Is Saving $20 a Week It? Building Passive Income with Stock Worth Investments

Today, many of us imagine being rich and turn to investing to achieve this dream. On the other hand, some of us do not have that much money that could make a difference. Or do we? You might think you need hundreds of dollars to make a solid investment but there are other ways. Today, I’ll talk about what you can achieve with as little as $20 if you make smart investments.

Kornelija KazlauskasMay 24, 2023

0 15 3 minutes read

Is Saving $20 a Week It? Building Passive Income with Stock Worth Investments

Today, many of us imagine being rich and turn to investing to achieve this dream. On the other hand, some of us do not have that much money that could make a difference. Or do we? You might think you need hundreds of dollars to make a solid investment but there are other ways. Today, I’ll talk about what you can achieve with as little as $20 if you make smart investments.

Compound Interest Might Be Your Best Friend

Compound interest is one of your best friends if you don’t have that much to invest every week. Basically, it allows you to earn interest from your initial amount and the accumulated amount on your account. In simpler terms, it allows you to earn interest on your interest. Let me give you an example: Let’s say you invest $100 with a 10% annual interest rate. Next year, you would earn $10 in interest. In compound interest, your interest would be calculated based on your current balance. So, instead of getting another $10 for your initial $100 investment, you would get $11.

As you can see, it might be a great way to increase your income with smaller amounts. After a while, it will cause a snowball effect and you’ll earn much more than it is possible with traditional interest. There are various interest periods like annually, semi-annually, quarterly or sometimes even monthly. It is especially beneficial for longer-term investments as it gives them more time to snowball.

Take Advantage of Dollar-Cost Averaging:

Dollar-cost averaging allows you to regularly invest a fixed amount of money without thinking about the market’s ups and downs. You can take advantage of market fluctuations by using this method. Think about it: Let’s say you can buy 20 shares of X for $20 and you are determined to stick to investing $20 every week. When the stock’s price goes up to $2, you can still get 10 shares. If it goes down to $0.5, you can get 40 shares. In time, these will accumulate and smooth out the effects of market volatility.

The biggest advantage of this approach is that it can save you from the emotional decision making process which often leads to stress and sometimes bad decisions that can make you lose money. Instead, you regularly make contributions towards a more financially stable future. Also, you can easily automate your investment to make things easier for you. It is especially suitable if you are systematic and disciplined in your life.

History Shows That Stock Market Tends to Grow

Yes, we agree. The stock market is kind of volatile in the short term. Yet, history shows that it has a tendency to grow over the long term. This means that taking advantage of long-term investments, even with smaller investments like $20 a week, can potentially earn you a lot of money in the future. By regularly investing in high-quality stocks and focusing on the future, you can use this upward trend in markets to your advantage. Don’t underestimate the power of your “Jacksons,” you can accumulate a lot without even realizing it.

Starting Small Is Not Something to Be Ashamed of

You might have $20 per week to invest right now but in the future you might set aside more to invest. Investing is not an “all-or-nothing” thing; there are thousands of people who invest small amounts. And it can be a great way to start investing for beginners. As your financial situation improves, those twenties you set aside might give you a nice foundation for something bigger. This period also could help you learn the ropes before investing in bigger amounts. So it is a win-win If I’m being honest here.

$20 a Week Also Allows You to Diversify Your Portfolio

As the old saying goes, “don’t put all of your eggs into a single basket.” Diversification is one of the pillars of investing and that’s a fact. Spreading your investments across the investment board can help you reduce the risk with individual stock fluctuations. By investing $20 a week into different stocks can help you save money while minimizing the potential harms of single stock’s potentially poor performance.

Final Words

So yeah, investing $20 a week in stocks is a viable investing strategy. “A penny saved is a penny earned” is the perfect saying for such small investments which can potentially snowball into something giant. You can prepare your future by using different methods and strategies that could work wonders in the long-term. The key here is to be determined, disciplined and patient as Rome wasn’t built in one day. I hope you achieve your goals. See you next time!