Figuring out how to cut down your expenses is a crucial step towards achieving best investment strategies for low income earners.
Evaluating your current financial situation and determining how much you are willing to invest is highly important.
Being stuck with a low income job doesn’t mean you can’t save for investments.
Proper scrutiny on how much you have been spending can be a good starting point of transformation in your investment journey.
Before talking about investments, it will be important to have some money saved in other to put food on the table. This will help anyone to focus on their investment strategies.
In this article, we will discuss about investment strategies for low income earners.
What is investments and it’s importance?
Investments can be seen as putting money into an asset with the assumption of earning profitable returns inform of dividends or interest earnings.
Investment involves committing a portion of your income to owning a share of a business with the expectation of receiving a higher return. Most popular investments strategies are stocks, bonds and real estate.
One of the most important aspect of investment is the ability to make more money and the will to meet your financial goals.
Financial goals can include wealth creation, buying a house, taking vacations and most importantly funding retirement.
Types of investment
Real investments. These are tangible investments that is physical, things you can feel and touch.
A good example of this is real estate such as property, plants and equipment’s, commodities such as gold that has some value and can be sold in exchange for money, Bullion which can be precious stones, Art a form of collection that people value( sculptures, and paintings).
Financial investments. These type of investment are intangible and it can be transferred. Examples of these investments are stocks, bonds, equity shares and mutual funds.
Before you start investing as a low income earner, you need to familiarize yourself with investment decision processes. Related: How to begin your financial journey towards financial freedom
Investments decisions for low income earners
1. Defining the objective of the investments: It is important to have an objective set out. A clear define purpose of where you are heading with your investments goals.
If your objective is to buy a house in 3-5 years’ time, you will structure your investments in such a way that you will be able to buy that house in 5years.
2. Analyzing investment techniques: Picking up basic fundamental learning about how to invest is an added advantage for anyone with low income.
Understanding the basics financial statements of any company you wish to invest in is a wonderful starting point.
The key to analyzing investments techniques requires some steps thus;
Steps to researching a good company
- Check recent annual report basically the company’s description, which entails segment, operations and industry.
- Management analysis discusses about overall business overview and performance.
- Financial statement analysis can be pulled directly from the latest quarterly and annual reports of the company including footnotes that explain what a company is involved in.
- Company presentation and earnings calls.
- Identify competitor analysis.
- Determine the value of the company.
- Identify the performance of the stock over the years.
- Look for buying opportunity.
3. Portfolio construction: Getting adequate knowledge about investments portfolio construction is one of the key steps in making investments decisions for a low-income earner.
A lot of people are stuck, can’t identify the right type of investments strategies they need to start with. It’s good to always consider a strong stable asset or portfolio because it’s good for both your financial health and wellbeing.
Always picture your investments strategies like a pyramid, a process of starting small and then expanding your investments over time.
Your assets has the ability to grow in a direct proportion with the ability to keep, manage and grow your money.
4. Performance evaluation: The performance of every investments matters for continuity. You will need a simple way to measure the performance of your investment, mostly through the Return on Investments each of the investment is bringing bi annually or annually.
As an investor it’s really important to note what a good rate of return looks like, what is realistic and in what market all these is likely to happen.
5. Portfolio management: Falling back to your financial planning quarterly or annually to check what your goal is, what is your destination? Which milestones have you achieved in your financial journey. The management techniques you have put in place. Asking these questions will help in determining sustainable techniques for your portfolio management.
Techniques for portfolio management
- Conservative: This type of technique is good for people with short-term investment strategy. You might be saving for kid’s college, savings for home purchase in a couple of years therefore you will definitely want to be conservative.
- Moderate: This is a mixture of being a little bit aggressive and conservative at the same.
- Aggressive: At this stage you are focusing more on growth and you are more aggressive in your approach. You are willing to tolerate more market fluctuations and see your portfolio bounce up and down in the hope that your investments will generate more return.
- Income oriented: This approach doesn’t worry about future growth, but more concerned about earning from your portfolio every day to your bank account. Two main ways to generate return from this approach. Total return approach which is harvesting some of your gains, selling some securities while dividends and interest approach is spending the dividends and the interest without touching the principal.
- Tax efficient: Focusing on qualified dividend and long-term capital gain for tax efficiency. Related: How to build a solid and profitable investment portfolio
Factors influencing investments decisions
6. Financial goals: Goals and priorities must be individually identified for the base of investment decisions.
7. Time: Understanding how much time you have to reach your financial goals is important. The time you have to invest will be determined by the type of investments you will be looking into. In general you should be looking at short-term investments if you have a limited time to invest. Although, compounding power will work best for people looking into long-term investments.
8. Investments criteria: The basis through which an investment will be accessed.
9. Risk and Uncertainties: All investments decisions involve some risks and uncertainties. How well are you prepared for these risks and uncertainties? Information about market research and market forecast of investments plays a vital role in risk assessment.
