how to start investing with little money

How to Start Investing with Little Money

Investing is a great tool for creating more wealth and ensuring financial security for your future. By investing wisely, you have the potential to surpass the inflation rate, thereby safeguarding the purchasing power of your wealth.

The idea that one needs to have a large amount of money before investing is no longer prevalent. These days, becoming an investor is easy – you don’t need to have a large amount of money before you can buy a fractional share from any company of your choice. 

Truth is, you can start investing with small amounts and gradually increase your investments over time. The important thing is for you to have an investment goal and acquire financial knowledge on how to manage your investment. 

In this blog, you find out how you can start investing with small amount, as little as 10,000 naira and the investment options you explore with that little amount. 

Where Can I Invest a Small Amount of Money in Nigeria?

Here are the several investment options you can choose from if you are looking for the best platforms to invest your money. They include:

1. Stock Market

Buying and trading stocks in the stock market don’t require massive capital especially when you are using an online investment platform like Trove app. 

Therefore, you should consider investing in low-cost index funds or exchange-traded funds (ETFs) that provide diversification across different ranges of assets. The process of diversification will help minimize risk while giving you exposure to the overall market performance. 

You can invest in dividend-paying stocks – These stocks generate a steady stream of income, even with a small investment. Make sure to look out for companies with a history of consistent dividend payments and also consider reinvesting dividends to increase the growth of your investment over time.

2. Mutual Funds

A mutual fund is a financial vehicle that pools money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. So, you can invest with a minimum of  5000 naira

This investment is managed by professional fund managers or investment teams. Therefore, if you are not interested in trading and managing any assets yourself, you can do so through mutual funds.

Investing in mutual funds allows you to access a diversified investment portfolio without having to directly manage or select individual securities.

3. FGN Savings Bond

FGN Savings Bond is another investment that seems to provide a secure and accessible option for individuals seeking a low-risk avenue with the backing of the Nigerian government. 

You can invest in FGN bonds through stock brokers on The Nigerian Stock Exchange (NSE).

These Bonds are issued by the Federal Government of Nigeria, making them a direct obligation of the government. Also, state and local taxes do not apply to the investment.

4. Fixed Deposits (FD)

Fixed deposits are another good saving option when interest rates rise. It is a type of investment where your money is locked for the duration of the deposit. The length of time the funds are deposited with the bank determines the interest rate on the deposit.

However,  the interest could be compounded quarterly and paid upon maturity or it can also be paid monthly, quarterly, or until maturity.

Factors to Consider Before Investing with Little Amount

1. Identify your Financial Goals

This will serve as a road map for your investment success. Take a moment and write out what you intend to achieve with your investment. Are you investing to save for a dream house, go on a vacation, or prepare for your retirement? Whatever the case may be, make sure to identify your goals so you can run with them. 

2. Create a Budget

Although you intend to invest a small amount of money you still need to create a budget for your investment. To get your budget, you must assess your current financial state and identify areas where you can cut unnecessary expenses, freeing up funds for your initial investments.

3. Educate Yourself on Investment

Financial knowledge is key to successful investing. You need to gain financial knowledge on how to invest and the various sectors you can with. Take your time to learn about different asset classes, risk management, and investment strategies. Online resources, books, and financial news can be valuable tools for expanding your knowledge.

4. Consider Fractional Shares

You can consider investing in fractional shares of stocks or ETFs. Investing in fractional shares will enable you to buy a portion of a share in any company, making you a partial owner of the company.  This approach helps you to diversify your investment portfolio with a limited budget.

5. Risk Tolerance

You must assess your risk tolerance before you go ahead with the investment. This will help you build a well-balanced investment portfolio. 

How emotionally stable are you when there is a market fluctuation or potential loss? You need to understand that different investments come with varying levels of risk, so choose options that match your risk tolerance.

6. Choose the Right Investment Platform

Select investment platforms or apps that cater to small investors. One such incredible platform is Trove Finance. This platform allows you to invest in US, European, Nigerian, and Chinese stocks, bonds, and ETFs with as little as $10. 

7. Always Stay Informed

You need to regularly stay informed about economic trends, market developments, and any changes in your investment portfolio. In the bit of keeping up to date, you should always review your portfolio and adjust your investments based on your financial goals and market conditions.

Read Also: How to Invest in the US Stock Market From Nigeria

Conclusion

Investing with a small amount of money is not only achievable but also a smart financial decision you will ever make for yourself, especially in this current economic situation in Nigeria. By considering the various investment options in this post, you can start growing your wealth even with a limited budget. 

However, ensure you conduct thorough research, diversify your investments, and, most importantly, stay committed to your financial goals. 

To get started in your stock investment journey with little cash, download the Trove app today!

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