How Much Money Do You Really Need to Start Investing

 

Not everyone is in a financial position to invest.

For a lot of people, their monthly outgoings are so high that they don’t have any money left over to plow into the stock market.

But if you have a surplus income you’re not spending right now, then investing could be a great option for you.

When it comes to investing, there is rarely a ‘minimum’ amount.

Technically, you can invest as little as you want.

However, you need to be aware of brokerage fees and transaction costs.

They can quickly eat into small sums.

 

How much money you need to invest

 

When investing, you should think about how often you’re going to invest.

High-earners try to put away money every month so that they don’t miss out on opportunities to accrue interest over the long-run.

However, some investors prefer to buy stocks and shares quarterly to keep brokerage fees down.

Some brokers charge you a fixed sum every time you make a trade.

If your broker house charges you a percentage fee, then it doesn’t matter how much stock you buy — you pay this regardless.

Most people try to put away $75 a month over the course of many years — perhaps a decade or more.

That’s because it takes a long time for the stock market to generate consistent returns.

Volatility tends to be high in the short-run.

If you’re thinking about investing a lump sum, then $1,500 is a good starting point.

If you go through a mutual fund or professional money manager, you may have to invest large sums of money.

For instance, Glen Clemans of CGC Financial reports that the firm has account minimums of $100k.

 

 

Where should you invest?

 

Most investors usually start off by investing in funds. They pool their money with other investors in a selection of curated investment instruments.

You don’t have to go down this route, though.

Passive investors will often buy ETFs, most of which are available in small, bite-sized chunks.

 

What about emergency funds?

 

Some people are extreme in terms of how much of their money they funnel into financial markets.

They can often invest so much that they don’t have any left over for emergencies.

And that’s where trouble can start.

Just think about the trouble that Covid-19 caused in March 2020.

People suddenly found themselves out of work, having to rely on their savings.

Those with emergency funds in cash were fine.

But those in need of money immediately had to cash out of a crashing stock market — not what you want.

Ideally, you want at least three months of expenses in cash at all times.

That way, you don’t have to cash out of your stock market positions to cover cash flow shortages.

 

Should you invest with debts?

 

You can start investing while you have debts, but it increases your risks.

Most financial advisors recommend that people use the surplus income to pay down debts first before putting money into the stock market.

Usually, interest on loans is higher than the interest you generate on portfolio returns.

 

 

(Disclaimer: This content is a partnered post. This material is provided as news and general information. It should not be construed as an endorsement of any investment service. The opinions expressed are the personal views and experience of the author, and no recommendation is made.)

Daily Wealth

Daily Wealth

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