How to Invest Your Money with Small Savings

Roshni Bhagtani

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A guide on how to invest your money with small savings

How to build your portfolio with Rs. 10,000 - a guide on how to invest your first amount:

You want to start investing but don't know where to start.

You're thinking, "I don't even have Rs. 10,000 in my bank account and I want to be the next Warren Buffett." it might seem impossible but this blog can help you to kick start.

A lot of people have this notion that if you have little to no savings you can not invest.

You can start saving and investing even with little money and you can slowly gain the knowledge and make investing a habit.

The first step is to start saving, Build financial discipline in you. Once you see your money grow at a compounding rate, investing will become a habit.

If you do not have enough money to invest at least 10,000 Rs. Begin by putting aside a minimum of Rs 500 to 800 each month.

If you did invest after reading this article, don't stop there; continue to save.

Let's have a look at the investment alternatives available to you:

Savings Account

Your friend or a family member has suggested that instead of investing ₹10,000, you should keep it in your savings account. They may be right because you must have a minimum of 20k to 30k in your savings account for spending. It’s important to maintain this balance in your savings account.

Fixed deposit/Recurring deposit

Fixed deposit is when you give an amount to the bank for a fixed period. It has a lock-in period. Interest rates typically vary from 4.5 percent to 6.5 percent, depending on the length of time you invest your money.

The liquidity is medium as some banks don’t allow you to liquidate your money and charge a penalty fee.

In a recurring deposit, you invest a predetermined amount every month, which helps you save, but there is a penalty charge if you miss your installment.

So when you explore other investment options the fixed deposit can become invisible because of its low rate of return but you can use a fixed deposit as an emergency fund and recurring to form a saving habit as they have zero risk.

Health Insurance

It is not an investment option, but rather an investment in your health, which is crucial. If you don't have health insurance and anything catastrophic happens, the medical bills might not only drain your funds but also force you to fall into debt.

You can invest in health insurance with other investment choices since you can become covered for an amount of 2-5 lakhs by paying Rs. 2,000 to 4,000 every year.

Mutual Funds

The goal is to build your portfolio with little savings. The best way to build your portfolio is to continue saving and investing, so after you have some amount in your savings account, emergency fund, and health insurance it's time to take the medium risk.

Investing in mutual funds allows you to diversify your portfolio while investing less. Mutual funds create a pool of money by collecting from people like you and me and fund managers invest that pool of money in well-performing businesses. With monthly SIP (systematic investment plan) you can start investing by just Rs.500. Mutual funds are in itself a full-fledged topic so don't forget to read our blog on mutual funds.

Bonds And Debt Instruments

To obtain funds, companies either sell bonds or debentures to the general public, which is similar to accepting a loan from the public and repaying it with fixed interest rates ranging from 7 to 11 percent.

The main difference between bonds and debentures is that bonds are secured, but debentures are not necessarily secured; there are unsecured debentures that are not backed by any asset.

It is a secure investment that has more risk than fixed deposits but less risk than mutual funds. Some part of your portfolio should be invested in secured instruments.

Liquid mutual funds

An investor seeking higher returns than fixed deposits should consider investing in liquid mutual funds. As the name implies, liquid mutual funds are extremely liquid and can be redeemed at any moment.

You can either invest your profits in the short term or set up an emergency fund. Liquid mutual funds invest your money in risk-free debt for a very short duration of time. It invests in debts instruments for a period of fewer than 91 days, there is no exit load on redemption after one week. However, if you redeem before a period of one week then there is a small exit load charged.

Other Investment Options

Other types of investments you can invest in are cryptocurrency and digital gold.

● Since the cryptocurrency market is so unpredictable, experts advise investing only 5 to 10% of your wealth. Don't put your initial investment in cryptocurrency. You can invest in cryptocurrency at a later stage of your investment journey. ● Digital gold can be used as the hedge against the market, with the digital gold investment starting at a price as low as Re. 1. We suggest you read our blog on digital gold to know more or contact our experts at Equiseed Wealth.

How to invest your Rs.10,000 in the stock market

Investing in the stock market can give promising returns. Investment in the stock market has always outperformed in the long run when compared with other investments. High returns and high risk are both sides of the same coin when investing in the stock market.

Know your company

Invest in a business instead of a stock price. Before investing, you should thoroughly research your business. This is the most basic and important tip. As you shouldn’t be depending on your luck so it's important to do the fundamental analysis of the company you are investing in.

Invest in growth stocks

Growth stocks are those companies that will outperform the industry and its competitors. The best way to grow your money is to invest in growing businesses. Blue-chip companies will grow but at a slower rate than growth stocks. When compared with dividend stocks and value stocks, growth stocks have more risk. Investing in growth stock, in the long run, can give tremendous returns if chosen wisely.

Volatility at your advantage

Use volatility to your advantage—the stock market is volatile, and you may take advantage of this by investing in funds when the market is bearish and the price of the stock you want to buy is low.

Long term investment

We've all heard about the IT industry. If you had invested Rs. 10,000 in TCS when it went public in 1993, your net worth would have been approx Rs. 1.20 crores.

You must make a long-term investment in a business unless certain red flags are indicating the company will go bankrupt or is not operating to its full potential when compared with its competitors.

We hope this blog has guided and inspired you to begin investing, as well as shed some light on investing with a small amount.

Do you require a financial wingman to assist you in the creation of wealth?

We at equiseed wealth are here for you; have a look at our wealth plan, which focuses on compounding money for you.