Micro Investment; A Beginner’s Guide On How To Invest Small Amounts of Money.

What is Micro Investment

Micro Investment refers to investing money accumulated through regular saving of small amounts for a period of time .The investor does not wait to have a lump sum so as to invest at once. You can find micro investment opportunities in purchasing securities through mutual funds, stocks, ETFs,(Exchange Traded Funds)and REITs (Real Estate Investment Trust)

Micro investment platforms have made the process even much easier.

You can create an online brokerage account for stocks, choose the options you want to invest in and track how you are progressing hustle free.

Mobile apps, affordability, easily accessible options that have low barriers to entry have seen many people embrace this method of investment.

Just at the click on the button or a swipe on your smartphone you can actually carry out your trade in a matter of minutes.

As a result,many people that thought investing was for the wealthy, are now embracing this method as compared to the traditional way.

Micro investment can be suitable for college students or anyone on low income and would wish to invest in stocks and the like.

Millennial who want things done fast with small amounts of money will also find this convenient.

For instance ETFs gives lower expense ratios than the traditional mutual funds and offer you the same liquidity gotten on trading stocks listed at NSE

What You Need to Know;

An investor can buy as little or as much as he/she can afford. It is also possible to invest very little money in groups of small investors pooled together by money managers in the market.

Share are bundled in minimum lots of 100 shares and above in the main market boards.

Fewer shares that are 100 are available on the odd lots board.(Source: Nairobi Securities Exchange)

Nairobi securities exchange has got several online and mobile stockbrokers options to choose from.

They include NCBA, Sterling ,Faida investment bank, Dyer and Blair ,old mutual, KCB capital ,Genghis capital,among others .

All you need is a digital gadget for online and an Android/iOS smartphone or tablet for your mobile tradings.

There are also other micro investment platforms in the market you can use.

Most mobile apps offer their clients free financial advice they need and also a range of investment options to suit their needs.

The trading platforms have to be licensed and regulated by the Capital Market Authority in Kenya.

Now with even new technologies like artificial intelligence, automated investment advice and portfolio management services are provided by robo advisors thus you can do most of the trading by yourself.

Micro investment, when done wisely and based on the experience gained, can open opportunities for larger investments.

With as little as Ksh 1000,you can trade for investments on daily, weekly, monthly or even yearly depending on the investment option you choose.

What Are The Benefits of Micro Investment?

  • It’s affordable, you don’t need much capital. With a few hundreds of Kenyan shilling you can start investing.
  • Can easily build a rich investments portfolio of stocks,RIETs,ETFs,etc through diversification of your small amounts of money.
  • You cultivate and enhance a saving habit thus opening doors for bigger future investments.
  • Automated debits from your account helps you stick to your financial plan.

 

Disadvantage of Micro Investment

  • You will need to have a retirement plan set aside since the micro investment does not lead to retirement goals.
  • Building wealth from micro investments may prove to be difficult since the accrued money is little.

You may be asking……

The difference between Micro investment and Micro Cap investment

While micro investments may require very small amounts of money to start,micro cap investments involves companies that have value at between 50 million USD and 300 million.

Although these type of investment may at times seem volatile,those investors with experience see it as an opportunity for higher returns.

Trading with caution is therefore vital since the risk involved is quite huge.

In this article we are going to look into how to get started in achieving your financial goal through micro investment.

But Firstly……….

The Bible on Micro Investment

Proverbs 30/24-28(New International Version)

Four things on earth are small,

Yet they are extremely wise.

Ants are creatures of little strength,

Yet they make store up their food in the summer,

conies are creatures of little power,

yet they make their home in the crags.

locusts have no king,

yet they advance together in ranks,

a lizard can be caught with the hand

yet it is found in kings palaces.

The four small creatures here work tirelessly for their food, safety, are in control and determined .

What a perfect example they are of how a minute being can work wonders.

Even in our financial success journey let’s embrace these opportunities that may seem small .

They may be the gateway to those large investments that await us in future.

