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Best ways to invest with little cash

When you have little yo invest, you want safer options that encourage you to invest.

By Spencer HawkenPublished 10 months ago 4 min read
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Best ways to invest with little cash
Photo by PiggyBank on Unsplash

One of the common mistakes made by new or early investors is blindly following the crowd. I found myself in that situation when I was urged by numerous people to invest in shares of an electric vehicle company called NIO. While it seemed like a good choice at the time, I lacked the understanding of when to exit the investment. Unfortunately, a tragic incident involving a car falling from a skyscraper caused the share prices to plummet, leading to a substantial loss for me. However, it's important to note that the money I "lost" was never truly mine, as it was generated through inflation. Despite having a nagging feeling to sell my shares, I ignored it.

Based on my success with NIO, I encouraged my friends to invest in the company as well. Sadly, they also experienced negative outcomes. We all struggled with determining the right time to sell, which became a valuable lesson in the world of stocks and shares. Regrettably, these experiences have left those individuals disillusioned with the investment platform I recommended. As a result, they have lost interest in stocks and shares. However, I consider myself fortunate as I had dedicated time to studying and understanding the investment process with greater accuracy and focus. Through this, I recognized that while share prices can be volatile, dividend-paying shares consistently provide returns, even if they may be modest.

By Carlos Muza on Unsplash

For novice investors, investing in shares that offer dividends is a smart move. There are two main advantages to this approach. Firstly, the gradual but consistent income generated from dividends confirms that you are progressing in the right direction. Secondly, you will realize that the dividends received from supporting organizations like banks often surpass what you would earn from depositing the same amount of money in a savings account.

A few years ago, there was widespread excitement surrounding a high-interest savings account called Marcus, created by Goldman Sachs. This account garnered significant interest in saving, and it seemed like everyone I knew had a Marcus account. Experts like Martin Lewis continuously promoted Marcus as a reliable place to grow your money. While I did deposit my money into a Marcus account, I took a more comprehensive approach by recognizing that Marcus, as part of Goldman Sachs, offered an opportunity to invest in shares of the organization. As an experiment, I decided to invest an equivalent amount of money in Goldman Sachs shares as the amount I had deposited in the Marcus account. The results surprised me.

I apologize if you are reading this as an American, as I will be discussing amounts in pounds and pence due to being from the United Kingdom. Although the difference was not substantial, I discovered that I was earning approximately 15 pence more per quarter in dividends from my Goldman Sachs shares compared to the savings in my Marcus account. Moreover, while share values can fluctuate, during most of my investment period, the share price of Goldman Sachs was increasing, providing the potential for dual earnings.

By Eduardo Soares on Unsplash

Dividends offer a fascinating perspective on shares. As a casual investor, it can be disheartening to see your investment decline in value after a few months. This discourages many people from entering the stock market. However, those knowledgeable about shares understand that long-term investments require focusing on shares that are likely to significantly increase in value over five years, rather than expecting immediate gains within a couple of months. Therefore, investing in dividend-paying shares is crucial for maintaining a positive outlook. The beauty of dividends lies in their ability to be reinvested. For instance, if you own a fraction of a share valued at £10, regardless of the share's fluctuation, as long as it pays dividends, you will continue to receive income. Realistically, you might receive around 3 pence per quarter on a £10 share, but the psychological impact is significant. Regardless of the share's performance, dividends provide a consistent stream of income that can be saved or reinvested, resulting in an overall positive effect. As you gradually accumulate dividends and reinvest them, your ownership percentage of the share will grow. Over time, a £10 share that initially yielded 0.10% in dividends will increase steadily through incremental payments. This psychological shift from viewing shares as intangible assets to perceiving them as complete entities aids in building a robust share portfolio.

So, how can you identify shares that pay dividends? Depending on the platform you use (such as Trading 212, the app I prefer), there is usually a section that highlights dividend opportunities. If it's unclear, you can conduct a Google search or take a chance on investing in established entities like banks or large conglomerates such as Apple or Vodafone. With time, you will become more adept at identifying dividend-paying shares. Energy organizations are also known for their reliable dividends. For those who prefer more frequent dividend payments, companies like Realty Income distribute dividends on a monthly basis, instead of quarterly, semi-annually, or annually.

The key to successful investing is to aim for maximum returns when entering an investment. Even if you can only save £10 per month, investing in future-oriented assets will eventually yield noticeable results, as long as the company's trajectory is positive. Your investment will continue to grow, providing you with valuable returns in the future and placing you in a better financial position.

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About the Creator

Spencer Hawken

I'm a fiftysomething guy with a passion for films, travel and gluten free food. I work in property management, have a history in television presentation and am a multi award wining filmmaker, even though my films are/were all trash.

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