Myth 1: I Need a Lot of Money to Invest
So, where do some of the stock market fallacies come from? A common misconception that I come across is that you need a large sum of money to begin investing and be successful. In fact, this could not be further from the truth. To be honest, you don’t need $100,000 to get started investing properly. You don’t even need $1,000 to get started. All you need is a tiny stake and the correct amount of faith.
No! There are brokers which offer fractional shares like: IBKR
Hence, do you need a lot of money to invest? Let’s find out!
Investors are losing faith in the market
Three major financial crisis in the last 20 years – The dot-com bubble, The Great Financial Crisis of 2007 and the Covid Crash of 2020 have impacted confidence in the U.S and global markets. Thus, investors who are typically loss averse have walked away from stock market investing.
Start small, invest in money you are willing to lose FIRST
You should start dipping your toe into investing if you are learning how to invest. It is a common occurrence where people are unsure where and how to start investing. First, don’t feel like you may not have enough money to start investing. In my humble opinion, people should only have 6-12 months of monthly expenses in their savings account. Anything more, will be a little too much. Yes, start now! FSM One have a Regular Savings Plan (“RSP”) where it is a monthly subscription plan that enables you to invest a small, fixed sum of money, as low as $50 on a regular basis which adopts the concept of dollar cost averaging. Some ETFs we will recommend will be (VOO – tracks the S&P500, 3067 – tracks the Hang Seng Tech Index and FTEC – tracks the MSCI Information Technology Index, this is the closest ETF to QQQ of all the ETFs provided by FSM One).
Why do we recommend investing in ETFs?
It is cheap! Yes, it is so cheap that its management fees (expense ratio) for VOO are as low as 0.03%. Its cheap costs are due to its inherent nature of tracking the index, which necessitates less work on the part of the management. As a result of the reduced costs, we strongly encourage investing in ETFs.
ETFs, since they trade like stocks, have greater liquidity and transparency than UTs. ETFs can be purchased and sold on stock exchanges at any time during trading hours, not only at the end of the day (in the case of UTs). When volatility is high and an investor has discovered a chance to add more of a certain ETF to their portfolio, this is a significant factor.
- Instant diversification
ETFs are a simple way for investors to diversify our investing portfolio, using benchmark indexes, such as the S&P 500 or the Straits Times Index (STI). This allows us to capture the broad-based performance of a certain market, which aids in mitigating volatility.
This myth is indeed NOT true. Investing DOES NOT REQUIRE A LARGE AMOUNT OF MONEY/Investing IS NOT ONLY FOR THE RICH. Investing, on the other hand, is about increasing your wealth over time by taking advantage of the compounding impact. When we invest with modest amounts of money, it is all about consistency and developing that critical habit of investing that will change our lives.