If you want to start investing, one of the first items you’ll need to figure out is how much you should put in stocks. This answer may not be the same for every individual. Instead, the amount you invest depends on your financial circumstances and your short- and long-term goals. Learn more about how much money you need to invest in stocks so that you can make smart investing decisions.
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Many people mistakenly believe that they don’t have enough available capital to get started with investing. However, you don’t have to be a high roller to get involved with the stock market. As little as $1,000 or $500 is enough to make your first investment. This point is especially important for young adults to understand. The earlier you start investing (even if it’s with a small amount), the more you’ll eventually profit from those investments. Starting out with smaller investments also allows you to become familiar with the stock market with less risk involved.
If you don’t have hundreds of dollars available for investing just yet, you can still get started with micro-investing. Certain savings accounts offer a small annual percentage yield (APY) with no minimum deposit required. You could also download an app such as Acorn or Stash which rounds up your purchases to the nearest dollar and invests the spare change for you.
Move Up to the Next Level
Once you feel that you understand how to make money in stocks and how to select promising investments, you can start to put more capital into this venture. You can place more money in your existing investments or seek out particular stocks that have caught your interest. For example, maybe you’ve saved up enough to invest in a particular company with shares priced at more than $1,000 each.
Understand Stocks vs. Stock Funds
Beginner investors often start out with stock mutual funds or exchange-traded funds. When you invest in one of these funds, you purchase small portions of many stocks in each transaction. This option is great for building up your portfolio.
Individual stocks, however, are each connected to a specific company. You can buy one or many shares of a company by purchasing individual stock shares. This action involves more risk and usually requires a bigger investment.
Balance Your Percentage
Make sure you consider the way you allocate your capital while investing. The recommended proportions for your portfolio change based on age. When you’re younger, you can take on slightly more risk and may have about 80 percent of your portfolio in stock funds, 10 percent in bond funds, and 10 percent in individual stocks. You may want to dial back your stock investments as you near retirement age to create a more conservative portfolio allocation.
If you’re not sure how to balance your mix of investments, consider hiring a financial adviser to help you come up with a strategic plan based on your financial goals.
Although you don’t need a lot of money to get started, the potential returns for stock investments can be quite rewarding. Make the most of your money by understanding the best practices for investing in stocks.