For many aspiring investors, the idea of building wealth can feel intimidating, especially when budgets are tight. However, the truth is that starting small is not only possible but also a prudent way to embark on your investment journey. By leveraging modern tools and investment vehicles, even modest contributions can lay the foundation for long-term financial success.
The Power of Small Contributions
The cornerstone of wealth building is consistency, not starting capital. Thanks to the magic of compounding, even small, regular investments can grow significantly over time. As much as $50 monthly contribution to an investment earning 8% annually could grow to more than $37,000 in 20 years. The key is getting started early and staying disciplined, regardless of the dollar amount.
Fractional Shares: Owning a Piece of the Action
One of the most significant barriers to entry for new investors used to be the high price of individual stocks. Today, fractional shares remove that obstacle, allowing investors to purchase a portion of a stock, regardless of its full share price. For example, instead of needing over $3,000 to buy a single share of a company like Amazon, fractional shares let you invest as little as $5. This innovation means small budgets no longer limit access to high-quality, long-term growth opportunities.
Micro-Investing Apps: Simplifying the Start
Micro-investing platforms like Acorns, Stash, and Robinhood have revolutionized how new investors get started. Acorns, for instance, rounds up everyday purchases and invests the spare change into diversified portfolios. These platforms can enhance diversification by enabling diversification accounts both within and across multiple asset classes, helping to reduce risk and providing exposure to a broad market. With low barriers to entry these types of tools make it easy to form the habit of regular investing while building a balanced portfolio that mitigates the impact of market volatility.
Staying the Course
Regardless of the method, the real secret lies in consistency and patience. Avoid the temptation to chase quick returns or time the market. By focusing on incremental growth and sticking to a disciplined plan, small-budget investors can unlock the same wealth-building potential as those with larger portfolios. Remember, every great journey begins with a single step.
Kovitz Investment Group Partners, LLC (“Kovitz”) is an investment adviser registered with the Securities and Exchange Commission. This report should only be considered as a tool in any investment decision and should not be used by itself to make investment decisions. Opinions expressed are only our current opinions or our opinions on the posting date. Any graphs, data, or information in this publication are considered reliably sourced, but no representation is made that it is accurate or complete and should not be relied upon as such. This information is subject to change without notice at any time, based on market and other conditions. Past performance is not indicative of future results, which may vary.
