Whether you’ve invested in stocks or are just planning to get into stock trading, you need to decide how much you should invest. Data from Statistic Brain revealed that 48% of individuals don’t invest in stocks.
Around 53% of them claim they don’t have the money they need to invest, making it the top reason why most people don’t invest in the stock market. While it’s common, it’s actually a major fallacy. Most people believe that you need to be rich in order to get into stock trading. However, you can make do by starting with a low budget.
How much is good for starters?
As a starter, especially if you’re a typical working person, you only need as little as $500 to $1,000 to begin trading. The amount you need will depend on the broker you use. There are brokers that will require around $5,000 to $10,000 in your account to start. Full-service brokers will often need more. However, you can find some online brokers that will let you start with just $500.
Stockbrokers are divided into two: discount and full-service. A discount broker will allow investments as little as $500. You can also expect considerably lower fees compared to a full-service broker. The reason is because you will be the one in charge of all decisions – this means you can’t ask for expert advice.
A full-service broker, on the other hand, will charge you with higher transaction fees in exchange for a premium service. This is why they only accept minimum account funding of at around $25,000 or even more.
You also have the option to directly purchase shares from a company, although most of them will have a minimum initial investment required.
How to start investing
Aside from deciding how much money you should invest, you also need to learn how to choose the right stocks. Stocks have the potential to increase in value as long as you choose the right one at the right time. For example, if you invested in Next PLC back in 2010, you’ll have already gained a huge return considering the recent Next PLC share price which is more than twice the value than it was that year.
To start investing, make sure you have emergency funding. The goal is to keep at least 3 to 6 month’s worth of gross living expenses in your reserve. This is to help you remain financially stable when you start trading stocks. With emergency funds, you’ll have cash reserved in case things go haywire.
Next is to tally your income and create a statement to determine how much money is received and how much is spent and where. Simply list your total income and total expenses in your statement to see your cash flow. If you have a positive cash flow, you may then decide to start investing in other stocks. If it’s the opposite, you’ll have to come up with a better strategy and likewise limit your expenses.
Conclusion
Investing in stocks isn’t just about the money you’re willing to put in. It’s also about learning how where, when, and how to invest.
