What if I don't have enough cash to invest now?

It’s no secret that over the last decade sharemarkets globally – including Aussie shares, have recorded excellent gains. It’s great for those who were in the market. But if you don’t have much to invest, it can be easy to look on from the sidelines and wonder how you can get a slice of the action.

There is a solution that can help Australians invest sooner. InvestSMART has launched Fundlater, an interesting new product that lets you invest – and diversify, without the need for a sizeable deposit.

Before I go any further, please note I am biased as I am Chair of InvestSMART and own shares in the company. But this is a new idea, one that I think in time will be offered by many others. And for investors looking to get a head start, it’s worth knowing about.

Fundlater works like this. You make one initial deposit of $4,000, and InvestSMART backs this up with a $6,000 loan. So you can get started with $10,000. That’s a decent sum to cost effectively spread your risk. And when combined with InvestSMART’s professionally managed portfolios of exchange traded funds, you’re ticking the box for diversification from day one.

From there, you repay 20 instalments of $325 per month. That means repaying $6,500 in total. You can pay off whatever’s left of the $6,000 at any time with no exit fees and no further $25 monthly fee.

Of course, there’s nothing new about borrowing to invest. Margin loans to fund shares have been around for a long time. However, they come with the risk of a margin call. If your shares fall below a certain value the lender will ask you to tip cash into the loan to reduce the balance – often with just a few hours’ notice. What’s so unique about InvestSMART’s Fundlater is that it lowers the risk of borrowing to invest because even if the value of your investment portfolio falls, you don’t owe any additional money.

I reckon Fundlater is the nudge plenty of Aussies have been looking for to grow their wealth. It’s all about a simple savings strategy where you set up regular installments to pay off your investment while staying in the market to reap the rewards of compounding.

Click here to learn more about InvestSMART's Fundlater.

Paul Clitheroe is Chairman of InvestSMART, Chair of the Ecstra Foundation and chief commentator for Money Magazine.

Borrowing money to invest can increase gains in a rising market and magnify losses when a market declines. Click here for Fundlater terms and conditions.