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How Much Money Do I Need to Start Investing?

January 18, 2012

 

The idea of investing money for the first time can cause panic and frustration about each and every detail that it takes to make successful investments. It is perfectly normal to get advice about how much money is needed to start investing. Not everyone that takes up investing has access to a large bank account or trust fund in the Cayman Islands. Pulling your hard earned money out of your hands and investing it does take courage, but you probably need less money to invest than you think.

How to Determine Your Investment Amount Before you let your money flow into unchartered investment waters, you need to know what standard of living that you can maintain with an absence of money in your cash account, savings or retirement account. An easy mistake made by an eager investor is putting too much hope of earning a return into the first investment. Every investment has a certain element of risk attached that is usually attributed to the knowledge of the investor. By creating a realistic budget to use to begin investing, you will be able to be honest with yourself and will not put yourself in any financial harm.

Steps to creating an investment budget: • Total credit card debt or unsecured debt • Add mortgage payments and car payments •Calculate health care expenses

• Total savings accounts, IRAs or other dormant money Subtract the amount of your current debt and expenses from the amount that you have sitting in savings or other holding account that is drawing little to no interest. This total, no matter how big or small, will provide you with a number to start with to begin making investments that can help you add more net worth. 

Total Money Needed for Popular Investments
If you plan to invest in the stock market, you may be disappointed with what an investment of $5000 can do for you. Many individual shares of companies are well over one hundred dollars each with annual returns that can average less than five percent. The constant fluctuation of the stock market may leave you feeling uneasy about the future of your monetary growth. 

Real estate investment properties usually take an investment between $5000 and $25,000. While $5000 is not enough to purchase a property, you could be introduced to a partnership or other arrangement that is used to pool money from multiple investors to purchase a property that is shared and co-owned by several investors. This method provides a monthly cash return on your investment with an annual return between 15 percent and up to 25 percent.

Investments are Long-Term Financial Goals
Any amount of money that you have to invest can help you reach your goal of increased financial wealth. Making smart decisions with your money and keeping in mind that investments are long-term solutions will help you. Educating yourself and getting expert investment advice is what can set you apart from overzealous investors that quickly end up on the losing end of a financial investment.

By Gregg Cohen

I am a co-founder at JWB Real Estate Capital, and I love to talk about investing in rental properties! You’ll often find me here contributing to our blog and in our Facebook group connecting with the community & sharing insights.

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