Many people think that be to even begin an invest requires a large amount of capital. However, this is just a myth. You can start with as little as Rs. 500 and build your corpus as you go. When it comes to investing a small budget just means you have to work smart, it doesn’t mean you shouldn’t start early. So to help you get going, here are some tips to keep in mind which can help you start your journey as an investor as early as possible:

1. Make a comprehensive plan:

The first thing you need to do is figure out for what goals you are investing towards, so that you can find the most optimal way to use your funds. Goal oriented planning is extremely important because it helps you understand the time horizon you need to consider. Apart from this you should also think about the amount of risk you are willing to take and contingencies that could possibly occur. Consider working with a professional financial advisor during this phase as it has become extremely affordable and will definitely be in your best interest.

2. Start planning for your retirement early:

When it comes to retirement planning, the early you start the better. This lets you use the power of compounding effectively and build a sizable corpus in the long term. You should look into opening a Public Provident Fund (PPF) account as early as when you get your first job. Apart from this, making contributions towards the National Pension Scheme (NPS) is another option. You can open an account online and start with as little as Rs. 500. Investing in these schemes also comes with certain tax benefits that you should not overlook.

3. Take advantage of mutual funds:

Investing in mutual funds through a systematic investment plan (SIP) is a good way to grow your wealth in the long term. Furthermore, it can be quite useful for new investors who may not have sufficient experience, as a certified professional manages the funds. The advantage of SIP is that you can make periodic payments starting at Rs. 500 at a frequency of your choice; which can be on a weekly, monthly or even quarterly basis. Apart from accumulating sufficient amount of wealth over time, undertaking SIP will also help you develop the discipline you need to successfully manage your finances. Mutual Funds also gives you benefit of diversification thereby spreading your risk across.

4. Diversify your portfolio:

The most traditional method of investing is, keeping money in bank deposits. It is important to see that your money doesn’t lose its value. Therefore, it is necessary to not put all eggs in one basket. Keep only 3-6 months of expenses in saving account/FD for emergency or if any goal is approaching. Remaining amount should be diverted towards investing for long term goals.

These are just a few tips for smart investing on a small budget, and there will be other strategies which could apply to your personality as an investor. But with a comprehensive plan in place, starting your investments with small amount will get you much farther than you can imagine. So don’t wait any longer!