đ€5 Small Investments That Make Money: Your Financial Freedom Secrets
Scared of starting your investment journey? Do you think you need piles of money, a six-figure salary, or generational wealth? You would be surprised how easily you can start investing. You can start your as low as 20 dollars. Invest small and these small investments with smart investing strategies and the magic of compounding can help you climb the financial ladder. So what are these small investments that make money for you in the long term? The answer is index funds. Letâs learn what are index funds.
âWhat are Index Funds?
Index funds are just a collection of companies where your money is invested. Instead of trying to pick one better stock, your money is invested in 100s of companies. You choose the type of index fund that you would like to invest and that money gets spread across all the companies that the index fund holds. For example, an S&P 500 index fund would invest your money in the 500 largest companies that are publicly traded in the US. Letâs see why are those considered small investments in the world of investing.
"The most sensible equity investment for the great majority of investors is a low-cost index fund."
Why are Index Funds "Small" Investmentsâ
- Low Minimums to Start: A good amount of index funds these days allow you to start as low as $20. And I am sure if you can spend 20 dollars on a meal then you can invest 20 dollars for your future meals too. These small investments have become accessible to most of us.
- Fractional Shares:Â Some investment platforms allow you to purchase fractional shares of an index fund. This means you don’t need to come up with enough money to buy a whole share (which can be expensive for high-performing funds).
- Automatic Investing:Â If you are investing then you must hold it for the long term to truly get the compounding magic work for you. Most banks have made it easy to automate your investments in these index funds on whatever schedule you are interested in.
â Benefits of Starting Small with Index Funds
- Develops Habit and Discipline:Â Investing isnât a one-time thing. You must form a long-term habit and discipline for your investments to grow bigger and fatter. Invest whatever you can and make sure you make it a habit.
- Reduces Risk:Â The fear of losing money is real and starting small and understanding your investments in index funds are invested in 100s of companies reduce the risk and fear of losing the money. Not all the companies are gonna go down together. If one goes down another will rise and your money will grow with that.
- Low Fees:Â Index funds are passively managed since your money is spread across multiple companies there is no active management required. Hence the low cost of management. This helps for your small investments because the majority of money is invested and not wasted on fees.
- Long-Term Growth: History speaks for itself and stock market history shows that even with occasional crashes your money is bound to grow. Your small investments in the long term will grow bigger as the market grows. Index funds will, more or less follow the same upward trend in the long-term.
"By periodically investing in low-cost index funds, the index fund investor captures the major gains of the American economy without blinking."
5ïžâŁ Best Index Funds to Start Your Small Investments:
You wonât be able to build wealth by putting your money in a bank account. Inflation is going to eat the value of the current dollar. We must beat inflation and prepare for our future needs by investing our money. The compounding of money will help us have more money if we start sooner. Donât rely on social security or your kids, you must secure your retirement by automating your investments.
- Vanguard S&P 500 ETF (VOO):Â Vanguardsâ S&P 500 index fund tracks the S&P 500, with an expense ratio of just 0.03% is a still.
- Fidelity ZERO Large Cap Index Fund (FZROX):Â If you donât want the fees at all then Fidelityâs S&P 500 tracker, promises an expense ratio of 0.00% (no fees!). My personal favorite.
- Schwab U.S. Broad Market Index ETF (SCHB):Â Schwabâs broad market provides even more diversification at the expense ratio of 0.03%.
- Vanguard Total Stock Market ETF (VTI):Â Tracks the entire US stock market, including large, mid, and small-cap companies, for comprehensive US market coverage with an expense ratio of 0.03%.
- Vanguard Total World Stock Market ETF (VT): For globally diversified exposure, this fund tracks stocks from developed and emerging markets, all with a low expense ratio of 0.07%.
"Owning the S&P 500 for the next 100 years clearly makes more sense than sprinkling your assets throughout a bunch of funds, especially where you pay high fees."
đConclusion: The Path to Passive Prosperity
Financial freedom and security must be everyoneâs top priority. Investing is a tool that achieves that. Investing does sound intimidating but starting small can help anyone start. Once you take that first step and slowly understand the rules, benefits, risks, and long-term gains, you will remain with only one regret, why didnât you start early?
"The beauty of investing in index funds is that youâre buying a piece of the entire marketâs potential; itâs like casting a wide net to catch as many opportunities as possible."
Start small, and make a move. Get over the fear and your financial success awaits.
What's Next: take action today đŻ
Remember: A small step on the right path will take you to your destination. The small investments in these index funds will grow eventually and have the potential to take you to your financial summit. Over time index funds have proven to grow with the market and are the best advisable investment tools for anyone who is starting or is already investing money.
