How to start an investment with little money easily in 4 steps

For most people, the idea of investing often stress them out. Yet investing does not necessarily have to be painful, you can simply start your investment with 4 steps.

1. Make sure your finances are in order

Before you get started, it is important to ensure that you are in a healthy financial situation. To make sure your finances are healthy and in order, you should test yourself with 2 simple questions:

· Do you have emergency funds set aside for unexpected circumstances?

· Do you have fully control of your debt?

Based on Christian Hudspeth’s research, if you are under the pressure of paying more than 12% interest on your debt, or you don’t have emergency funds to feed yourself in unexpected circumstances, you won’t have spare power to consider investment.

2. Pay off yourself first

Saving money is closely connected to investment, especially when you are young. In order to invest, you should save and set aside money for investing. Pay off yourself first is considered to be a golden rule for saving and personal finance management, which means you pay into your own savings first before you make other living expenses or purchase. Set up an amount and pay yourself regularly (e.g. monthly) just like any other bill you need to pay monthly. It doesn’t have to be 20% of your income at first, a little amount will help a lot over the long-term.

3. Identify your risk appetite

Different from saving in a bank account, investments are always accompanied by risks. Age is a key element that influences how much risks you can assume. For example, young adults can bravely take on more risks, while elders or retirees should choose a lower risk investments such as bonds. In addition, your personal risk tolerance impact your investment decision as well. If your tolerance for risk is high, you can invest more stocks in your portfolio to achieve higher return, while if you are seeking for a stable return, you can mainly invest in lower-risk investment product such as bond, cash rate, fixed interest, etc.

4. Use a robo-advisor investment app to start

A robo-adviser is a good fit if you lack investment experience and professional knowledge. Compared to traditional investment with a broker or financial advisor, robo advisor ease the barrier of traditional investment (e.g. high initial fund) and make it accessible to everyone, you can event start your investment without any initial fund requirements. Also, it can help automate the investment process so that managing money will not take up too much of your leisure time. According to Voisin, “It's a really easy way to not think about having to almost allocate more of your budget to savings — because you're just using spare change, more or less.” Yet investing with spare change—one of attractions for masses though——is not the best long-term strategy. Once you accumulate experiences and acknowledgement in investment, you should or you may want to scale up your investment contribution and seek more personalised advice from broker or financial advisor.