It does not matter the size but wisdom is what matters. Better start up small than wait to get a lot of money to start your investment journey.

Once you take a step God will grow you into a person that He wants you to be according to the plan He has for you.

 

How To Start In Micro Investment

The basic steps to consider;

a) Determine Your Investment Option.

Is your money manager profession, yourself or a robo advisor going to manage your investment?

Depending on your knowledge about the investment, time and your current financial situation ,you may want to choose what works for you.

Set clear your goals i.e short term or long term so as to guide you.

If you choose long term,then you may have to set an emergency fund account so as not interfere with your plan.

If you are not conversant, most online brokers give free advice and have a range of investment products to opt for.

b)Open an Account for Micro Investment

An authorized stockbroker can help you open an account with Central Depository System (CDS) where your shares will be held.

The stock brokers will then do the trading on your behalf.

But you need to be in touch with your investment progress by attending the company’s financial yearly meetings.

This is key to help decide based on the performance outcome.

c)Get A Suitable Micro Investing Platform.

There are various platforms currently in the market.

Its good to employ due diligence to establish the legitimacy.

Research also on the one that is user friendly and can address your financial needs effortlessly.

Also choose an app designed for the investment.like for mobile trading at NSE (Nairobi Stock Exchange) you may need Android/iOS mobile gadget.

After shopping for a platform that suits your needs,you will have to sign up and create your account online.

Have a strong password and make your details secure by enabling authentication to keep off scammers.

d)Start Your Regular Contributions

Deposit the small amount you have saved for this purpose.

Ensure you have automated your deposits from your bank account so that you do not miss on consistency.

Consistency will help you increase your investment over time.

e)Choose What To Invest In

Micro investment options on various platforms range from individual stock,ETFs etc

Your current financial situation, the knowledge about the choice of investment and your risk tolerance will help you determine what you want.

f) Figure Out The Amount You Can Invest

The amount may depend on the goals you have set up. Whether long term or short term.

Diversifying your portfolio spreads the risks.

Consider allocating suitable amounts for each investment.

For ETFs, you will have to put in mind the costs and commissions involved in actively trading .

g)Take Control of Your Investment

Get access to your statements and keep an eye to your account so that you are able to identify any suspicious activities and report immediately.

Also be in line with emerging market trends and adjust your investments to meet the current market situations.

The investment performance will also help you make necessary adjustments so as to achieve your goal.

h) Equip Yourself with Knowledge.

Financial literacy plays an important role in saving and investing.

Find resources that are available in your investment space so as to get some knowledge and understanding.

Micro Investment Trading Options in Kenya

1.) Real Estate Investment Trusts (REITs)

Here the investor benefits from investments in large scale real estate business i.e through property or mortgages.

It trades as stock on the security exchange.

The two types of REITs in Kenya include;

  • Income Real Estate Investment Trusts (I-REITs) which gets income from property rentals. It owns and manages income generating real estate for the benefit of its investor.
  • Development Real Estate Investment Trust -A scheme whose proceeds go to development and construction of property for sale or rental

 

2.) Exchange-Traded Fund (ETF)

You can buy or sell shares throughout the day on a securities exchange at a price determined by the market.

It can track both the performance of basket of shares and single commodities like oil or gold.

You can manage an ETF either passively i.e by professional money managers or actively i.e yourself

micro investment platform

 

Conclusion;

Micro investments are helping more people venture into what was traditionally perceived to be a preserve for the rich.

With small amounts of money you can start your journey of investment. The experience helps advance into larger investment opportunities.

A suitable micro investment platform should be user friendly.This is to enable the investor do the investment himself without struggles.

The secret to your financial success is inside yourself.

If you become a critical thinker who takes no wall street fact on faith, and you invest with patience confidence, you can take steady advantage of even the worst bear markets.

by developing your discipline and courage, you refuse to let other peoples mood swings govern your financial destiny.

in the end, how your investments behave is much less important than how you behave.-The Intelligent Investor- Benjamin Graham

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