Most of the time of assuming the word investment is only for the wealthy. It is only applicable for individuals who work in high profile. Generally, businesses and MNC’s tend to have huge turnovers.
There is always a misconception, which most normal people without a ton of wealth can’t play around with investments. However, there are several tools available for everyone to get into the investment and get wealthy.
Few Practical Tips to Invest Even You Are Not on the List of Rich People
Here are a few tips through which one can start investing even if you are not rich. Understand how you can work on your financial circumstances to create a secured future.
Create a plan to invest
The first step is to start building wealth by creating an investment plan. Make sure to start the investment with low-risk or fixed income investment instead of high or low-risk options. This way one, can see the returns from lessening the debt load and interest payment.
The rest of your portfolio should consist of higher risk and higher investment plans like stock. One can pay the bulk amount in loan repayment if there is low-risk tolerance.
Clear off the debt
The first smart tip is to start investing is to reduce the debt. Student loans, Credit cards, and other loans can eat away the savings as well as investment possibilities. Hence the best thing is to focus on reducing the liabilities by paying the debt first. There are many people with pending debts and credit card dues. They even have bad credit scores. Many people take personal loans in Ireland with bad credit and fail to pay them off on time. Reducing debt considerably helps to lower the stress level and free up your mind to focus on certain investment options. It can also help to create a space for better financial planning. However, make sure to put the same amount, towards investment once paid off the debt.
Start learning to save
The next step to learn investment is to learn to save. A person can only invest if he has the money to invest. Make sure to audit the expenses and see where you can cut the cost to invest more. Here the focus should be on building this saving habit step by step. The first goal is to reduce impulse shopping. Once done then one can open a savings account and start saving money there. Once there is enough savings amount then you can start investing that amount.
Rent a room scheme
Under the Irish government Rent a room scheme, one can rent out the spare room in the house if the income does not exceed 14000EUROS per annum or 1166EUROS per month. Here the room needs to be attached to the house. The granny flats in the back garden do not count. Here you can easily earn anywhere around 14000EUROS. The applicable tax is 0% for the amount up to 14000 EUROS. Here the 100% of the income one receives is yours to keep it tax-free up to 14000 EUROS.
Investing in Pension schemes
There are a lot of things one can consider while looking at the pension, depending upon the personal circumstances. Pension is also considered the tax deferral tool that can lower the taxable income and pay the lower taxes. Here the capital gains and dividends are 0%. The real rate of return depends upon the pension. The average ten-year real rate of return of pensions in Ireland has only been up to 2.9% per year after the inflation and fees. Here also, the point of obligation emerges. You can save bigger for retirement only when you have less or no debts. It is fine to get short term loans in Ireland for small needs but try to avoid any pending debts and unnecessary long-term debts.
Investing in Employer Share Options
You can find many American Pharmaceutical and tech companies in Ireland. Many of these companies offer bonuses of shares in the company to purchase additional shares at a discount. This is considered the best way to buy high-valued stocks at a discount.
Here the real rate of return depends upon the company’s stock value. One can easily share the gains of 1270EUROS with no tax every year. Here the capital losses can be claimed 3 years in arrears.
Investing in Stock Market Funds
Stock Market Funds are referred to as Irish and EU domiciled funds. This is one of the best ways to build wealth over time, even with minimum investment. This option comes with low-cost management fees as compared to the active funds. This is also known as passive investing, where one needs to buy and forget the funds.
These funds come in a liquid form, and hence they can be sold anytime. Talking about tax, the exit tax on gains can be up to 41%. The market has seen the real rate of returns anywhere around 9 to 12% in the last 10 years.
Start with Individual stocks
Individual stocks are the all-time best option for investment with low funds. Here the tax is lower on the gains as compared to the regular Irish stocks. The income tax on the dividends is more beneficial to the long-term investors who tend to withdraw. It is possible to carry forward the capital possessed to offset the future gains.
One can sell the shares with gains of around 1270 EURO each year tax-free. These individual stocks can be sold anytime. The real rate of return has been between 9 to 12% even after considering the inflation.
Invest in Individual bonds
Bonds are considered as the basic investments that one can buy from the places where corporations borrow money from you. Here corporations agree to pay the investors back with specific interest to a particular schedule. This option comes with lower risk and lower reward.
One can choose the bonds with fixed income paid throughout the loan and the repayment at the end. These are stable stocks, and some come with long-term lock-ins when the money is unavailable. The average rate of return of the bond since inception is around 5.21%.
Start with Peer-to-Peer Lending
With peer-to-peer lending, one can lend money to other people through an online match-making and collection platform. One can choose the loan type and the duration while choosing the option.
The platform divvies up the money across multiple loans so that one is not loaning to just one person or a company. This option comes with higher returns and regular fixed income. It is a popular concept which can help you earn a lot of money. However, there is no doubt that professional knowledge is required for it.
With this, we are wrapping up the best ways to start investing with low money and build the portfolio. The sooner you start, the more chances of making the investment work in your favour.
Saving for investment or investment for saving is like two sides of a coin. Those who are not rich may find it difficult. However, practically, it is not rocket science if you know to manage money smartly. In most of the cases, people surrender before they actually try for you. Are you also among them? In that case, you may never succeed to work on your financial goals.
Hudson is a graduate of banking and finance and works as a financial consultant at MyLoansBoat. He has a professional qualification to counsel people about money management. At MyLoansBoat, his key duties include shortlisting applications of borrowers and counseling them about credit score improvement, building an emergency cushion, retirement funds, and getting rid of debt. He is an ardent reader of finance books and uses the gained knowledge to help people with their finances. He also writes for the company’s blog on various topics like budgeting, investing, saving, debt management, joint finances, and the like. His aim is to dedicate his life to helping people have a debt-free life.