How Much Should I Be Investing?

If you’re a new investor, this is one of the first questions you’ll ask yourself.

Unfortunately, I will not be giving you a magic number of how much you should be investing weekly as there is no one right answer. However, I can help you figure this out. The amount invested depends on:

  • Your financial goals – this could be buying a home, moving overseas or retiring
  • Your risk tolerance – how comfortable you are with market volatility
  • How much you can afford – how much disposable income you have

Financial goals

The reason I’m not giving you a flat “Invest 15% of your income” is because it really depends on your goals.

If you want to be a real estate tycoon, you shouldn’t invest a high percentage of your income, perhaps closer to 5%. Similarly, if you want to retire in your 30s, then you would be investing perhaps 60 – 90% of your income. Sit down and figure out what your financial goals are and how much you should be investing to achieve them.

Risk Tolerance

If your portfolio dropped by 30% in one day, would that stress you out? If it would, then investing significant amounts in the stock market may not be suitable for you.

Stock market investing can be very volatile. Markets fluctuate daily and so does the cost of your portfolio. You may have $12,000 one day and $9,000 the next. If you are not comfortable with this kind of volatility, I would highly suggest not investing a large amount such as over 15% of your income. This is to avoid a key investing disaster – selling at a loss.

However, if you are well-educated on the market and investing, know your emotions won’t get to you in a stock market crash and are willing to take on risk – investing large amounts will work well for you.

Affordability

The amount that you invest will depend on your disposable income – what you have after necessary expenses and payments.

It’s hard to say “Invest 25%” when disposable income is 10% of your total salary. Investing should not be prioritised over paying high-interest debt or saving for an emergency fund. However, you can always cut down discretionary expenses such as going out to eat or shopping. Find out how much you can spare with budgeting your income and expenditure for a few months.

Okay, so much should I be investing exactly?

You can find out how much you should be investing with an investment calculator. Click here to access one of my favourite ones which is completely free and very easy to use. Simply pop in how much and how often you will be investing and at what rate of return. You can play around with the calculation to see what figure will meet your goals.

For example, if I want to retire in 30 years – I’ll need around one million dollars. I am a high risk investor that is starting with $10,000 that would like to invest weekly. Let’s see how much money I would need to invest weekly:

The Money Marketer Blog, The Money Marketer, Ruba Khan blog

The calculator shows that to have $1,000,784 in 30 years I would need to invest $137 weekly – that is how much I should be investing.

Published by themoneymarketer

The Money Marketer is a financial discussion space to discuss all things money and investment, with a touch of food and lifestyle.

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