When it comes to investing, you need money to make money, right? Every new investor or trader starts off with one problem: a lack of funds (unless you’re already rich). Consider the following:
- Person A starts with $1 million, and makes 10 percent.
- Person B starts with $100,000. In order to match the profits of Person A, Person B must make a 100% return.
The point is, you need to start investing with as much capital as possible. So how can you increase your intial investment capital?
Investing is kind of like a business: you’re in the business of making money. Since most business owners don’t enter into business with a lot of money, they bootstrap their way up – saving as much money at home and pouring their savings back into the business. Likewise, a new investor needs to be frugal at home and plow those savings into his/her initial investment capital. Here are a few ways to save (most of which I have used).
- Cut your cable. (Oh, the horror!). Nowadays, the internet has decimated many of the uses of cable – most of your favourite shows are uploaded to sites such as Youtube as soon as they come out. So why spend hundreds of dollars a year on cable – hundreds of dollars that could be used for your investments – when you can watch the exact same shows for free online?
- Buy a cheaper smartphone. Many people buy iPhones because they think it makes them look “cool”, affluent, and rich. If you’re one of these people, ask yourself the important question: would you rather look rich or be rich? If you choose the later, then scrap the $100 a month iPhone! There are much cheaper alternatives that are almost just as good, such as Android smartphones. With the hundreds of dollars you can save each year, that is extra money to your initial investment capital.
Start An Investment Related Business
Some people say it’s more important to save that earn money, and others say the opposite. I say both are just as important – just because you want to make money investing doesn’t mean you can’t find other ways to make money, which will be plowed into your initial investment capital. Since you’re learning how to invest, the best way to make side money is to create an investment-related business. For example:
- An investment blog. This is arguably one of the best ways to make extra money by doing what you’re already doing. All investors keep notes that include their thoughts on the market, thoughts on the economy, how they invest, etc. Why not upload that onto a blog, which they can potentially profit off of? A good example is Cullen Roche from Pragmatic Capitalism: he started his blog as a way to organize his investment thoughts – now, he’s being contacted by investors begging him to take their money. Another example is Barry Ritholtz – his investment blog earns him upwards of $200k a year.
- Sell your investment model. This is an option, albeit one that I’m not too fond of (I like keeping my most treasured secret a secret). Some investors are able to make a lot of extra money by selling a copy that illustrates how they make their investment decisions.