How Do I Invest Small Amount of Money in Share Market Safely?

Dear Friend!

I find your question is very sensible on two crucial aspects: small amount of money and safety of investment.

Safety of investment comes from knowing what we are doing. Conversely not knowing what we are doing causes ‘Investment Risk’. There are two things you can do:

1. You can learn investing safely in the share market through ‘Value Investing’ for which I recommend you read the wonderful book, “The Intelligent Investor” by Benjamin Graham. Value Investing is safe and shares can be purchased for small amounts of money. 
   
2. If you can not learn investing for whatever reasons, you may invest in an ‘Exchange Traded Fund’ or ‘ETF’ or a ‘Mutual Fund’.

ETFs:

An ETF is created by fund managers that exactly reflect popular stock indices like BSE Sensex and NIFTY. In India ‘Goldman Sachs’ provide many ETFs, the popular being ‘Nifty BEES’ and ‘Junior Nifty BEES’. You may also invest in any mutual fund of a credible organisation. ETFs can be purchased just like shares on the stock market through online online platforms.

Mutual Funds:

Mutual Funds are operated by reputed financial institutions. There are different funds based on equity, debt and various mixes of both. Debt funds provide regular income but no capital appreciation. Equity funds provide both. Please do not allow yourself to be confused by issues like which mutual fund best returns. All funds are equally good in the very long term.

What is important in investing is not to disturb the investments for very, very long periods of time, say for twenty to fifty years. Over such long periods of time the law of ‘Miracle of Compounding’ will work for you in creating significant wealth.

In conclusion, yes, you can invest small sums safely in the stock market and become rich over a long time.