Investing is often seen as a “rich man’s game” because as the saying goes, “it takes money to make money.” Although this is true, the statement is missing one main component – time. In compounding savings, having the time to multiply your money is key. Herein lies the phrase, “time is money.” Therefore, the time to start investing is now. No amount is too little to start. Here are five ways to invest on a budget.
Derivatives
A derivative draws its value from an underlying entity, like an asset, index, or interest rate. Options are a common derivative. Options allow you to control shares of the stock at a discounted rate without having to purchase stock directly. The benefit is, you can profit whether the stock rises or falls, depending on the type of option. The risk is, you only have a predetermined amount of days to control the stock, depending on the expiration date of the contract. This is risky, but you can make quick money.
Forex
Forex is the currency market and is the largest investment market in the world. One way to engage in this market is through currency trading. In currency trading, you are trading currency against one another as pairs (ex. USD/EUR). Prices fluctuate based on the economic situation of the countries involved. Learning how to measure gains and what a “pip” is (percentage in points) may take time and much practice, but you can connect with a forex broker and begin trading for as little as $50. The benefits are quick gains providing money for larger investments or petty cash. The risk? All investment is risky, but you can put measures in place to limit your loss potential.
REIT (Real Estate Investment Trusts)
Want to receive income from owning property without the hassle of maintaining the physical property? A real estate investment trust account allows you to buy shares of publicly owned real estate companies for as little as $13 per share. A REIT is a company owning and typically operating real estate which generates income. Properties in this portfolio may include apartment complexes, data centers, hotels, and healthcare facilities. These types of companies pay a dividend to investors from gains. The benefits are steady dividends if you own shares. The risk, possible low growth.
Value Investing
Value investing was made famous by billionaire Warren Buffet. The idea is to choose stock that appears to be trading for less than their book value. Value investing is similar to knowing how to bargain shop. Just because the market speculates TVs are selling low does not mean they will not exceed expectations during holidays or during Super Bowl season. The idea is to invest while the stock is low and hold on to it until it is on the rise again. The benefit is buying low. The risk is playing the waiting game.
Small cap stock
Small cap stock is simply buying shares of smaller companies. Small cap stocks are good investments because they are typically less expensive to obtain, with the potential to grow as the company grows. The myth about small cap companies is they are startup companies. This couldn’t be further from the truth. Most small cap companies have strong track records and moreover, great financials. The benefit is they are smaller giving their prices a greater chance of growth. The risk… well, we are talking stocks so there is always a risk that the market will not grow as exponentially as we would like.
FinOp Consulting Group wants to help provide ways to compound your money for both short and long -term investing. Compounding is a way to multiply money through investing in money market accounts. The idea of needing to have lots of money to invest is a myth and often a barrier to entry. It is the goal of FinOp to introduce information to African Americans to decrease this barrier through financial literacy and investment tips. Understanding investment options will hopefully encourage investing. Compounding takes time, the one component that is not replicable. Whether you have $20 or $20,000, the time to start investing is now and FinOp Consulting Group, LLC can teach you how.
Melva Paden is president of FinOp Consulting Group, LLC.
