How to invest small amounts of money

Small, regular investments can also be used to build up wealth in the long-term. The following four steps will help you to utilise your money effectively:

1. Getting an overview

Before making your first investment, you should take a close look at your finances. How much do you earn per month? How much of this do you spend on rent and utilities, food, telephony and internet access, insurance, transport and leisure activities? This will enable you to identify potential savings in your everyday life and determine your budget for investment.

Important: We recommend keeping a reserve of at least three months’ expenditure in your savings account to cover unexpected costs.

2. Setting the amount

Once you have an overview of your own finances, you can determine what you have left to invest. The long-term goal is to use about 20% of your available monthly budget for savings and investments. Don’t have much money available? No problem! As little as CHF 50 a month is a solid foundation for building up your wealth!

After building up cash reserves and repaying loans, your top priority is paying into the pension scheme. Any remaining funds are then available for targeted investment. Investors should invest only what they won’t need in the long term.

3. Choosing an investment vehicle

There are a number of investment options depending on for how long you want to invest your money and how great a risk you are willing to take. However, we suggest putting smaller amounts in a “savings plan” at a bank. In this case, a fixed amount is debited from your account on a monthly or quarterly basis and invested in a fund, for example.

Funds consist of bundles of shares in several companies as well as bonds and other investments. Since this allows you to make several investments via a single vehicle, it spreads your risk diversely. The dividends and interest earned on the invested money are reinvested immediately, thus enabling you to generate a return on the yield itself (compound interest).

4. Managing assets

If you have saved up a small financial cushion, you can consider professional management. Many banks offer potential investors digital asset management services starting at CHF 5000, for example Migros Bank and its Focus Asset Management programme.

Although investors don’t get individual support, the investment funds in which they invest are monitored and optimised continuously by professionals.

Barbara Russo is a client advisor at Migros Bank and an investment expert.