Invest with little money – Top 5 important tips

Is it worth investing with little money? A clear answer from consumer advocates: yes. Never before have investors with so little capital had so many investment opportunities as today. Interesting investments, such as the purchase of real estate and other promising investments, are no longer open only to wealthy investors, according to online reviews.

Is wealth management only for the rich? Is not correct. If you regularly invest some money in the capital markets or P2P investments, you can build a long-term fortune.

This is possible through new digital investment models, online sales channels, and innovative investor management software that significantly reduce the costs of structuring, selling, and managing for private investors compared to traditional investment products. This includes, for example, innovations such as crowdfunding. In this way, exclusive markets can be made accessible to a large group of private investors who can now participate in promising projects with relatively small sums of money.

What opportunities do micro-investments offer

The micro-investment strategy opens the opportunity for above-average returns. In addition, many smaller financial investments significantly reduce investment risk: if a small investment does not produce the expected return or even loss, this can be offset by profits from other financial investments.

The probability that none of the selected investments will generate a return, on the other hand, is quite low and decreases with the increase in the number of micro-investments. Through various investments with little money, the risk of loss from the general portfolio is minimized.

1. Invest in stocks with little money: attention, price fluctuations!

Buying individual shares is not an option for investors who do not want or can invest little money. Because small amounts cannot be widely spread in a large number of stocks in different industries and countries. Therefore, price fluctuations have a full impact on the value of the package of shares, which makes investing in individual shares extremely risky.

2. The savings book is not enough

Own capital reserves make life easier. Whether you need money for a major purchase or you want to secure your financial standard of living in old age: the more money you already have on top, the better. And that means: you will automatically get in touch with the subject of the stock market. Because the savings book alone will only help you to a very limited extent in the continuous accumulation of assets. At present, interest rates are simply too low for that. It’s more like investing in stocks and bonds with which you can increase your money visibly.

3. Obligations: This ensures a regular income

When investing in the stock market, you should not put everything on one card. As a rule, investors distribute their assets in two asset classes: bonds and shares. Similar to a savings account or a fixed-term deposit, bonds provide regular interest income.

4. That’s how connections work

The basic principle of a bond is quite simple: a debtor lends money to a creditor. Instead, the borrower receives a receipt from the borrower for the amount borrowed and pays interest regularly. The receipt shows how much money was borrowed (face value), how much is the related interest (nominal interest), when it will be paid, and when the borrowed money must be repaid (maturity date). Such receipts are nothing more than bonds (also called bonds or notes). The time between today and the due date is called the remaining term.

5. This calculates the yield on a bond

The yield is calculated from the nominal interest rate, the price of the bond, and the remaining term on which the interest income is distributed. Example: Suppose you buy bonds for 1,000 euros with a nominal interest rate of three percent. The bond has a term of five years and you pay 100 percent of the face value, ie 1,000 euros. If you held the bond for five years, you would get three percent interest for five years and the face value back at maturity, a total of 1,150 euros. In this case, the annual yield would be three percent.

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