A Broke Person’s Guide To An Initial Investment

A Broke Person’s Guide To An Initial Investment.

Everyone would love to invest, but the reality is that it’s harder than it seems when you’re skint. Sadly, not everybody has £10,000 worth of pounds, euros or dollars. If you do, check out this cool MooMooCoo post on what to do with the cash. When you struggle to make ends meet each month, investing is the last thing on your mind. Still, it shouldn’t be an exclusive thing which is governed by how much cash you have leftover. It’s flexible, which means you can do it whether you’re rich or broke.

 

Here’s what to do if you fall into the latter category.

The Leaky Tap Strategy

Take the little amount of money that you have left over and put it into dividend reinvestment plans. Also known as DRIPS, these are options which allow you to buy small amounts of stock directly from the company. And, it isn’t only the little firms which are involved in the scheme. The likes of Coca-Cola, GE, and Johnson & Johnson all have accessible DRIPS. Thanks to the leaky tap strategy, you can build up wealth over a long period and then diversify the funds into other investments.

ETF

WTF is an ETF? The acronym stands for Exchange-Traded Funds, and they are products that track the performance of a sector of the market. Which part is down to the type of ETF you invest in initially. Because they collate data and keep you up to date, it’s easier to make informed, real-time decisions and to avoid common beginner errors. Probably the best part of an exchange-traded fund is the accessibility – you can buy as little as one share. But, you have to use a broker rather than dealing directly with the company. Seen as many of them pay a dividend, it isn’t a massive issue.

Pay Day

Using a payday loan company feels like a risk because of the terms and conditions. However, it isn’t a major deal breaker if you make informed decisions from the beginning. For example, it’s essential to choose a company that has a low rate of interest. Fast Loan UK has loans and the APR is less than 30% if you pay it back in a short space of time. Considering that the majority of lenders are closer to the 1000% mark, this is cheap. Also, invest wisely. Coke and Apple are bound to recoup a small amount each month, and you can use this to pay off the loan and still reinvest.

Compounding

This is when you invest while in debt. Why do it? It’s because debt elimination is a costly exercise in both time and money. By the time you’re done, there will be fewer years to build a wealthy, diverse portfolio. However, with compounding, it’s not impossible to earn enough to pay off your arrears and still have money left over. All you need to do is to develop a portfolio which covers the percentage of interest. Check out Investopedia for more.

 

Are you broke? How do you plan on using your money to build a portfolio?

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