How much do you have to invest while you start investing?
How much do you have to make investments for those who are a novice investor? The answer to this query is not as easy as you might suppose. Your financial health, age, and personal urge to eat in case of danger are just a few of the factors you may need to consider.
In this article we are going to discover each of those variables and describe why they are vital. Read on for all the details, or click a hyperlink to jump straight to a part…
How much do you have to make investments while starting out?
If you’re a novice investor, it can be easy to get overwhelmed by investment advice for beginners: “Make investments no less than £200 a month for a good passive income”, “Buy little, promote excessively”, “Put money in an index tracking fund and skip buying and selling.”
These one-liners are common in investment circles. While they aren’t essentially useless, they are generic to say the least.
The fact is, when it comes to investing, your personal circumstances should be at the forefront of your thoughts. There’s usually not a one-size-fits-all method, and this goes for asking how many stocks, shares, or bonds you should buy to start your investment journey.
What components should first-time buyers think about?
If you’re anxious to find out how much is best to invest for those who are new to the stock market, here are three important components to keep in mind.
1. Your current funds
It almost goes without saying, however, for those who are in debt, otherwise don’t have much in savings, improving your financial health should be your top priority. In other words, if your private funds are shaky, it’s best to forget about investing for now. Instead, think about paying off any money owed or building a halfway decent savings account.
While the horrors of inflation can erode the value of financial savings, it’s still worth having an emergency fund that costs about 3-6 months of your daily bills. By sticking to this rule, you’ll be in a safe place if you have to go through an unexpected event or two, which could negatively affect your bankroll. For example, a sudden lack of income.
In fact, when you have accumulated a good financial savings fund, you are ready to start investing. The additional savings you have, the more you will be able to invest.
2. Your age
That is why, as a general rule, young buyers are likely to get away with investing only a small amount to start with.
However, if you are an older investor, then time is clearly not on your side. Because of this, you will want to start your investment journey with a larger amount.
3. Investment objectives (and urgency of danger for food)
People make investments for various reasons. For some, investing is their path to monetary freedom. For others, the goal is likely to be wealth preservation. Some buyers might even view investing as a method of making a quick buck by buying and selling daily.
The fact is that we all make investments for various causes. Because of this, in order to decide how much to start investing with, it pays to understand your personal investing style.
That’s also where your own risk tolerance comes into play. For example, if you are willing to take on a high level of risk in order to pursue higher returns, then you may be tempted to start investing too much.
Conversely, for those who are risk averse, you may want to keep a larger proportion of your wealth in money or other assets. Buyers with this mindset may want to stick with a small sum, at least to start with.
What platforms are appropriate for first-time buyers?
There are a plethora of funding platforms on the market, but how do you find one that’s right for newbies?
Well, unless you intend to speculate a lot to begin with, you will most likely need to find a platform that has the following features.
- A low minimum purchase quantity. Some investment platforms require you to purchase a minimum number of shares to start investing. This may very well be problematic for those hoping to start small. Because of this, first-time buyers might opt for platforms that have a low minimum purchase requirement, or one that helps by being able to buy fractional shares.
- Zero stock trading fees. If you’re planning to speculate for the first time, it’s generally sensible to avoid platforms with high stock trading fees. This is because these charges, usually a hard and fast amount, are likely to account for a sizeable chunk of your total investment wealth for those who don’t buy a lot of stocks. Fortunately, there are many providers right now that allow you to buy shares with a 0% fee.
If you must always do your own research before settling on a funding platform, eToro, Freetrade, and Trading 212 are three 0% commission platforms that allow buyers to trade with small sums.
To learn more about how to find the right platform for you, check out our article explaining how you can make investments without knowing anything. If you want to learn more about buying stocks without paying stock trading fees, also check out our article explaining how you can buy stocks with 0% fee.
Keep in mind that you can improve your investments in the future
If you’re new to investing, there’s nothing wrong with starting small to test the waters. If your private funds increase in the future your investment objectives change, otherwise you simply become a safer investor, you can simply increase the amount you put into the stock market.
Always keep in mind that the amount you start investing with is not as important as consistently investing and learning good habits. If you’re a beginning investor eager to learn more about investing, join our bi-weekly MoneyMagpie investment e-newsletter to stay informed.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore any data found here in conjunction with opinions, comments, recommendations or methods is for informational, entertainment or academic purposes only. This should not be considered a monetary recommendation. Anyone thinking of investing should carry out their own due diligence.
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