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Investing smartly on a small budget
24 Feb 2021
Every new year ushers with it new resolutions and personal targets. For some of us these might be related to start saving a portion of the income we receive during the year in order to invest for our future.

In today’s scenario, depositing savings in a bank account rarely bears enough fruit, so we need to look at other options such as investments that can make our money work harder for us. It is a misconception that you need large sums of money to embark on an investment journey. 

Today’s financial products allow for smaller budgets – a solid portfolio can be built with as little as €50 per month. 

Small steps towards larger wealth

One of the essential things to keep in mind is to apportion and spend your salary wisely. A percentage of your salary should go towards daily expenses, unexpected costs and short-term goals. Start by calculating these expenses and place a portion of your earnings to cover these expenses in a savings account. The remaining balance can be used for investment purposes. 
Knowledge is power – start getting into the world of investments through knowledge acquisition. The internet offers a wealth of information. Acquired knowledge can better assist you in making better investment decisions. Most financial institutions offer advisory services through highly skilled Financial Advisors who are trained and equipped with the necessary tools and updated information. Through one-to-one meetings, they can assess your risk profile, investment objectives and advise you on the investment that is most suited to your financial requirements. 

If you have a small budget to invest, monthly investment plans, such as Unit Linked or Capital Protected Funds, could be a the most apt option. One of the plus sides of investing regularly through monthly investment plans is the benefit of cost–averaging. This lowers the risk of volatility by averaging costs of the investment units that you purchase over time. 

Unit Linked Monthly Investment Plans
are based on collective investment schemes where money from a number of investors such as yourself, is pooled into a fund and invested by a fund manager according to the criteria of the specific fund. The fund is divided into segments called 'units', similarlyto shares. With your monthly €50, you will be pooling in alongside other investors like yourself, and you would be able to invest in various companies, sectors, assets and different geographical regions, providing you with immediate access to the expertise of investment professionals and diversification. This is made possible through the pooling of funds of many investors put together.  Unit Linked Plans are also flexible and liquid as funds can be redeemed subject to a fourteen day notice period. 

Capital Protected Monthly Investment Plans are mainly aimed at the longer term investor. These plans can provide a number of investment guarantees, annual bonuses and have the added benefit of being tax efficient. The main aim of a Capital Protected Investment Plan is to provide steady, conservative returns whilst also offering valued assurances. It is a secure means of investment which offers a potential for growth whilst protecting your savings from short-term market volatility. 

The crucial step with investments is getting started. The sooner you start, the quicker you can start building a lump sum for the future. The complexities of markets and the terms and conditions related to these plans can be overwhelming to a new investor. It is therefore recommended to seek the services of a Financial Advisor who will provide you with a full picture of costs, fees, risks and possible returns.

This was written by Renee' Marie Brincat and published on the Sunday Times of Malta on the 21st February 2021. Renee' Marie Brincat is a Portfolio Administrator at the BOV Gzira Investment Centre. 

This article is not, and nothing in it should be construed as a recommendation in respect of investment products or services offered by the BOV Group.  Any views, assumptions or opinions expressed in this article are those of the author. Value of investments may go down as well as up and may be affected by changes in currency exchange rates. Past performance is not a guide to future performance. Issued by Bank of Valletta p.l.c., 58, Triq San Żakkarija, il-Belt Valletta VLT 1130.  Bank of Valletta p.l.c. is a public limited company regulated by the MFSA, licensed to carry out the business of banking and investment services in terms of the Banking and Investment Services Acts (Cap.370, 371 of the Laws of Malta).
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Bank of Valletta p.l.c. is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap.370. of the Laws of Malta).