You have very little money, but you want to make the ‘smart move’ and start investing in shares? I logged into my online banking and tried to invest as little money as possible, here’s how much I got away with.
The minimum amount that I could invest in shares was a total of R131. However, only R6.48 of that was to buy the actual stock, and the rest of that money went to brokerage fees. That said, I highly recommend that you don’t invest anything less than R1000 at a time. Otherwise, your brokerage and tax fees alone will cost more than your actual investment.
If you only have a few thousand rands lying around to invest, don’t expect to get rich. Here’s an article that explains how much you can make on the stock market along with realistic expectations.
With that said, can investing ‘little money’ make a difference in your financial situation? Keep reading to find out.
Why I Wouldn’t Invest Little Money In Shares
According to Market Watch, the average investor only makes 4.79% per year on their investments, which, if you think about it, isn’t a lot at all. And these are full-time investors that probably spend every single day researching stocks. So if you think you can make more part-time, think again.
But I’m an optimist.
So let’s just pretend you’re a fantastic investor and you’re going to do double and make 10% on your investment, would you become rich? Let’s take a look.
You spend R1000 on shares of your favorite company, and you perform twice as well when compared to your average investor at 10%. That means with an investment of R1000 you’ll make a total of R100 in a full year. That’s around R8.33 per month.
Not really worth it is it?
Now just to be clear, I’m not against investing in shares, not at all. In fact, my standing is quite the opposite. I buy shares on the stock market all the time.
All I’m saying is if you have very little money to invest, there are better places to put your money that will yield much more significant results. If I had less than R200,000 in free cash flow, and I didn’t have any sources of passive income, I would stay far away from the stock market. But don’t take this as investment advice, it’s simply what I would do.
Where Would I Invest ‘Little Money’ Instead Of Shares?
Now that you have a realistic view of how little shares can make, you’re probably wondering, “where’s the best place to invest my little money?”
Here’s what most investors won’t tell you. ‘One size fits all’ investment strategies don’t exist. You should be making different investing decisions compared to someone who has more or less money than you have.
Try to visualize this as a three-story building. A boss is sitting right at the top, and a receptionist is sitting in the lobby. Each level up is another level of success. Now, do you think the receptionist can skip the middle level and become the boss by simply imitating the boss? highly unlikely. However, a more realistic and smarter approach would be to try and reach the next level up by making smarter decisions than those in a similar situation.
And that’s true for investing as well. You can’t invest like the “boss” on the top floor when you’re still stuck in the “lobby.” Instead, you need to invest your money where it can give you the most significant ROI (return on investment) in your specific situation.
The reason for this is simple. It’s a lot easier doubling R10 than it is to double R1000 000, which is why full-time investors are happy to settle with a 5% yield. This is a good thing for you if you think about it because you’re in a position to snowball very quickly! You just need to take the right path.
Here’s the route that worked best for me.
1st Floor: Invest in yourself.
You probably don’t want to hear this, but it’s true. The first step is to invest in yourself. This will give you the most significant yield on your money, and it’s where you should start. The best part? you don’t even need cash, all you need is time.
An important note, I’m not talking about investing in a university degree or technology certificate. Instead, invest in skills that you can use right now to produce cash-flow.
Are you interested in seeing the resources I used to learn how to start an online business? Here they are:
- Smart Passive Income. When I started an online business around four years ago, I first consumed as much of Pat Flynn’s content as possible. He has some fantastic content tailored for the beginner that will put you ahead of the learning curve. This is where I started, and if you’re new to online business, you should start here too.
- Digital Marketer is another resource worth checking out. Their content is heavily geared towards running Facebook ads, and email marketing, which makes or breaks online businesses. So make sure you learn as much as possible.
2nd Floor: Invest in your own online business.
Now that you’ve learned some necessary online skills, it’s time to put them to the test by opening your first online business. You could open a business with less than R1000 so there are no excuses!
- Here’s a full guide provided by Shopify that will talk you through opening an online business with very little money from start to finish.
- Once your online store is fully set up, make sure you listen to the perpetual traffic podcast to learn how to market your store using Facebook ads. Facebook ads are the BEST and fastest marketing platform you can use to promote your business. However, make sure you don’t try to run these ads without going through perpetual traffic first, or you’ll risk losing your money.
It’s probably worth mentioning that going through steps 01 and 02 is not an overnight process. It took me around three years of constant trial and error before I could comfortably rely on my online income. Don’t give up! Going online is probably one of the best decisions I’ve ever made in my life.
3rd Floor: Now, invest in shares, but only if you want to…
Ok, so I might be getting ahead of myself here, but let’s say your online business is successful, and you do reach a point where you get a nice chunk of free cash coming in monthly. Now, this is when you’re hanging out on the top floor with the ‘boss,’ and now investing in shares is a valid option.
However, keep this in mind. During your online journey, you would probably have realized that success doesn’t come easy, and that’s even more true on the stock market. With that said, do your research before you start throwing money into shares.
You see, investing all boils down to putting your time, money, and effort into the area that will yield the highest returns. Investing R1000 into an online startup business can easily yield 1000%. However, making 1000% on R1000 000 is extremely difficult. Which is why you can’t take the same path as any other investor. You need to continually reassess your situation, and figure out which path will give you the highest return on your investment