What is the best investment for those with little money?

When it comes to investing, it's easy to feel overwhelmed, especially if you're just starting out or have little money available to invest. However, investing isn't just for the rich. In fact, there are several affordable investment options that can help you build your wealth over time, even with small amounts of money. 

What is the best investment for those with little money?

Investing can seem like a challenging task, especially for those who are just starting out or have limited financial resources. However, it is important to understand that investing is not exclusively for the wealthy. Even with little money available, it is possible to embark on a wealth-building journey and achieve your financial goals.

1. treasury direct

Tesouro Direto has become one of the most popular and accessible investment options for those with little money. It's a Brazilian government program that allows investors to buy government bonds online, directly, without the need for intermediaries.

Types of Securities

There are three main types of securities available on Tesouro Direto, each with its own specific characteristics:

• Selic Treasury: This bond is post-fixed and its return is linked to the basic interest rate of the Brazilian economy, the Selic rate. This means that it offers a rate of return close to the market interest rate, which makes it an interesting option for conservative investors. In addition, the Selic Treasury offers daily liquidity, meaning that investors can redeem their money at any time without paying additional fees.
• Tesouro IPCA+: Also known as Tesouro IPCA or NTN-B, this bond offers protection against inflation, as its yield is made up of a fixed rate plus the variation in the IPCA (Broad Consumer Price Index). This means that even in periods of high inflation, investors will have their purchasing power preserved. The IPCA+ Treasury is an interesting option for those who want to protect their money from devaluation caused by inflation and are willing to keep the investment until maturity.
• Prefixed Treasury: This bond offers a fixed rate of return set at the time of purchase, regardless of market fluctuations. This can be advantageous in scenarios of falling interest rates, as the investor is guaranteed a predictable return over time. However, it is important to note that the Prefixed Treasury is subject to market risk, i.e. its value may change before maturity if interest rates rise.

Advantages of Treasury Direct

• Low initial investment: Tesouro Direto allows investors with little money to start their investment journey with affordable amounts, starting at R$ 30.00.
• Ease of access: The entire process of buying and selling Treasury Direct securities can be carried out online, simply and quickly.
• Security: Government bonds are considered low-risk investments, since they are issued by the Brazilian government, which is considered a highly reliable issuer.
• Diversification: With different types of securities available, Tesouro Direto offers the possibility of diversifying your portfolio, allowing you to choose the securities that best suit your investor profile and financial objectives.
• Attractive returns: Even though they are considered low-risk investments, Treasury Direct bonds offer competitive returns compared to other fixed-income options available on the market.

2. Investment Funds

Investment funds are collective investment vehicles in which the money of several investors is pooled and invested in a variety of financial assets, such as shares, bonds, foreign exchange and commodities, according to the strategy defined by the fund manager. This structure allows even investors with little money to access a diversified investment portfolio and benefit from the expertise of professional managers.

Types of Funds

There are various types of investment funds available on the market, each with its own specific characteristics:

• DI Funds: These funds invest mainly in low-risk fixed-income securities, such as government bonds and CDBs (Bank Deposit Certificates) from top-tier banks. They are suitable for conservative investors looking for stability and liquidity, as they offer low volatility and quick redemption.
• Equity funds: As their name suggests, these funds invest mainly in shares of companies listed on the stock exchange. They are ideal for investors who want to achieve higher returns over the long term, as the shares have the potential to appreciate significantly over time. However, they are also subject to greater market fluctuations and are therefore more suitable for investors with a moderate to aggressive risk profile.
• Multimarket funds: These funds have the freedom to invest in different asset classes, such as shares, bonds, foreign exchange and commodities, with the aim of obtaining higher returns. They are suitable for investors who are looking for diversification and are willing to take on a little more risk in exchange for higher potential returns. Multimarket funds can be an interesting option for those with little money, as they offer access to a diversified portfolio of investments managed by professional managers.

Advantages of Investment Funds

• Diversification: By investing in a fund, you are acquiring a basket of financial assets, which helps to reduce the specific risk of each individual investment. This means that even investors with little money can benefit from diversification, without the need to invest in multiple assets on their own.
• Access to Professional Management: Investment funds are managed by professional managers who have expertise and experience in the financial market. This means that you are entrusting your money to specialists who have the knowledge and resources needed to identify investment opportunities and manage risks effectively.
• Ease of Access: Investing in investment funds is easy and convenient. Most funds are available to investors of all profiles and offer different investment options, such as low initial investments and the possibility of investing regularly through monthly contributions.
• Liquidity: Most investment funds offer daily liquidity, which means you can redeem your money at any time, usually without paying additional fees. This provides flexibility and convenience for investors who may need to access their money quickly.

