Time to time, I get questions in my email like these,
"Gin, how do I get started in investing when I don't have much capital?
That's an important question.
After all, investing is a process that uses money to make more money.
And only when our capital becomes bigger, our investment returns become more meaningful.
Imagine if you only have $10,000 - even a 10% return will only yield $1,000 a year.
That's barely enough to become financially free.
However, if you have $300,000 - a 10% return will yield $30,000 a year; which is a pretty decent amount of passive income for most people.
Well, everybody starts their journey at some point - and in this blog post, I share six tips and mindset that anyone can use right now to start building up their investment capital.
1. Pay Yourself First
For those, who have been following my blog for awhile - you would know that I always advocate this concept.
Because it is one of the key builders of wealth.
Every month, when your paycheck comes in - or whenever you get a sum of income - have the discipline to immediately put it aside for the purpose of investment.
This is otherwise known as forced savings.
Warren Buffett put it this way,
Do not save what is left after spending, but spend what is left after saving
Most people will splurge their money the moment their salary comes in.
For me, I have been consistently putting money every month into my brokerage account every single month.
The reason why I do that is because, I know that any savings in the bank will only depreciate due to inflation.
Here's a comparison between a typical bank interest return of 0.05% versus a conservative 5% investment return when we contribute $500 every month for 10 years.
Click to enlarge image. Bank return of 0.05% (left) versus investment return of 5% (right)
The difference over 10 years is around $38,000.
It is this fact alone - that made me understand that learning how to invest is a crucial skill set if we truly want to grow our wealth.
Some would also argue that,
"But Gin, the stock market is risky - putting money in the bank is much safer."
Well, these concerns are definitely valid.
However, the concept of risk is so skewed in this statement.
We have to understand the true meaning of risk,
Risk comes from not knowing what you are doing.
Its is the same logic when it comes to taking a plane for example.
Would you tell yourself,
"Flying a plane is risky, maybe I should walk from Malaysia to Thailand instead."
That's sound absurd, doesn't it?
The idea of saying "the stock market is risky", it is simply a convenient excuse for those who do not have the discipline to learn investing."
Besides, I used a conservative estimate of 5% return.
Take a look at the historic annual returns of the stock market index, SPY.
Well, here's what I googled.
All we had to do was to consistently dollar cost average into the index, and our returns would have been well over the conservative estimate of 5% annually over 10 years.
Perhaps, the biggest reason why most people think the stock market is risky is because they were trying to get rich overnight, and was not able to think long term - which is also why they tend to panic whenever there's a stock market correction.
So in short, that's the first tip - understand the importance of paying yourself first, and contributing to your investment portfolio consistently.
2. Declutter Your Home
Everyone is probably guilty of this - buying things that we don't actually need.
And its very common - after all, almost all of us buy things based on our emotions, rather than logic.
Look around you, are there things that you don't need or use anymore?
It could be the old laptop, old phone, your bags, shoes, furniture...it can be even an old PC, the list goes on.
Warren Buffett said this,
If you buy things that you don't need, soon you will have to sell things you need.
You can easily take a picture of these items, and post it on websites like eBay, gumtree, Carousel.
Example of people selling their iPhones on eBay
This way, you can easily sell these items that you don't need, for a good amount of cash.
You might probably think that, "who would want this old item of mine?"
But the truth is that you never know.
And even if there are items that you cannot sell because they are not of much value - why not donate them for a great cause. Remember that the secret to living is giving. You may never know if someone out there would benefit from the stuff that you were thinking of throwing away.
That's tip 2 - declutter your home and sell your clutter for cash.
3. Be Comfortable With Used Items
Well, this is pretty much a personal choice - but I decided to add this in, because I know that there are people who are like me, who are always looking to optimise our finances.
You probably guessed that a second-hand item is going to be way cheaper than a new item.
Look at this for example.
For myself, I have been looking at getting a phone upgrade for a Samsung S9 - and you can see that the difference in price is over $300!
This phone would have cost you close to $1000 when it was first released in 2018.
In 2020, a used S9 would only cost you $280.
To me, it makes little financial sense to buy a new phone because of the steep depreciation.
I would much rather use the savings and invest in quality companies that would actually appreciate in price.
However, like I said - there will still be people who will prefer brand new items - which is really a personal choice.
You don't have to be like me 🙂
That's tip 3 for you - be comfortable with used items. Now, for tip 4.
4. Increase Your Income
For the first three tips, I have been talking about saving money.
However, there's a limit to how much you can save right - after all, if you only make $3,000 - the most you can save is $3000 (assuming you don't spend a single cent.)
But when it comes to earning money, what do you think it is the maximum you can earn?
Well, the sky is the limit.
