Investing starting from 1,000 won? Types of small-scale investments you didn't know and practical tips!

Reasons Why the World is Changing Rapidly

Prices keep rising, but wages remain stagnant—this frustrating reality. The old myth of becoming a “instant millionaire” has disappeared, and instead, the risk of becoming a “instant pauper” has become a reality. The future of the national pension is uncertain, and stories of success with real estate and cryptocurrencies are frequently heard around us. As the 2030 generation emphasizes the importance of investment and financial planning to maintain their current quality of life, the issue is that many lack the lump sum needed to start investing and don’t know where to begin. For these people, we introduce various small-scale investment types that can be started with just a thousand won.

What Exactly Is Small-Scale Investment

Small-scale investment is a method that allows investing small amounts of money across multiple financial products. Unlike real estate, which requires large capital, or stocks, which have a minimum purchase unit per share, there are no such restrictions. You can invest as much as you want, making it less burdensome and allowing for quick initiation. There are many types of small-scale investments; let’s look at the main ones.

Starting Small-Scale Investment with Fractional Stock Trading

Traditional stock trading requires buying and selling in units of 1 share. However, small-scale investment methods allow purchasing stocks in units of 0.1, 0.01, or even 0.001 shares.

Let’s consider a specific example. If a stock costs 10 million won per share, normally, you would need that amount to buy 1 share. But by utilizing fractional trading, you only need 10,000 won to buy 0.001 shares. If the stock price is 1 million won, then 0.001 shares cost just 1,000 won.

Since September 2022, several securities firms in Korea have adopted this system. They pool multiple buy orders to purchase a full share and then distribute profit certificates to investors.

The downside of this method is that real-time trading is difficult. Because transactions go through securities firms, you can’t sell immediately at your desired price, and the fees are higher than regular stock trading. However, it allows you to gradually accumulate quality stocks and is good for beginners to gain practical experience.

ETF Investment: Lower Risk While Seeking Returns

Exchange-Traded Funds(ETF) combine the freedom of stock investing with the stability of funds. They pool various stocks into a single product, allowing for diversified investment across multiple companies even with small amounts.

For example, buying an ETF that tracks the S&P 500 index means investing in 500 large U.S. companies at once. It has less volatility than individual stocks but is managed by professionals like a fund.

There are various types of ETFs: index-tracking(such as KOSPI, NASDAQ, etc., sector-specific)such as technology, finance, real estate, and dividend-focused(companies with high dividends.

The biggest advantage of this approach is lower risk. Due to diversification, the impact of poor performance by one or two companies on overall returns is minimal. Therefore, it is suitable for young investors who want to grow their assets steadily while avoiding risks.

Investing in Real Estate with Less Cash: REITs

REITs)Real Estate Investment Trusts( are small-scale investments that allow you to invest in real estate income without directly purchasing property. They pool funds from multiple investors to invest in apartments, hotels, offices, warehouses, etc., and distribute rental income as dividends.

Actual real estate investments require huge initial capital, and there are taxes like acquisition tax and capital gains tax, along with ongoing management costs. In contrast, REITs have almost no such burdens.

The appeal of REITs is the steady cash flow. Since regulations require distributing over 90% of income as dividends, they can create a “second salary” on a regular basis. They are also less volatile than the stock market, making them effective for diversifying portfolio risk.

Innovative Method of Trading Only the Difference: CFD Investment

Contract for Difference)CFD( is a method where you invest only in the difference between the buying and selling prices without actually purchasing stocks.

For example, if a stock’s buy price is 50,000 won and the sell price is 51,000 won, the difference is 1,000 won. Using CFDs, you can invest in this stock with just 1,000 won instead of 50,000 won because the securities firm handles the actual buying and selling.

The advantage of this method is that you can invest in large stocks with a small amount of money and adjust leverage ratios to aim for higher returns. It also allows betting on price declines (short positions)price falling(), enabling profit in both rising and falling markets. Capital gains tax does not apply.

However, a major risk is that higher leverage increases the potential for losses. You could be liquidated and lose your principal, so caution is necessary. This investment method is suitable for investors in their 20s and 30s with high understanding of investments, but beginners should avoid it.

How to Choose the Type of Small-Scale Investment

Choose based on your investment personality and goals. If you want to grow assets steadily, ETFs or REITs are good options. For aggressive profit-seeking, CFDs or fractional stocks are more suitable. Beginners are recommended to start with ETFs. Starting small and quickly is the best way to harness the power of compound interest.