3. Investing in shares

Investing in shares is one of the most traditional and effective ways of building long-term wealth. By purchasing shares in companies listed on the stock exchange, investors become owners of part of the business and have the opportunity to benefit from the company's growth and success over time. For those with little money, investing in shares can be a viable option, especially with the popularization of so-called "fractional lots", which allow the purchase of fractions of shares with small amounts of money.

Main Benefits of Investing in Shares

• Growth Potential: Stocks have a proven track record of delivering significant returns over the long term. By investing in successful, growing companies, investors can benefit from the increase in share value over time, generating substantial profits.
• Profit Sharing: As a shareholder in a company, you are entitled to a share of the profits distributed by the company in the form of dividends. These dividends can provide an additional source of passive income for investors, helping to increase the total return on investment.
• Diversification: The stock market offers a wide variety of companies in different sectors and geographical regions. This allows investors to build a diversified portfolio of shares, reducing the specific risk of each individual investment and increasing the potential for long-term returns.
• Access to Promising Companies: Investing in shares offers investors the opportunity to become owners of innovative and promising companies, many of which may be leading future growth sectors. These companies have the potential to generate significant returns for investors as they grow and expand their businesses.
• Liquidity: The stock market is highly liquid, which means that investors can easily buy and sell shares at any time, usually without difficulty. This provides flexibility and convenience for investors who may need to access their money quickly.

Risks of Investing in Shares

• Market Volatility: The stock market is known for its volatility, and stock prices can fluctuate significantly in the short term due to a variety of factors, such as economic conditions, industry news and geopolitical events.
• Risk of Capital Loss: Investing in shares involves the risk of capital loss, as the value of the shares may decrease due to unfavorable market conditions or company-specific problems.
• Need for Research and Analysis: To successfully invest in shares, investors need to carry out careful research and fundamental analysis of the companies they are interested in. This requires time, knowledge and financial analysis skills.

4. Robo-Advisors

Robo-advisors have emerged as an innovative and accessible alternative for investors who want a simplified and automated approach to investing their money. These platforms use algorithms and artificial intelligence to create and manage diversified investment portfolios tailored to each investor's profile, without the need for direct human intervention. For those with little money, robo-advisors offer a convenient and efficient way to invest in a variety of financial assets, with low fees and affordable investment minimums.

Main features of Robo-Advisors

• Personalization: Robo-advisors use questionnaires and algorithms to determine each client's investment profile, taking into account factors such as financial objectives, risk tolerance and investment horizon. Based on this information, personalized investment portfolios are created to suit each investor's needs and preferences.
• Diversification: One of the main advantages of robo-advisors is the ability to create diversified investment portfolios by distributing funds across a variety of asset classes, such as stocks, bonds, real estate funds and commodities. This helps to reduce the specific risk of each individual investment and increases the potential for long-term returns.
• Automatic Rebalancing: Robo-advisors continuously monitor investment portfolios and make automatic adjustments when necessary to ensure that they remain in line with the investor's objectives and risk tolerance. This includes periodically rebalancing the portfolio to maintain the asset allocation proportions as initially planned.
• Low fees: In general, robo-advisors charge lower fees than traditional financial advisors because their operation is highly automated and requires less human intervention. This means that investors with little money can benefit from professional investment management at an affordable cost.
• Access to Sophisticated Investments: Through robo-advisors, investors with little money can access a wide range of sophisticated investments, such as international bonds, index funds (ETFs) and alternative strategies, which may not be easily available to individual investors.

A challenge

Investing with little money may seem challenging, but it's not impossible. With the investment options mentioned above, it is possible to start building your wealth even with modest amounts. However, it's important to remember that all investments have some degree of risk, and it's essential to make a careful analysis before making any investment decision. 

It is also advisable to seek advice from a qualified financial professional who can help you develop an investment strategy that suits your needs and financial objectives. Always remember to invest in a conscious and disciplined manner, with a view to the sustainable growth of your assets over time.

See also: 10 profitable businesses in Brazil

April 3rd, 2024