There’s no denying that the idea of investment – the cultural concept of it – is one that carries a certain amount of prestige. For those that have never invested, it may seem like a longshot, a goal up on the bucket list alongside owning a yacht.
In reality, investing is a smart, sound financial path open to all individuals – not just ones that already have significant wealth. In fact, investing small amounts of money consistently can build a portfolio in less time than you likely imagine.
Psychology tells us that money-related or no, doing anything on a regular basis makes you more likely to continue doing it. When you normalize setting aside a certain amount for investments on a regular basis – say, with every paycheck you receive – you’ll be surprised how quickly it becomes second nature. Consistency is the key to investing, particularly with smaller amounts. When you commit to weekly, bi-weekly, or even monthly investments of the same amount, you’ll be able to grow your portfolio in a measurable way without hurting your wallet.
Investing small amounts of money over time is hardly a revolutionary concept, but it’s getting more endorsement than ever before. As cash-strapped millennials and their younger counterparts eye retirement in an employment field sparse on pensions, buying “parts” of stocks or making “micro-investments” through apps give them more financial hope for their golden years. The best way to match investment strategies to income, however, remains working with a professional: apps can’t offer the customized financial guidance that they’ll need as their investment grows.
Certain investments, even ones that are only funded $10 or $25 at a time each week, can help shave tax liability down to manageable levels. When an investor works with a professional to find the right investment vehicle for their consistent deposits, they can opt into programs or accounts that shield them from taxes or defer taxes to a later date. This can help keep them in the desired tax bracket, or lower their overall “on paper” income alongside a spouse or partner’s to lower their tax payment requirements.
Believe it or not, by adhering to the myth that a lot of money is needed before investment can begin, a lot of people end up cheating themselves out of free money. By skipping out, for example, on a workplace 401k matching, they’re leaving that match on the table when they could be pocketing it for their future. When you consider it could be 4% of your total salary, setting aside 2% doesn’t seem so painful in the short term. Interest rates on bonds, investment accounts, and other investment vehicles can fluctuate with the market – but a 401k match, taking advantage of consistently? That’s a guaranteed return on the match percentage, no matter how volatile the market may become.
If you’re ready to wade into the lucrative waters of small investments over time, work with a financial professional to find the best path for your needs and budget. You’ll likely be pleasantly surprised at what you can accomplish in only a matter of weeks, and the benefits will last you well into your old age.
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