Investing Basics: How to Start Investing with Little Money

Investing might seem like something only older people do, or perhaps something that requires a finance degree, right? Think again.

Start an investment at an early age and see how your money will have more time to grow.

Do you want to create a stable foundation for financial security and plan for a successful future? You have to learn the basics of investing early.

Investment

Putting your money into different things like Stocks, bonds, mutual funds, or even digital options like cryptocurrency are different means of investment. There may be many means of investing however the main idea is growing your money several fold. For example, if you buy an investment plan for ₹1000 and its value grows to ₹1500, don’t you think your investment is now worth ₹1500? In due course when you are 30, that same bond could grow ₹50,000 or much more.

In professional terms, we can say the money you have invested has earned dividends or interest. This earning when reinvested will again earn more dividends and interest. This cycle keeps repeating, helping your money grow more and more over time.

Start Investing Early

So far we have understood that if we want to grow money we should start investing and the earlier the better. The following reasons will substantiate why starting investments early is beneficial:

1. Compounding: When you earn returns not only on your original investment but also on the returns it generates you are benefiting from compound interest too. Is it not that your money will grow faster over time through Compounding? So, start investing early.
2. Financial Discipline: Among the various skills you acquire, developing skills like saving, budgeting, and managing your finances are valuable for your future. How can you develop these skills? Well, it is through investing early.
3. Finances Over Time: If you want to grow a considerable amount of wealth over the years, begin with investing small amounts regularly. Again start investing early for huge returns.
4. Conquer Inflation: As years pass by and due to inflation, the value of money decreases. But do you want to maintain the value of your money? Start investing early, by which you can earn more and be prepared to overcome inflation.
5. Financial Goals: Investing early can help you attain your financial goals: buy a house, finance your education, go on an international trip, etc.

Budgeting to Invest

If you are an amateur in investing, do not worry, follow the steps given, and make a budget to know how much money you can practically invest.

1. You should make a note of your monthly income (after tax deductions) and your actual monthly expenses on prerequisites like phone bills, electricity, rent, groceries, etc.

2. Next, check on expenses like outings, shopping, restaurants or entertainment.

3. Now, calculate the amount of money left and invest this safely. That makes sense, right?

Investment strategies

1. Clear Goals

Do not just jump into investing with the urge to get high returns. Set clear and explicit goals for things you want to gain. This will motivate and support you in making the right investments. Goals can be

• Short-Term (1-3 years): For things like saving for a holiday or a laptop, etc.
• Long-Term (5-10 years): For things like higher education or buying a house, etc.

2. Small Budget

The thought of investing can look overwhelming as you might feel you need to have a lot of money to begin. No, a small amount is enough for a good start. The main thing is you need to assess your income and expenses so that you will know how much you can actually invest. Even investing amounts up to ₹100-₹500 is a great start but being consistent is the key.

3. Emergency Fund:

Emergencies like unexpected expenses are like unwelcome guests, but they do happen unexpectedly and yes, we should be well prepared for it, do you agree? So, before you start investing, have a six-month corpus set aside for emergencies and later the rest amounts you can plan and start investments. By doing so you need not sell all your investments prematurely just to overcome any crisis.

4. Investment Platforms:

In case you opt for a digital or online mode of investment, choose the platforms wisely. You can start investing small amounts through many investment apps and platforms in India like Groww, Zerodha, and Paytm Money. They offer stocks, mutual funds, and digital gold and accept UPI payments. making it student-friendly.

Investment Options in India

Now, you must be thinking if there are any suitable options in India as you are a student with limited funds but interested in growing money over time? Yes there are:

1. Savings Account: Are you looking to split your spending money from your savings as well as get reasonable interest? A savings account is the best way. You can also keep your savings in a different bank to find better interest rates.
2. Recurring Deposits (RDs): If you want to invest a specified amount of money each month and for a specific duration with guaranteed returns then RDs are a good, safe investment option.
3. Fixed Deposits (FDs): If you want to earn more interest and are sure you do nott need that money for a while go for Fixed Deposits.
4. High-Interest Savings Accounts: One more way of growing money faster is by investing in saving accounts that have high interest rates.
5. Mutual Funds: Money collected from many people is invested in Mutual funds, a combination of stocks and bonds. Through Systematic Investment Plans (SIPs) you invest small amounts as small as 100/- regularly. This is a great way to build your wealth slowly.
6. Public Provident Fund (PPF): The government offers this as a long-term(15-year), safe and reliable saving scheme and assures a fixed interest rate along with tax benefits.
7. Exchange-Traded Funds (ETFs): Another way of investing a small amount is ETFs which are like mutual funds. It allows you to invest in a variety of stocks on a single purchase.
8. Stocks and shares: Do you want to own a part of a company? Invest in stocks and shares and see the magic.Apps like Zerodha and Groww help you to invest in stocks with small amounts, and buy fractional shares.
9. Digital Gold: If you want to invest in gold try Digital Gold. With as little as ₹1, you can buy gold in small amounts through apps like Paytm, Google Pay, or PhonePe.
10. Bonds: If you want to avoid stock market variations affecting your investments then invest in Bonds. This is like a loan that you give to a company or the government. They use your money for their needs and pay you interest in return.

