How much do I need to start investing?
There are no hard and fast rules about the amount you need to start investing. If you have covered the basics and have some money you won’t need in the short-term, then now could be the right time.
What are the basics?
- Your income exceeds your expenses
- Your debt is either minimal or working for you
- You have a savings buffer
- You understand the costs and risks
- You understand your goals
Do your research
If you have done the basics and think you might be ready to start investing the next step is to do your research.
Your goals will guide you on what investments suit your timeframes but it is also important to factor in transaction costs and tax implications for your choices.
If you are new to shares, you might want to start researching companies that you are familiar with and then move to a broader, sector view.
Once you've decided to buy shares in a particular company make sure you have a complete view of potential profits, losses and costs associated with making the investment.
Count the costs
Most investments will have transaction costs or commissions, and if you are investing a small amount of money at a time, these need to be factored in as part of the investment.
Every share trade you make will incur a brokerage fee and this will be charged when you buy and when you sell.
If, for example, you want to invest in three different companies, you will have to pay three brokerage fees as each company represents a separate investment.
If the shares you buy don’t increase in value, you could potentially lose money on the investment.
Most investments also have a minimum dollar amount that you need before you can get started.
Tax time
Selling shares may result in an assessable capital gain in a particular financial year and this will cause an overall increase in your tax bill.