Did you know that you can begin to invest your money even when you are living paycheck to paycheck?
Investment begins when you make the choice to begin putting a little bit away every month so that you can begin to build your net worth.
Without investments, there is a very good chance that your financial future and your potential retirement are not going to be where you’d like them to be.
With these 5 unique ways to invest your money, you will be able to build a strong financial future that will allow you to accomplish every goal that you may have.
The days of living paycheck to paycheck can be long forgotten. You can have the things you need, some of the things you want, and be in a better position to give back – all because of investment success.
It all begins when you make the choice to accept some level of risk. The 0% risk plan for investing involves taking a box, putting your cash into that box, and then burying it in your backyard.
Money like this is very safe, but it won’t build in value.
Cash that is not invested will lose value over time because of inflation.
This is why knowing how to invest your money is so important!
#1. Look For Direct Stock Purchase Plans [DSPs]
DSPs are an investment option that the average household living paycheck to paycheck doesn’t even know about.
When you think of purchasing stock, what comes to mind? Funneling your cash through a broker, right? Maybe putting your money into an online investment account?
The problem with these options is that if you can only invest $100, much of that cash is going to be eaten up by fees. Even affordable online platforms that charge $7 per trade will cost you 7% of your investment cash up front!
DSPs take the broker out of the equation. The best plans aren’t going to charge you any fees at all.
You’ll be able to invest all of that $100 into shares of that company, which means you have a greater potential of expanding your net worth. When you have more money to invest, then you can purchase more through your preferred DSPs.
As you are looking at direct stock purchase plans, keep an eye out for opportunities that are called DRIPs, or dividend reinvestment plans.
When you own at least one share of a company, there is the possibility of earning a dividend on that share. DRIPs allow you to re-invest those dividends into more shares of the company.
Over time, with re-investments that continue to happen with those shares that you’ve got, a nice nest egg can begin to develop.
#2. Look For a Consistently Performing Mutual Fund
Mutual funds are often seen as an expensive investment proposition, but they are really quite affordable.
Many mutual fund companies today are allowing new investors the chance to begin building their net worth with deposits that are less than $50.
You might need to set up an ACH withdrawal on your checking account to participate, but that just means that you’ll be expanding your investments over time and that’s not a bad thing.
The one thing to watch out for with mutual funds, including low-minimum investment mutual funds, are the initial one-time investment fees that are sometimes present.
If you have $50 to invest, but you’re charged a one-time fee of $25, then you’re paying an initial fee of 50% for your total transaction.
If no fees are charged for future investments, then that percentage can begin to come down over time.
If additional fees are charged on top of the one-time investment fee, however, you’ll need to plot out how much of your cash is actually going to the mutual fund company and not to your future financial strength.
#3. Open an Index Fund
The problem that many investors have faced over the years is that their stock investments have looked more like mountains and valleys instead of a steep incline.
Large gains have been followed by large declines and at the end of the day, many stock investors have been lucky to be able to break even with their investments.
For those who have invested into an index fund, however, the broad market tracking has enabled some of them to achieve consistent 10% annual gains every year.
There are a number of index funds from which you can choose and the minimum investment amount that will be required of you can vary.
For Roth IRA accounts, Americans can open up an account for as little as $250.
If you have additional funds available that you might be able to invest, then you have the ability to pick and choose from even more investment options.
Here’s how to find success with an index fund: Look for an index fund that has a low expense ratio. The ones that are under 1% are typically the best that you’re going to be able to find.
#4. Think Long Term Gains Instead of Short Term Gains
For day investors to make profits, they need to be able to use thousands of dollars on stock investments to take advantage of small percentage swings of their investments.
If you’re investing less than $1,000 into stocks, however, you aren’t going to experience many short term gains at all.
Between the trading fees and the taxes that you’ll have to pay on profits, you won’t have a lot of extra capital to help you invest into something new.
That’s why it is important to think about long term gains instead of short term gains.
You’ve got a lot of options to consider when looking at long term gains. One of the best right now might actually be gold stocks.
Gold stocks are just like if you purchased the valuable metal on your own, but you have a paper representation of that value instead of the actual gold.
People tend to put their money into gold and other precious metals when the economy looks to be on a decline and in late 2014, the world economy looks to be in a decline.
Outside of China, Great Britain, and the United States, most major economies in 2014 were reporting recession statistics.
Even China’s growth has been the lowest it has seen in several years. All of this creates uncertainty and that uncertainty creates the conditions where investors flock to secure investment options to protect as much money as possible.
For gold, because it will become more scarce due to higher investment levels, the end result means that prices can go up.
#5. Limit Your Risk If You Are Uncomfortable
Any gains that you have are better than the negative results that happen when you just hold onto your cash.
If you are uncomfortable with the idea of investing into stocks, mutual funds, or starting an IRA, then going down to your local bank or credit union to look at local investment options is always a possibility.
Interest rates right now have been at historical lows for quite some time, so the amount of money that you’ll build through local banking institution investments is rather low – often 1% or less.
In return, you can lock up your cash into a CD or other investment for 6 months or 1 year to help build a little extra.
To put these ultra conservative investments into real numbers, let’s say that you have $500 to invest and you decide to put it into a CD.
At a 1% interest rate that is awarded at the end of the life of the CD, you’d make an extra $5. If you are awarded 1% interest monthly on the CD, a 6 month investment would net about $30 instead.
Bonus Tip: If you are wondering what is the best way to invest money, the answer is – Invest In Yourself
Before you can actually begin investing into a higher net worth, you’ve also got to be willing to invest into yourself.
This investment into yourself can take on a number of different forms, based on your personal preferences and needs.
- Create a new business opportunity on informative platforms like Wealthy Affiliate. (Open Education Project)
- Take educational classes that can help to bring about a higher degree, more certifications, or other specific job skills that can lead to a promotion.
- Invest into equipment that can help you turn a hobby into a second job at home to earn extra cash [i.e., buying a computer to help you write, jewelry supplies to help you make items, etc.]
Investing into yourself will always pay off in the long run.
To make sure you have money to be able to do this, you will need to pay yourself before you pay your bills.
Even if you just set aside a dedicated $20 every paycheck, that can begin to pay off over time.
In return, you’ll be able to invest your extra money and the skills that you have into a legitimate net worth that will provide you with the strong financial future that you need.
What do you think are the best ways to invest your money? Please let me know in the comments section below.
Image courtesy of kangshutters at FreeDigitalPhotos.net (Business Graph Growth Blue Arrow)