.
Many advisors recommend investors choose a diversified S&P 500 index or an exchange-traded fund like the SPDR S&P 500 ETF (ticker: SPY) and consistently invest the selected amount per month. However, there are thousands of index funds that are worth the research.
Build your Investment Portfolio with Robo-Advisors
Once already familiar with investing, one can even try out creating a portfolio with selected companies, and while the method used to be pursued only by those with a degree in finance (which is still highly recommended to this day), fortunately the modern technology can also enable those without the background.
Dozens of Robo-advisors can recommend companies and help you create your portfolio and some of them require no upfront investment at all. With just a small monthly saving, you can get a well-diversified portfolio of stocks and bonds fully managed for you.
The Robo-advisors will design the portfolio for you, then manage it going forward for a minimal fee.
Read Investment Books
While targeting investment options, it is imperative to have at least some understanding of how an investment works. Luckily there are many books for beginners that can provide an excellent theoretical background.
Probably the most famous is Rich Dad Poor Dad (1997) by Robert Kiyosaki. This classic is a must-read for young investors. The book provides the author’s perspective on purchasing assets and when to sell them.
The Essays of Warren Buffett: Lessons for Corporate America (1997) by Warren Buffett
Widely considered to be the most successful investor of all time, Warren provides his views on various topics such as finding the right companies, evaluating them based on a company’s management and shareholders, as well as the thought processes involved in enhancing a company’s enterprise value and much more.
The Intelligent Investor (1949) by Benjamin Graham
Considered the father of value investing, this book has been hailed by Warren Buffet as the best investing book ever written. The author explains the analysis behind the purchase of stocks that appear underpriced relative to their inherent value and are profitable to acquire.
Summary
The most important thing is to take action! The modern world is always full of opportunities regardless of budget. There are dozens of both safe and speculative investments and it is up to the investor to decide how much risk can be tolerated, however one thing is for sure, the sooner one begins, the faster one’s money grows.
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