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4 Smart Investment Options When the Budget is Limited

smart investment optionsOne of the most common misconceptions about making investments is that this is something that only the rich can do. Some years ago, this was truly the case since most of the great investment options available were reserved for the rich. Nowadays though, things changed. We now have access to countless investment options, ranging from complex ones like online CFDs to simple ones like using a savings account.

4 Smart Investment Options When the Budget is Limited

The big problem with investments when the budget is low is that there are too many to consider. If you want to make a safe choice though, the following should be taken into account.

1) The 401(K) Investment

The 401(k) and various other retirement plans are now available and are often considered one of best smart investment options.

They are advantageous because of the fact that they are very secure. Usually, there is no investment minimum that exists so you can easily start investing around 1% of the paycheck you get every single month. However, usually, it is recommended to contribute as much as the employer does.

As an example, the very common matching arrangement is 5% for 6% of the salary you contribute. If this is your scenario, contribute 6% every year and you get that amount nearly doubled by the employer.

2) Robo-Advisors

Robo-advisors are services that help you to manage investments with the use of advanced computer algorithms. Overheads are low so the services charge very low fees when compared to the human investment managers. Usually, the fee is under 0.5% and you might open accounts with zero minimums.

These advisors are wonderful for beginners that want to get started since most of the work is done for you. Obviously, you do have to look at your account since it is your money but the heavy lifting is done by the robo-advisor.

Related: How to Make a Passive Income with Wealthsimple

3) Mutual Funds With A Target Date

These are practically retirement investments that will automatically invest your money while taking into account the estimated retirement year of the account holder. As an investor, you practically buy a mutual fund share. Then, the mutual fund invests the holdings it has access to. While it’s not perfect, it’s one of the top smart investment options for the newbie investor.

Professional managers take care of your funds. They choose what choices to make. Usually, this is done based on the experience of the manager. Target-date mutual funds usually hold a mix of bonds and stocks, but this is not always the case. As with any investment, be sure that you know where your money will be used, regardless of what guarantees are offered.

Related: Can Your Mutual Funds Beat the Stock Market?

4) Index Funds

The index fund is very similar to the mutual fund but the entire investment is run on autopilot. Professional managers are not used since index funds constantly track market indexes, which are selections of investments. As an example, the S&P 500 that many talk about is a market index. It holds stocks of around 500 of the largest American companies.

Index funds are passive so they carry much lower expense ratios for investors. Fees are charged based on how much you invest. Similarly to the funds, most buying is done in single transactions. While minimum investment requirements exist, you can get around this with the help of some brokerage firms.

Which of the Smart Investment Options Will You Choose?

Well there you have it. Four of the top smart investment options that nearly anyone can choose from!

  • 401(k)
  • Robo-investing
  • Target date mutual funds
  • Index Funds

Now that you’ve read up a bit on each option, which one do you think you’ll choose?



My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

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