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Top 5 Tips for Smart Investing for a Small Budget

Updated on November 26, 2020 , 213 views

Many people are confused about investments. There’s a common perception that investments require a huge amount of money to start off. However, the reality is that investments can be started off with a few thousand or even hundreds. Invest small amount for a long-term and patient, let it grow. But, first things first, commit yourself to research before you can start Investing in private or public funds.

1. Research Investment Options

Before you can begin investing, look into the various options that are available in the market today. These options could paint a clear picture of what and where to invest. Understand why you want to invest in any option that appeals to you. Make a conscious choice before investing any amount anywhere.

2. Invest in Mutual Funds

Mutual Funds are a people’s choice when it comes to investment. However, it’s crucial to understand the benefits of investing in Mutual Funds before making a decision. One of the reasons investors like investing in mutual funds is the advantage of Portfolio Management. Investors pay a small amount as part of the expense ratio which is used to assign a professional to aid the investor’s financial journey with Bonds, stocks, etc.

Investors are given an option to reinvest their dividend for higher returns. Mutual funds diversification is another major advantage that leads to reduced portfolio risk. You can make a minimum investment in mutual funds. However, returns depend on the fluctuations in the market.

Systematic Investment plan (SIP) is one of the best options in mutual funds if you are looking to make monthly investments. It offers an opportunity to earn high returns in the long-term.

One of the advantages of investing in SIPs is the minimum investment amount, that is as low as Rs. 500. You can make regular investments on a weekly, monthly or quarterly basis. It is based on the Principle of compounding, which means regular investments for a long time will yield higher returns in comparison to lump-sum investment. Compounding births snowball effect, which means that little investment accumulates to yield bigger results year after year.

While SIPs promise higher returns, it also makes you disciplined with money. You can become a responsible financial planner and a smart investor.

SIP investments also act as Emergency Funds to help you in your time of crisis. You don’t have a lock-in period in SIP which makes it an extremely convenient option.

Best SIP Funds to Invest in 2020

FundNAVNet Assets (Cr)Min SIP Investment3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)2019 (%)
Franklin India Feeder - Franklin U S Opportunities Fund Growth ₹48.0287
↓ -0.19
₹2,282 500 2.121.840.324.617.534.2
DSP BlackRock World Gold Fund Growth ₹18.1923
↑ 0.21
₹832 500 -15.2-1.73814.517.235.1
Aditya Birla Sun Life Digital India Fund Growth ₹77.85
↑ 0.03
₹684 1,000 15.157.845.123.616.69.6
SBI Banking & Financial Services Fund Growth ₹20.0973
↑ 0.12
₹1,665 500 22.153.51.19.916.620.7
ICICI Prudential Technology Fund Growth ₹87.82
↑ 0.68
₹832 100 19.470.655.92516.42.3
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 26 Nov 20
*List of best mutual funds SIP's having Net Assets/ AUM more than 200 Crore in Equity Category of mutual funds ordered based on 5 year CAGR returns.

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3. Invest in government funds

The Indian government has various schemes available for investors who wish to invest and help their wealth grow.

National Pension Scheme (NPS)

It is a retirement saving scheme is extremely popular in the country. The scheme is open to every citizen in India. Under this scheme, an investor can allocate funds in equity, corporate bond and government securities.

Public Provident Fund (PPF)

PPF another important scheme offered by the government. It is one of the oldest retirement schemes and the amount invested in the scheme is exempted from tax. It is a safe investment option. It’s a good option for those who have just started working.

National Savings Certificate (NSC)

It is another major option by the government of India and is a fixed income investment scheme. An investor can avail it at the local post office. It focuses on the small to mid-income investors. It offers tax deduction and 8% interest p.a. You can start an investment with Rs. 100.

4. Invest in Gold

Possessing gold is one of the best ways for investment. However, possessing gold can bring its own concern regarding safety and high cost. However, amid the global Coronavirus pandemic, gold rates have fallen. You can purchase gold coins and can even own gold on paper by gold ETFs. This happens on a stock exchange (NSE or BSE). Another option to own paper-gold is by investing Sovereign Gold Bonds.

Conclusion

Smart investments require focus and dedication. If you have detailed knowledge about the investment you can grow your wealth and fulfil your dreams and desires.

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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