How Much Do I Invest?

If you are just starting out investing, you may be thinking that you should invest every last cent you have. Unless you can see into the future and pick a share that will double overnight, investing everything is foolish and an almost sure way to lose it through poor decisions. To determine how much money you should invest, you need to figure out how much you can actually afford to invest and what are your financial goals, both the short-term and long-term.

The first thing you need to do is to look at how much money you currently can afford to invest. Do you have any savings in a bank account somewhere? If so, this is the first step! However, you don’t want to cut yourself short in terms of money if you devote all the money and tie it up in some investment. You have to ask yourself what the money was being saved for. If you were saving up for a new car, it may be unwise to invest all of it at once, because you will need to money to buy a car that you will need!

For living expenses, it is always a wise move to keep at least three (preferably six) months of living expenses in the a bank account you can access readily. This money is your safety net, so NEVER invest this money, no matter how good the opportunity is. Keep it safe by keeping it in the bank.

If you have money left over from the above paragraph, this is where you can start thinking about investing. Unless you have an inheritance waiting for you, this will be all the money you have to invest. It doesn’t matter how much it is; it only matters that you invest it wisely over time.

So now that you have your starting money, what is next? The next step is to determine how money you can afford to add to your investment portfolio over time. If you are currently employed, you can devote a certain percentage of your weekly pay cheque and have it invested. You may even be able to talk with the payroll department of your company and have it automatically deducted from your pay and invested for you. That way, you won’t be able to spend it. How convenient is that! At this stage, it is best to talk to a qualified financial planner to set up a household budget and see how much of your regular income you can afford to invest. You’d be surprised that smaller, regular amounts invested at regular intervals can add up over the years, especially if your investment choices are sound! The amount you invest shouldn’t leave you out of pocket or affect your lifestyle, but you want to invest enough so that you reach your financial goals as safely and as soon as possible.

For certain investments, there will be an initial amount required. Generally, the better the invest, the more will be required, though this is not always the case. If you have done your research, you will know all the initial costs. If you don’t have the money for the initial investment, you should look elsewhere. There are many opportunities available for those who look hard enough for them. Some people make the mistake of borrowing on their credit card. This will lead to disaster, as the interest rate on the card will usually be much higher than the return of the investment.

When deciding how much to invest, the final decision should always come down to you. If you have done all the research and had some good professional advice, you should only invest money that will not affect your current lifestyle. Remember, putting food on the table and paying the rent will always be more important that a risky investment opportunity. Only use money you are prepared to lose. That way, you can always “live to fight (or invest) another day”.

About The Author:

Doug has been writing articles online for nearly 3 years now. Although he specializes in topics such as investing and trading commodities, you can check out his latest website, USBWirelessDongle.com, which discusses the various types of USB wireless dongles, such as Bluetooth dongles and other types of dongles for all your wireless computing needs!

Article Source: http://EzineArticles.com/?expert=Doug_Arnold