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Investment Tips for Investors with Less Money

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Diversification is the essence of financial planning and is an effective method to get maximum returns at low risk from your investment portfolio. A diversified portfolio contains an assortment of financial assets from different sectors. Ideally, an efficient portfolio should comprise small- and large-cap stocks, international equities, bonds, commodities, and so on.

However, such investments usually require considerable investment to generate satisfactory returns over time. The question, then arises, is this – how should one diversify one’s portfolio with low investment?

This article will offer some beneficial tips for how to diversify your portfolio with little money.

Zero Commission Brokerage Trading

Zero commission brokerage trading enables investors to save on the outflow of commissions. Sarwa has introduced a zero-commission brokerage trading portal that helps investors and traders buy any stock or exchange-traded funds (ETFs) without paying any brokerage fee.

Zero commission trading portals make for a good choice for young investors who wish to diversify their investment portfolios with little investment. Some of the most common zero-commission brokerage trading portals in the UAE are Sarwa, eToro, and Robinhood.

Use Index Funds for Diversification

Index funds enable investors to diversify their portfolios with minimum investment. When one buys ETFs or mutual funds that mirror the broad indices like NASDAQ, S&P 500 and more, one buys them at negligible cost. It is an easier and more efficient way to improve one’s portfolio. With index funds, you don’t have to worry about building the portfolio from the start and reviewing the company’s performance time and again.

You can also consider investing in sector-specific index funds if you want to earn returns from particular industries. While these funds are slightly more expensive than broad indices, they are suitable investment options for investors who want to actively manage their portfolios.

Invest in Low Cost Exchange Traded Funds

When planning to diversify your investment, you can also take low-cost ETFs into account as an investment option. With low-cost ETFs, you can own any security including micro-cap stocks, global equities, commodities, and real estate investment which can help in filling in the investment gaps in your portfolio. One of the major reasons to invest in low-cost ETFs is that there is a minimal fee to be paid annually for fund management.

Robo-Advisory Platforms

Robo-advisors are digital investment portals that allow users to invest their money in well-structured investment portfolios. They are a low-cost investment option that requires minimal management, as their algorithm-operated financial planning platform requires negligible human supervision. Robo-advisors analyse your financial goals through an online survey and use the data to make suggestions about investment options.

The best Robo-advisors in the UAE make it easy to setup an account, comprehensively make plans as per the goals, and manage the portfolio. They also offer security services like round-the-clock customer service, low fees, and comprehensive education.

The functioning of this investment option is straightforward as the investors simply need to provide a few details, after which the Robo-advisory platform estimates the risk based on this information. Unlike most financial advisors who charge a hefty fee for their advisory services, Robo-advisors require you to spend less for online advisory services.

Invest in Target-date Funds

Investing in target-date mutual funds is another way to create a diversified portfolio with less money. Working on the lines of passive investing, these funds allow the investor to select a date in the future as their financial goal. The date selected is usually the retirement date.

Under this type of mutual fund, the funds are invested in riskier ventures (like equities in the early stage) and transfer the portfolio’s allocation to safer financial assets like bonds and cash. This type of mutual fund is suitable for people who seek to invest passively.

Buy Fractional Shares

Another option to diversify your portfolio with minimum money is buying fractional shares. For this, you simply need to purchase fractional shares at your convenience. One of the reasons for this is that the price of the company’s shares do not affect the fractional share.

Invest in No Load Mutual Funds

In a no-load mutual fund, the shares are sold without charging any sales commission and are directly distributed by the investment company. This makes it an ideal investment venture to diversify the portfolio with less money. Investors can invest in broad-market mutual funds.

Key Takeaways

  • A perfect investment portfolio contains investments in diverse ventures. Diversification is an effective way to earn maximum returns with a low-risk profile portfolio. However, as a diversified portfolio contains an assortment of financial assets from different sectors, such investments usually require a lot of investment.
  • You can diversify your portfolio even with less money. Some ways to do this are zero-commission brokerage trading accounts, investments in index funds, affordable ETFs, target-date mutual funds, no-load mutual funds, and investing via Robo-advisory portals.
  • Zero-commission brokerage trading lets investors eliminate the commissions. Zero-commission trading portals are preferred by beginners who want to diversify their investment portfolios with little investment. Some of the most common zero-commission brokerage trading portals in the UAE are Sarwa, eToro, and Robinhood.
  • You can invest in broad-market index funds with minimum investment. When you buy ETFs or mutual funds that imitate the broad indices like NASDAQ, S&P 500 and more, you get to purchase them at a negligible cost. It is an easier and more affordable way to boost your portfolio. With index funds, you do not have to worry about creating a portfolio from the scratch and keeping a check on the company’s performance frequently.
  • Robo-advisors are digital investment portals that enable you to invest your money in well-structured investment portfolios. They are a low-cost investment option that requires minimal management. It is an algorithm-operated financial planning platform that requires negligible human supervision and eliminates high fund management as well as financial advisory costs.
  • Another way to diversify portfolio with minimum investment is to buy fractional shares. One of the reasons for this is that the fluctuations in the price of the company’s shares does not affect the fractional share. 

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