The answer to the question of how much should you invest depends on several factors. These factors include what you earn, what sort of investment you are looking to make, what sort of return you want to see and what your financial situation is looking like.
However, if you are thinking of making a single one-off investment then there are different factors to consider.
It is very important to get professional guidance and advice for your particular situation as investing can be tricky. There are many other tips and trips relating to working out who you should invest with and what you should invest in and these are all equally important.
How much should you invest if you are thinking of investing every month? What to consider:
The question of how much you should invest relies entirely upon your unique situation. The following points will help you to work out what the right amount is for you.
- What you earn
What you earn is probably the most important factor in deciding how much to invest. You must be able to cover all of your monthly expenses and still have some money for your own spending.
The money left over can be divided into savings and money for investing. It does not matter how little you can spare for investing as over time your investments will grow and at some point in the not too distant future, you will have a large investment portfolio with quite a bit of money invested.
You should never invest more than you can afford as this could prove disastrous for you financial situation.
- Why is it important to save money when you are investing?
The money that you put into your investments is money that you usually will not be able to get hold of in short notice.
Also, because most investments hold some level of risk, your money could have decreased. If you have an emergency expense like a vets bill, medical expense or a vehicle that needs to be fixed, you should have a savings fund that you can dig into for emergencies. It is also a great idea to pay for holidays out of your savings fund.
As mentioned above, should you need excess cash quickly, you must have a savings account that you can get it from as you will not be able to rely on getting your money out of your investments immediately.
- What you spend
Your expenses every month, including your personal spending money and what you put in your savings account, will also affect the amount that you should invest. If your expenses are usually more or less the same every month, then you can rely on investing the same amount every month.
However, if your expenses differ greatly, you will have to work out what you invest anew every month.
How much should you invest if you are thinking of making a single, one-off investment?
This depends entirely on how much money you have on hand. It is never a good idea to invest all of your money in one place, particularly if you have a large amount of money that you would like to invest.
Putting lesser amounts in different investments is the best way to go about this. Do not, however, throw your cash into funds without thought, make sure that you understand exactly how the company or investment fund works, read the fine print, get professional advice on what is the best way to invest and use your head.
If you have a large amount of money to invest and you already have a nice amount of money in your savings account, you could consider investing the whole amount of excess money.
Make sure that you invest at least a third of it in low risk investments where you are sure to at least get your money back. If you do not have a savings fund, put at least half of your money into savings and invest with the rest.