10. Emotional factors: The rise and fall of stocks is a major factor influencing investments decisions. The rule of investing is to always plan for long-term and not be bothered with market fluctuations.
Best investment options for low income earners
As a low-income earner, it will do you a lot of good by picking small businesses to invest in before expanding to bigger investments.
Most of the rich people today started investing with the little income they have been able to save and they aim to grow.
There are a lot of online side hustles anyone can start with little income. At first, view it as a hobby, that way you won’t put pressure on yourself about the quality.
Be consistent at what you are doing and over time, you will start improving the quality of what you are doing which will automatically bring in a lot of sales.
If you know how to play piano, you can pay someone 50 dollars to help you film it and edit, you can then turn it into an online course and sell it through your website or platforms that sells online courses for free.
There are also tons of books you can invest in that teaches how to invest with small amount of money. Learning the basics of buying and selling is a greater advantage for people with low income.
Some haven’t even try to earn something outside their regular jobs, you need to start acquiring some negotiating skills to help you start selling. You can get tons of articles online that teaches the basics of buying and selling for free.
Best investment plans for low income earners
There are some passive income ideas people are not really looking which is obviously suitable for a low-income earner.
One of them is buying a year old blog that is up for sale. Some of the owner of these blogs have lost the patience to watch it grow, meanwhile it takes an average blog a year plus to start getting much traffic.
So buying a blog after a year is a wonderful investment strategy, you can make money from the blog through different ways; Ads, sponsored post, affiliate marketing, self-publishing, membership dues and courses.
The only clause here is that you need to be interested in the idea of owning a blog. You can even get some freelancers on fiverr to help you manage your blog.
In case you are wondering how to get buyers, don’t fret. There are sites that connects blog sellers to buyers, one of them is flippa.com.
How to buy a blog for passive income investment strategy?
- Search for blogs in a topic of your interest on google
- Contact the owner by email to ask if the blog is up for sale
- Get screenshot for income or other proofs like google analytics. This is where you will get all the information about the organic google traffic which is highly monetized.
- Check Ubbersuggest for links and keyword rankings to make sure all their links are all legitimate to avoid trouble in the future.
- Negotiate on price and draft a proposal on what you are willing to offer based on the current earnings of the particular blog.
- Draft a contract and set up payment
- Transfer domain registration, hosting and files
The second passive income ideas is buying finished online courses as passive income investments. You will want to check Udemy for these types of value packed courses that has been set up but haven’t been gaining much exposure due to marketing deficiencies from the author
How to buy a course for passive income investment strategy?
- Search Udemy for courses
- Contact creators and ask if course rights are for sale
- Ask for income proof and negotiate on price
- Draft contract and set up payment
- Transfer all video files, material, and ownership on Udemy
The third idea is buying of e-Book rights from authors on Amazon. Check the reviews of their book and how much sales they have so far.
Contact them directly through their page and request for a free version of their book.
Ask how much they are willing to sell. You can buy the e-Book through the above process and add some additional ways by converting your books to audio version, run some ads on amazon and expect your monthly paychecks. Realated: How to start saving and investing money for beginners.
Best investment strategies for low income earners.
11. Access the market: In other to access the market, it has to be watched for the first three months before making a decision to start investing.
The aforementioned decision will give a clue to the market trends, syncing your thought and processes into the world of investment which is of utmost importance.
Taking some time to access the market will help you to eliminate all possible emotional impulse through buying and selling.
12. Check your risk tolerance level: Taking into account what your risk tolerance is before investing is one of the best strategies you can adopt to win in the world of investment as a low income earner.
Map out a plan you are comfortable with that aligns with your risk tolerance level.
13. Treat it as a business opportunity: When you are sure you want to start to buy stocks, bonds or equities, see it as a buying opportunity and buy in stages.
You do not need to buy everything at a go. As a low-income earner with limited funds to spare, let’s say you deposited 500 dollars inside your investment account.
Start buying 20 dollars’ worth of stocks weekly to test the market and learn the robes of investments.
14. Focus on long-term investment: Long-term investment is a strategy that helps low-income earners to minimize their risks to the lowest minimum.
By focusing on long-term investments, our financial health will be highly improved because come to think of it, the economy is going nowhere, the people are still on the planet earth.
Market fluctuations might happen every now then, likewise market boom will also happen every now and then.
15. Invest in income producing assets: Before you can invest or buy some of these assets, you will need to make some money upfront.
If you are low on your investing budget, you can start with peer to peer lending platforms to generate some interest on your money.
Remember to always check the fine prints if you’re comfortable with this type of investment to avoid any problem.
There are also some online business that gives consistent income by actively participating in it or by handling it over to professionals.
Finally, low income earners have the advantage of cutting cost easily from their monthly expense which is an important step towards saving money for investment.
By following the investments strategies listed in this article, you will have familiarize yourself with investments principles and hopefully be encouraged to start investing as a low income earner.
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