Nowadays, there are basically two ways for people to earn money
The first of these is to generate an income. The second option involves investing existing assets in such a way that their value increases continuously over time – even though there can never be a 100 percent guarantee of this.
However, many consumers believe that investing money must always involve a high level of effort and financial investment. In reality, however, this is not the case at all. Even with a fairly manageable budget and a small effort, it is possible to invest your own assets profitably.
The following article shows which options are available and which convincing advantages they have.
Crowdinvesting
In crowdinvesting, a company – usually a start-up – is financially supported by many investors. In relation to the total capital, the contribution of each investor is quite low. The amount paid in can be reclaimed by the investor at a later date – plus a corresponding interest rate.
Many investors expect an above-average return from crowdinvesting. Nevertheless, the risks associated with this form of investment should not be underestimated. If the company being financed fails, the entire investment is lost. Comprehensive research into the company in advance should therefore never be dispensed with.
The ETFs
If only a little money is available for investing, the purchase of an index tracker represents a particularly recommendable opportunity. These funds, which are traded on the stock exchange, are known as Exchange Traded Funds, or ETFs for short.
Index funds and exchange-traded funds are used to track the performance of an asset class or a stock market. There are numerous advantages for investors.
For example, a small amount of money is already sufficient, which is divided among the fund shares accordingly. In addition, important risk diversification takes place almost automatically with ETFs. As a rule, an index includes a large number of individual securities, so that a broad diversification of the investment takes place. For example, an investment in stocks trading Europe is recommended.
It should also not be neglected that ETFs are often much cheaper than funds that are actively managed. Thus these are to be evaluated as a particularly economical and simple possibility if it goes into an investment into shares.
The Partial Shares
A quite new variant, in order to make an investment with small amounts, represent the so-called partial shares and/or the fractional shares. Their popularity has been growing rapidly for some time, which can be attributed to their immense advantages. Fractional shares mean that an investor does not own a whole share in a company, but only a part of it. These fractional shares allow an investment even with a small budget.
The common feature of ETFs and fractional shares is that both variants are perfectly suited for risk diversification. If different fractional shares from different sectors are purchased for a certain amount, the risk is ideally spread.
Risk diversification basically aims to reduce the risk of the investment by spreading it across different categories, industries, and financial instruments. In this way, possible losses can be minimized. Accordingly, risk diversification does not create a guarantee against losses, but the risk of losing a lot of money is significantly reduced.
