The global stock market is worth trillions of dollars. Have you gotten in on the action yet?
You may be feeling curious about how much money you should actually put into this venture. We can help. Read on to answer the question, how much should you invest in stocks?
Understand the Different Stock Types
What sort of stocks you plan to invest in will affect how much money you should be investing. But, you need to make sure you understand the different types first when you’re looking into investing for beginners. Some types of stocks you might want to invest in include:
- Small, mid, and large cap stocks
- Domestic and international stocks
- Common stocks and preferred stocks
- Growth stocks
- Blue-chip stocks
- Penny stocks
- Cyclical and non-cyclical stocks
- Safe stocks
Ensure that you understand the differences between small cap stocks and the other types, for example, before you start buying them up. That way, you won’t end up throwing away your hard-earned money.
Take Your Income Into Consideration
How much money you make should be a major part of your investment decisions. If you have more to spare, you can invest more. If you’re living paycheck to paycheck, it may not be time to start investing at all.
You’ll also need to think about your previous savings and investments. If you don’t have a lot of other investments, you probably don’t want to go all-in on investing in stocks.
Make sure you have an appropriate cushion, just in case something goes wrong with your investments. You don’t want to be suddenly without a retirement account, after all.
Time It Right
The timing can be a factor in how you decide how to invest. Look at what the market’s currently doing, and consider whether now is a good time to start investing more of your money.
Think about how much risk you’re willing to take when you’re investing your money. Investing when you’re about to make a big purchase, such as a house, might not be the best of investing strategies. Wait until you have your finances resettled before you put more into stock investments.
Think About Your Goals
What your investment aim is will play a major role in how much money you should invest in the stock market. Think about how much money you’re aiming to generate.
Write down what milestones you want to achieve in your life and how you plan to finance them. Getting married and having children, for example, are very expensive endeavors. If you want to be able to pay for these things sooner than later, you may want to invest more heavily in the stock market.
How Much Should You Invest in Stocks? Now You Know
Hopefully, you can now make a decision about how much should you invest in stocks. When in doubt, consult with a financial advisor.
Do you need more financial advice? Scroll through a few of our other money-related articles for more of what you need to know.