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Many first time investors think that they should invest all of
their savings. This isn’t necessarily true. To determine how much
money you should invest, you must first determine how much you
actually can afford to invest, and what your financial goals are.
First, let’s take a look at how much money you can currently
afford to invest. Do you have savings that you can use? If so,
great! However, you don’t want to cut yourself short when you tie
your money up in an investment. What were your savings originally
for?
It is important to keep three to six months of living expenses in
a readily accessible savings account – don’t invest that money!
Don’t invest any money that you may need to lay your hands on in a
hurry in the future.
So, begin by determining how much of your savings should remain in
your savings account, and how much can be used for investments.
Unless you have funds from another source, such as an inheritance
that you’ve recently received, this will probably be all that you
currently have to invest.
Next, determine how much you can add to your investments in the
future. If you are employed, you will continue to receive an
income, and you can plan to use a portion of that income to build
your investment portfolio over time. Speak with a qualified
financial planner to set up a budget and determine how much of
your future income you will be able to invest.
With the help of a financial planner, you can be sure that you are
not investing more than you should – or less than you should in
order to reach your investment goals.
For many types of investments, a certain initial investment amount
will be required. Hopefully, you’ve done your research, and you
have found an investment that will prove to be sound. If this is
the case, you probably already know what the required initial
investment is.
If the money that you have available for investments does not meet
the required initial investment, you may have to look at other
investments. Never borrow money to invest, and never use money
that you have not set aside for investing!
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