Small budget, big opportunity: Investing with little money

Wealth accumulation is not just for the wealthy. Even with little money, you can build up assets over the long term. The most important thing is to start early and invest regularly. We’ll show you what you need to know.

Are you on a tight budget? Even small contributions can increase significantly over the years due to compound interest effects. This guide explains how you can invest wisely even with little money – and what you should bear in mind with your investment strategy.

Is it worth putting money in a savings account?

No, savings accounts are hardly worthwhile. In Switzerland as well, interest rates on savings accounts have fallen sharply in recent years and are often unable to even offset inflation. This means that the money loses value over the long term. A savings account still makes sense for short-term emergency reserves. But you should consider other forms of investment for long-term wealth accumulation.

Why invest in equities in small amounts?

Equities are seen as one of the best ways to grow assets over the long term. By buying shares, you invest in companies. Even small amounts can be invested in equities or equity funds on a regular basis. Continuous investments over a long period of time have decisive advantages:

• Return opportunities: Thanks to investments in equities or funds, higher returns are possible than from traditional savings accounts. Market fluctuations are balanced out over the long term: The longer your investment horizon, the better.
• Risk diversification : The risk is spread – on the one hand by taking different asset classes into account and on the other hand by having a large number of different securities within an asset class. In this way, losses and gains on individual investments offset each other and your portfolio is protected against major losses.
• Individual focus: Investments can be tailored to your own goals, values and risk tolerance. For example, some investors deliberately invest in sustainable funds or particularly low-risk asset classes.
• Average price effect (cost-average effect): By investing a fixed amount in securities on a regular basis, you buy more units when prices are low and fewer when prices are high. This strategy leads to a lower average purchase price in the long term.
• Compound interest effect: Profits earned are reinvested, leading to exponential growth in invested assets over many years. This effect is also particularly effective for long-term investments.

What should you do when investing with small amounts?

Whether you have a lot of money or a little, the right strategy is more important than the amount. Our five-step plan explains how you can actually tackle the issue of investing your money.

Step 1 – Check your finances and build up a reserve

First, get an overview:

1. What is the ratio of regular income to expenses?
2. Where can you find potential savings in your day-to-day life?
3. Do you have approximately three months’ salary in your savings account as a reserve for unforeseen events?

Our tip: Invest only money that you can do without in the long term. You shouldn’t risk facing financial difficulties.

Step 2 – Set priorities and investment amount

Regularity is much more important than the amount: Successful investing also works with small amounts.

1. First repay high-interestloans .
2. Then review your pension goals – and prioritize them.
3. Now you can set the monthly savings amount.

Our tip: It is often recommended that the equity component in the portfolio be adjusted to suit your age – as a rule of thumb 100 minus your age. For a 40-year-old, an equity allocation of 60 percent would therefore be appropriate.

Step 3 – Define the risk and investment horizon

It’s important that you invest in a way you are comfortable with. Never let anyone talk you into something! A good investment strategy is the one that suits you.

1. Set the investment horizon – the longer it is, the more you can invest in equities/equity funds.
2. Evaluate your personal fluctuation tolerance honestly.
3. Choose an investment strategy that lets you sleep soundly at night.

Our tip: Depending on your family situation, it may be worth taking out risk protection in the event of disability or death.

Step 4 – Select investment type

Time to implement: Now that everything necessary has been clarified, you have a good basis for making a decision.

1. It’s best to use a savings plan. Start investing early and regularly instead of saving a large amount of money first.
2. A broadly diversified investment minimizes your risk: consider funds or ETFs instead of individual equities.
3. Choose a suitable investment in line with your risk tolerance, objectives and values.

Our tip: Before deciding on a product, be sure to look out for fees and hidden costs.

Step 5 – Optimize efficiency

Now the job is done – from now on, your money is doing most of the work.

1. By automating deposits, you benefit in two ways: You save time and invest consistently.
2. Directly reinvesting the earnings you generate helps to maximize the compound interest effect.
3. Buy and hold: As a rule, stick to your investments instead of constantly switching. Of course, there is nothing wrong with checking your portfolio every now and then.

How do I balance risk and return?

The magic triangle of investment describes the key challenge in choosing the right investment strategy. It consists of the three most important factors:

• Availability
• Security
• Earnings opportunities

Every investment is a trade-off between these three aspects, as they influence each other. For example, a high level of security often means a lower return. And maximum returns are usually associated with limited availability. As it is impossible to maximize all three at once, investors face the important challenge of setting their priorities clearly. The goal is to find a balance that best suits your personal goals.

I’d rather invest in Pillar 3a – this is how I can save on taxes!

That’s correct. Payments into Pillar 3a can be fully deducted from taxable income in Switzerland. And even better: Pillar 3 and capital accumulation can be easily combined – simply invest your Pillar 3a capital. You can of course also invest in Pillar 3b.

AXA offers solutions for a variety of needs as part of its SmartFlex product.

• SmartFlex capital plan: Here, you can start with a single payment of at least CHF 15,000 into your Pillar 3a or CHF 25,000 into your Pillar 3b account.
• SmartFlex pension plan: With this option, you make regular deposits of at least CHF 600 per year or CHF 50 per month.

Summary: Is it worth investing with little money?

Yes, definitely. The compound interest effect – i.e. the reinvestment of income – becomes more significant over time. The decisive factors are a long-term investment horizon and a stable savings amount.

It is generally advisable to have sufficient reserves in your bank account. But you should invest capital that you do not need in the long term to grow it. For example, AXA EasyInvest is discretionary management that offers maximum flexibility for deposits and withdrawals.