Tips

1. Begin Early and Be regular: Even if you start with a small amount, investing regularly helps your money grow over time.
2. Investment Diversification: Do not stick to only one or two modes of investment but spread your money across different investment options discussed above to reduce risk.
3. Stay Informed: Keep yourself updated and informed about investments by reading economics related news, seeing related videos, or taking online courses. The point here is if you know more you can make better decisions.
4. Automated Investments: Remembering that a fixed amount has to be invested regularly is difficult so try automating your account for investment transfers. This will ensure you invest regularly without having to think about it.
5. Be Patient: As investing is a long-term journey do not hurry with expecting quick returns. Also at the first sign of trouble do not make a hasty decision of withdrawing money. All that is required is patience.

Common Mistakes to Avoid in Investing

1. Investing Without Research: Always research and understand where your money is going rather than just following someone’s investment methods.
2. Pursuing High Returns: Investments that promise very high returns often come with higher risks. So choose your investments wisely and carefully.
3. Portfolio modification: Regularly check and modify your investment portfolio to make sure it matches your financial goals and risk level.
4. Predicting Market: Predicting market changes accurately and planning investments accordingly or trying to buy low and sell high is risky, so focus on long-term investing.
5. Ignoring investment Fees: Many investment plans have high fees linked to it. High fees can reduce your profits over time.
6. Lack of investment Plan: Set clear goals for your investments and stick to your plan. Avoid changing your strategy based on short-term market ups and downs.

Where to Learn More About Investing

1. Online Courses: Platforms like Khan Academy, Udemy, and Coursera, offer free and paid courses on investing basics.
2. YouTube Channels: Channels like “Asset Yogi” and “Pranjal Kamra”
3. Books: “The Little Book of Common Sense Investing” by John C. Bogle, “Rich Dad Poor Dad” by Robert Kiyosaki, etc.

Did you know our Indian government too has several schemes and tax benefits for people with small amounts to invest? For example:

1. Sukanya Samriddhi Yojana, b. National Pension System (NPS), c..ELSS (Equity Linked Savings Scheme)

Conclusion

It is not just older people or the rich that can start investing. As a student, you can begin with a small amount and build your finances gradually. Being consistent and informed will help your money grow. Start early, even with a little, and let time work for you.

Take the first step today! Investing small amounts with clear goals is a great way. Always do your research and make your own decisions. Remember, you control your money. Be wise, learn along the way, and watch your money grow!

FAQs

1. What are the 7 types of investments?

The 7 common types of investments are:

• Stocks – Buying shares in companies for potential growth.
• Bonds – Loans to companies or governments with fixed interest returns.
• Mutual Funds – Pooled investments managed by professionals.
• Real Estate – Investing in property for rental income or resale.
• Commodities – Physical assets like gold, oil, or agricultural products.
• Cryptocurrency – Digital currencies like Bitcoin and Ethereum.
• Fixed Deposits (FDs) – Low-risk savings with fixed interest, common in India.

2. What is the simplest investment?

The simplest investment is a Fixed Deposit (FD). You deposit a lump sum with a bank for a fixed period, earning guaranteed interest. It’s low-risk, easy to manage, and ideal for beginners seeking stable returns.

3. How to buy stocks for beginners?

Beginners should start small, diversify, and aim for long-term growth while buying stocks. Here’s a simple guide to buying stocks for beginners:

• Open a Demat and Trading Account – Select a reliable brokerage or app to set up your account.
• Complete KYC and Fund Your Account – Provide PAN, Aadhaar, and bank details, and deposit money to start investing.
• Research Companies – Focus on financially sound companies with growth potential.
• Place an Order – Choose between a market order (current price) or a limit order (specific price)
• Monitor Your Investments – Track performance and stay updated on market trends.

4. What is the safest investment?

The safest investment is typically a Fixed Deposit (FD). Banks guarantee both the principal amount and interest, offering low but stable returns. Other safe options include Public Provident Fund (PPF) and government bonds, as they are backed by the government, ensuring minimal risk.