Any people who think of investing in any conventional investment vehicle like the stock market to build wealth may have the saying in mind as it needs money to make money. However, you will be surprised to know the fact that you can now start investing even with a few dollars a week to create wealth over time. Here are some tips from Ali Ata for beginners who are new to the concept of micro-investing.
As the name suggests, micro-investing is all about saving for small chunks of money, like the spare change you have in hand. By investing consistently into the market through ETFs or fractional stock shares, you will be able to ensure a consistent return over time. As your investment piles up over a longer-term, even the smaller amounts will turn into thousands of dollars with consistent investment and reinvestment.
Being an investment consultant, Ali Ata suggests that beginner investors need to know the basics of micro-investing at the very first point. Skipping some small purchases that have already become a habit of rounding up to the nearest dollar of the changes while spending may be enough to get started with micro-investment.
This allows the investors to be in the market even when they do not have much in terms of savings to consider.
With the stocks of the well-known market giants and Google or Amazon, whose stocks are more than $2,500 or so, it may take a lot of time for a micro-investor to purchase just a single share. There are some personal finance management mobile apps too, which now offer debit cards that may automatically round up your purchase and put the additional money into ETFs or fractional shares. Here, the fractional shares will give you an opportunity to participate in the trade with affordable investments.
As Ali Ata points out, the approach of investing in the stock market can prove to be profitable over the longer term. Investing a small, fixed amount every week or month is, known as dollar-cost averaging, will take the market-timing decisions out of the equation. A consistent purchase model will help investors buy more shares while the prices go low and few shares when the market is bullish. With the dollar-cost averaging model, you will buy more over time and keep averaging the purchase prices.
Benefits of micro-investing
Here is Ali Ata’s top list of benefits of micro-investing:
- Low investment – We have already discussed the same as the top advantage of micro-investing, which will allow the beginner to start by investing even the least among money you have in hand.
- Diversification of the investment portfolio – Even if you adopt the low-cost ETF model, it is tied to the broader market indexes like the S&P 500, and you can build a diversified investment portfolio to build over time.
So, Ali Ata points out that consistently making small contributions with an add-on to a fair investment amount over time may potentially turn your little extra changes every week into thousands of dollars over the years.