How Much Capital do You Need to Start Investing?

Many people imagine that investments are only for those who appear on the Forbes list. But they couldn’t be more wrong! When they regard their modest finances, they assume that it is not in their place to invest. So they end up saving instead. Ironically, by the end of the year, they realize that they have consumed the bulk of what they saved. 

You don’t have to be one of the richest persons in the UK before you consider investing. You can find more about financial companies in the UK, some of which you can invest in on luminablog. 

In some investment websites, you could invest as little as £1, £25 per month, or £100 as a lump sum. These are, however, minimum marks. Many experts suggest that you invest at least £50 per month and around £500 as a lump sum. Not sure what to do? Check out our business advisory services. 

So how much capital do you need to start investing? Expectedly, the priority of any novice in the investing world would be to start with as little capital as possible. There is no one-size-fits-all but here are a few things that would determine how much capital you might need:

 1. How Much Are You Willing to Invest? 

This is the point of discussion. A famous tagline from a Ponzi scheme suggests that one should only invest money they are willing to part with. Even though Ponzi schemes are not exactly investment, this is still valid advice for an investment novice. If you start with too much, then you must ensure that you have the emotional and financial resolve to handle the outcome if it doesn’t succeed. 

 2. What Do You Intend to Invest In?

The stock market is what people think when you mention investment. But for a novice who is likely investing disposable income, stocks — asides from being a tricky terrain to navigate — are rather expensive compared to investing in funds. So if you are not so keen on parting with a lot of money, consider investing in funds.

 3. How Often Do You Invest? 

Do you intend to start with a lump sum or do you prefer to just drip-feed your money into the investment pot periodically? This plays a major role in determining how much capital you start with. If you want to start with a lump sum, then you would need to budget a larger capital, say around the region of £500 to £1000 and beyond. 

If you however intend to regularly invest in drips, then you could start with a little capital, say £50. The drip-feed is highly recommended for novices by experts.

 4. You Now Have Your Capital; How Much Should You Have in a Reserve Fund? 

Aside from the capital, it is also wise to have a healthy emergency fund so you can cope or adjust whenever you register a loss. Experts recommend that you hold at least three months’ worth of your net salary before proceeding with an investment. 

This offers you a safety net. It is also wise to clear up as much of your debts as you can. It would be a waste if all the profit you accumulate from your investments is being counterbalanced by the compound interest accrued on your debts. 

There are many more things, aside from the capital, that a new investor must consider, but one thing is clear: one need not be filthy rich to invest their money.