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Financial Planning
Investing on a budget: Is it possible to start small?
Learn how to invest with little money and build your investment portfolio gradually.
Key takeaways
- Start with as little as ₹100 to build your investment portfolio for long-term goals.
- Choose low-cost options like government savings plans, Recurring Deposits (RDs), Systematic Investment Plans (SIPs), Index Funds, and Exchange-Traded Funds (ETFs) for consistent investments.
- Diversify your portfolio and focus on long-term investments to reduce risk and boost returns.
The best time to invest is now! If you are under the misconception that you need a large sum of money to invest in the stock market, then you might be wrong. Starting early and staying consistent is a key factor in wealth creation. By starting with as little as ₹100, the micro-investing concept may enable you to progressively grow your portfolio and work towards your long-term financial objectives.
Establishing a reasonable monthly investment amount is the first step in building wealth with limited resources. Evaluate your income, expenses, and EMIs to make secure investment. This will help you decide how to invest in the stock market with little money. You could also consider the 50/30/20 rule which suggests dividing your earnings into three categories:
- 50% for needs
- 30% for wants
- 20% for savings and investments.
This approach to budgeting encourages self-control and keeps you focused on building wealth.
These strategies can help you in beginning modestly and gradually increasing your wealth:
Make low-cost investments
It's crucial to start with what you can afford when investing with little money. As a micro-investor you should prioritise investment options requiring minimal fees or commissions to maximise your returns. You can choose safe choices, such as government savings plans. The minimum investment amount for the majority of government savings plans is normally ₹1,000.
Make a Recurring Deposit (RD) investment
In India, recurring deposits are among the most popular risk-free investment choices, as it allows you to make monthly instalments. This tool is ideal for salaried people with steady incomes. A recurring deposit requires monthly contributions over a defined tenure. This is different from fixed deposits, which require a lump sum investment for a fixed duration. You can start a recurring deposit account with a minimum investment of ₹500.
Establish a Systematic Investment Plan (SIP)
With an SIP, you can make consistent investments and use compound interest to increase your wealth over time. Note that in an SIP, you can invest as little as ₹100 every month into a scheme that aligns with your financial goals. One potential advantage of an SIP is that regular monthly investments may help to mitigate the impact of market volatility by averaging the purchase price of each unit.
Case study: Breakdown of an SIP with a 15% step up every year
| Monthly Investment | ₹ 1,000 |
|---|---|
| SIP Step-up per year | 15% |
| Expected Return Rate (p.a.) | 12% |
| Investment Duration | 20 Years |
| Investment Amount | ₹12.29 lakhs |
| Estimated Returns | ₹17.96 lakhs |
| Total Estimated Value | ₹30.26 lakhs |
Even if you start small with just ₹1,000 a month, you can build a meaningful corpus over time—especially if you step up your SIP each year as your income grows. The key is consistency, patience, and gradually investing more as you earn more. Start small, stay committed, and let compounding do the heavy lifting.
Consider Index Funds and ETFs
Index Funds and Exchange-Traded Funds (ETFs) have revolutionised the method of investing and provide an affordable option for gaining market exposure. An Index fund is a mutual fund that tries to imitate the performance of a specific market index such as Nifty 50. However, an ETF fund is traded on the stock exchange as a stock while replicating the performance of a certain market index. While you can start with as little as ₹500 for an index fund SIP, the minimum amount required to invest in an ETF is usually the cost of one unit.
Diversify your holdings
Diversification is not just for experienced investors as novices can also profit from this strategy. If you have a limited amount to invest, you might consider diversifying across debt, equity, and hybrid mutual funds that span several industries. However, it's important to remember that all investments carry risks and it's crucial to do your own research or consult a financial advisor. Keep in mind that depending too much on one industry can expose your entire investment portfolio to market fluctuations while diversifying your investments can help you to reduce risks by using a sound asset allocation strategy.
Invest for the long-term
Since the stock market is unpredictable in the short term and growth does not happen overnight, starting with a minimal investment for at least 5–10 years helps you maximise returns. Statistically, equity investments have the potential to perform better in the long term, so it could be beneficial to stay invested.
Conclusion
Starting to invest early, even with a modest sum of money, may allow you to see how even small investments have the potential to spur growth and generate wealth through the power of compounding in the long run. The next time you question yourself, 'how do I start buying stocks with little money', you have your answer.
Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.
Mutual Fund investments are subject to market risk. Please read all scheme-related documents carefully. Axis Bank Ltd. is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Any purchase of Mutual Funds by Axis Bank’s customer(s) is purely voluntary and not linked to availment of any other facility from the Bank. This content is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future returns. Readers are advised to consult a qualified financial advisor before making any investment decisions. Terms and Conditions apply.
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