Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
The Best Ways to invest with minimal output
Reading Time: 5 minutesInvest with minimal output. Investing can be a great way to make your money work for you. But how do you do it? And can you afford to do it? One of the biggest myths about investing is that you have to be rich in order to even start.
In reality, you can start investing even if you just have a tenner a month to spare.
In fact, there are all sorts of options open to you if you’re willing to put a little away each month.
Sam North from investment platform eToro shares tips and ideas to help you build your investment portfolio with only a little each month.
As Sam tells us the “reality is that hypothetically, the sky’s the limit when investing. To try and paint a picture of how you can earn from as little as ten pounds, we take a look at the case study of Amazon; A stock that many people would have heard of and if you had invested $10 on the day of its IPO in 1997, then you would have made $23,400 by 2021 (5-year performance: 140%). If this isn’t an example of why it’s good to have a long term outlook, then I am not sure what is.”
Educate yourself (with help)
“With eToro’s Academy, there is a bundle of free educational material for both complete beginners as well as more experienced investors. From guides and videos to live webinars and podcasts, there is something for everyone. Every month, we run an Introduction To Investing 3-part webinar series which is aimed at new investors, and we deliver a podcast every week on the top stories in markets, broken down into a fun and easily digestible format (investing doesn’t have to be boring).”
Trade on your success
“On eToro there are Popular Investors who people can copy. So if the users on eToro see that you are performing well, making good returns and have a limited downside, they could choose to copy your every investment as an eToro Popular Investor. The Popular Investor Program enables talented and experienced investors to potentially generate a significant level of income from eToro when others copy your profile.”
Watch what the younger generations are doing
“Close your eyes and look into the future to see what the current younger generation are doing. What are they using? What is commonplace in the future world? Now ask yourself what investments relate to that. Think long-term.”
Understand the difference between high and low risk
“Whether it be a tenner, a hundred or a thousand pounds, it really does depend on the individual’s risk tolerance. With greater risk generally comes greater potential reward, but those investors who aren’t necessarily looking for a quick buck may well favour an investment with lower risk.
Also remember that investment in a giant company does not mean giant returns. Investing in a giant company probably only means your downside is more limited. For more risk-averse investors, this is not a bad strategy: at least to have a decent percentage of your portfolio allocated to these companies. It is worth noting that the biggest companies can still deliver good returns though, as many are way higher than their 2020 lows.”
Play the long game
“There is no guarantee of being “risk-free” whatsoever, but there are things you can do to help swing the odds in your favour. Not investing all of your money at once is a good start, as timing the market can be very hard. Instead, investing every month can help navigate through the volatility. Finally, and this is advisable for any investment, but do your own research before getting in.”
Stocks and Shares
“It depends. It is always helpful to deal with percentages rather than monetary figures as that way it is more universal. Typically, the S&P 500 which is the most traded equity market in the world, returns on average 10% a year. Some individual stocks can more than double in a year, whereas some can more than half, so ultimately it does depend on what stocks you invest in but with compounding and regular investing the average returns or not to be sniffed at.”
Diversify
“Splitting funds is essentially what people mean by diversification. It is recommended as a good risk management tool. Nobody can guarantee that all investments will be winners unfortunately, even though that would be amazing. By spreading this risk and investing in different areas of the market, you are not putting all your eggs in one basket as the saying goes. If one area doesn’t perform well, there’s no problem, as you have other investments that might do.”
Why Dollar-Cost-Averaging (DCA) can work
“When it comes to any investing strategy, there are pros and cons. Dollar-Cost-Averaging (DCA) is no different and for some people it can be a great way to invest, whereas for others they might prefer to time the market more precisely. Some of the pros of DCA are that you are staying regularly invested and it can help reduce the psychological strains of investing too. With DCA, you are committing to buy each month for example, regardless of where price is trading and if the market is lower you can see it as an opportunity to buy at a lower price. On the flip side, if you time the market perfectly you could of course make greater returns than if you had DCA but timing the market can be extremely hard. For newer and less experienced investors who don’t have the time or experience to try and time the market perfectly, DCA can be a useful investing tool going forward.”
Moving forward
Hopefully this article helps give you the confidence to go out there and take your first steps towards investing your money. However, if you have further questions, then don’t forget that the eToro Academy is waiting: offering all the free resources you may need to continue learning about investing as well as keeping you updated with all that’s going on in the markets. Most of all, when it comes to investing, enjoy the journey.
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This communication is for information and education purposes only and should not be taken as investment advice, a personal recommendation, or an offer of, or solicitation to buy or sell, any financial instruments. This material has been prepared without taking into account any particular recipient’s investment objectives or financial situation, and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past or future performance of a financial instrument, index or a packaged investment product are not, and should not be taken as, a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication.
In the UK I know DCA and Pound Cost Averaging and is why I’ve set up a standing order to save some money each month rather than risking saving in an account and trying to invest at the right time