And this is what this tip is about - to increase your income.
To do this, you want to first identify something that you are interested or good at, and learn how to monetise it.
This could even be just mathematics, engineering drawing, video editing, video animations!
Then you want to be able to offer your service on freelance websites like Fiverr.
In today's economy, making an income online is already a norm - and this is ever so important ever since the start of the COVID-19 pandemic. People who still have yet to develop the skill set to make an income online will be very poorly position for the future.
If you take a look at Fiverr, there are many freelancers out there that are selling their skillsets for an income in US dollars. This is especially important when your currency is relatively weaker than the US dollars - you could easily make a pretty good living simply by providing a service that you are good at. This is otherwise known as currency leverage.
Example of freelancer selling video animation service on Fiverr
In this example, the basic package he is selling charges for $150.
And he has over 146 reviews, so conservatively, if all of them bought the basic package, that would already be $21,900 worth of income.
Now, think about a skill set that you have that you can offer to others - and you can consider offering your skill set on these websites.
5. Compound Your Knowledge
The more you learn, the more you earn.
Its important to take a portion of your savings to develop your own personal growth.
Most people stop learning and developing themselves the moment they leave university.
We need to understand that,
Our greatest investment is always in ourselves.
Even for myself, I am still constantly investing in myself to learn about stocks, properties and business - and I spent well over $20,000 of my savings. In exchange for that, was a skill set that will last me a lifetime - and today, I have the privilege to share what I have learned through my blog.
And I would always reinvest the returns into myself again - learning from even more successful investors and entrepreneurs.
In fact, many of my mentors do the exact same thing - some of them already invested well over a million dollars in themselves. This was because they recognise that they are their greatest investments.
Of course, you don't have to invest a huge chunk in yourself right away.
When I initially started, I had very little savings, so I started with books. As I got more results, I then started to invest in programs and mentorship. The more I invested in myself, the more clarity I had, and the faster I was able to get results.
And as I am writing this, I know that there are also my young readers who are just starting out and want to learn more about investing - which is why I created the free resource like the Stock Investing Hub - where I organise my knowledge into one page.
Even as I type this blog post, my calendar is also filled with the next investing/business program that I am going to attend - this is also so that I can update the resources for my readers as I continuously improve myself.
6. Start Your Side Hustle Business
This is probably the riskiest advice because most people will fail at this - but starting a business is the greatest personal development journey you will ever have, simply because it is extremely tough and that forces you to grow.
So my advice is to start small and fail fast - learn your mistakes and keep growing.
If you do what's easy, your life will be hard. However, if you do what's hard, your life will be easy.
I started my first mini-business of phone repair - where I will repair broken phones and sell them for a profit.
Here's a Picture of Me Doing A Phone Surgery
And I really appreciate this experience, because it taught me so much the importance of knowing your numbers.
There was even a point where I had 12 iPhones in my drawers, which were unsold - and that got me worried because there was no cash flow into the business.
Eventually, I did manage to sell all of them on eBay and got quite a good profit.
On a side note, all of these experiences allowed me to appreciate what are the numbers that are important for a business - and I combined them into the 8-Point Checklist for my investment decisions.
In short, when you start your own side hustle business, you are better to appreciate the financial numbers when it comes to investing.
7. Document Your Journey
Yes, I know I initially said six tips - but this was is too important to miss out.
So take this as a bonus 🙂
Documenting your journey and sharing your experience will be one of the most fulfilling journey.
Some may think that this is time consuming - however, I realised that as I am writing these blog posts, I benefitted from it the most, because I am able to get more clarity on my ideas.
To master a concept, you must be able to teach it to others. If you can't explain what you think you know, then you don't really know it.
I know there will always be people who are skeptical and say things like,
"If he/she is so good at investing, why waste time writing a blog and sharing all these knowledge? Why not just quietly sit behind the monitor and quietly grind out profits?"
I respect that people could be skeptical - and this is actually good, after all it is what protects us from bad investments in the first place. However, it is just as important to keep an open mind as well and understand that wealth is in abundance and share your experiences with others.
So in your journey, I encourage to share your experiences, as you may never know that someone out there in the world, get inspired by your content and you end up impacting his or her life.
It is heartwarming when I get emails like these and know that my content is benefitting others.
And that's the bonus tip for you - document your journey and share your knowledge as you will improve much faster than you imagine.
What's Next?
So, these are the seven tips for you if you are starting from nothing.
Remember that a thousand mile journey begins with a single step - have the courage to set foot on this journey, and enjoy the process - because you will emerge as a much stronger individual.
Which tip will you be taking action on today?
Will it be to declutter your home?
Or could it be to start documenting your journey?
Leave a comment down below and let us know 🙂