If investing was an animal, it would be a tortoise.
Sounds weird, I know.
Let me explain.
In the fable of the tortoise and the hare, the tortoise wins the race by going slowly, but steadily.
And just like a tortoise, those who invest slowly and steadily win the race.
It’s a common myth that you need a lot of money in order to start investing – but it’s not true.
There are quite a few low-cost, small investments you can make that will help you grow your wealth over the long-term.
In this guide, we’ll look at how to start off with small investments and 5 small investments we recommend.
How can I invest with a small budget?
The best way to start small is to set aside a specific amount to invest every month.
Start with whatever you are comfortable with, rather than focusing on what you want to buy.
This contribution can be anything from €50 to €500, or as little as €10 – whatever makes the most sense for you and your budget.
Once you know how much you are willing to commit, you’ll need to start looking for a first investment that allows you to start small.
So, let’s take a closer look at your options.
The 5 best small investments
1. P2P investing
P2P investing online is one of the best small investments there is.
That’s because you can get started with just €10 while making a higher than average return of 14% (or 16% with Swaper’s bonus!).
By lending your money online, you effectively act as a bank and receive the interest payments yourself.
P2P investing is also very straightforward to start with: you just need to set up a deposit, create an Auto-Invest Portfolio and watch your money grow over time – no need to learn what a P/E ratio is or the intricacies of the stock market.
You’ll also be able to withdraw your money by selling on the secondary market whenever you want your money back.
Stocks are one of the top ways to invest small amounts of money and complement other investments such as P2P investing quite well.
By buying fractional shares (stocks that have been divided into smaller parts), you can contribute as little as €10. Having said that, you will usually need to do this through a separate broker or robo advisor, which means they sometimes charge higher fees.
You can get an average return rate of 8% with the stock market, but you will need to do a bit more research so you know which stock or basket of funds (ETFs) to invest in.
You might also want to keep an eye on your portfolio and rebalance it whenever necessary.
Gold is becoming a more popular investment as governments keep printing money and the future of the economy becomes more uncertain.
Gold is a good safe haven investment that will help you keep your portfolio diversified.
Some gold dealers allow you to get started with as little as €50, but their fees may be a little higher than usual. By buying gold you often won’t have to commit to a contract, and you can even get your gold delivered at home.
4, Pay off debt
If you have any sort of debt with a high interest rate, paying it off is another great small investment.
Think about it: if your APR is 15%, paying off your rate offers you a return of 15% – and there is no risk of it fluctuating!
If you have expensive debt, then paying it off bit by bit is a great small investment idea. You won’t have to research company accounts and you’ll feel very relieved once you pay it off.
5. Property crowdfunding
With a monthly investment of €100, you won’t be able to buy a house, renovate it and sell it.
But you can give it to someone else who will!
With real estate crowdfunding, you can contribute a small investment that makes money with returns on a property.
This is sometimes done through a Real Estate Investment Trust (REIT) – think of it like a “property ETF”. You can also do this through property crowdfunding platforms, or by investing directly into a property management company.
This type of asset is also great for property diversification, but crowd-investing in property can be a bit riskier and the returns may be lower.
In many cases, you will also need to commit at least €500, so make sure to pick a platform that accepts smaller contributions.
All that being said…
Is it worth making small investments?
Yes – absolutely!
As the saying goes, the best time to invest was 20 years ago.
But, the second-best time to invest? That’s right now.
Thanks to the power of compound interest, investing a small amount of money regularly for a long time is often better than waiting too long and investing a large amount of money.
Here is our favourite real-life example:
James invests €50 every month from the age of 25 and earns a return of 14% every year.
At the age of 65, he will be a millionaire with €1,117,719.17 in total.
Maria is wary of investing and prefers saving €50 every month and leaving it in a savings account with no interest.
At the age of 65, she’s left with just €23,400.
That’s a huge difference of €1,094,319.17!
Compound interest is that extra million!
What’s even more astounding is that if Maria decided to invest €150 per month, but didn’t start until the age of 35, she would have €823,945.65 by the age of 65.
It’s still pretty good, but it’s still quite a bit less than what James has!
That’s because in the last 10 years of James’ investing timeline, compound interest is accelerating his returns at a rate that Maria would need an extra ten years to get to.
By investing small amounts every month into an asset like P2P investing, you’ll be able to steadily grow your wealth.
How to decide on a small investment
We’ve given you five small investment ideas for you to get started with investing – but which one should you pick?
As with most things when it comes to investing, there are a lot of things that depend on your own situation. Here are a few questions you can ask yourself when deciding which investment to pick:
- How much money you want to and can commit
- How quickly you want to grow your money
- How liquid you want your money to be
- How involved in the process you want to be
- The risk you can tolerate
As a P2P platform, we are big advocates for P2P investing (no surprise there!).
But that’s because P2P investing is simple to do, doesn’t require a lot of capital and offers higher returns than other asset classes.
At Swaper, you can create a free account with us and only need to deposit €10 to get started.
Ready to invest? Create an account here.