How much money should you buy stocks for?

How much money should you buy stocks for

A common question I usually get here on Investacle.com is how much money you should actually buy stocks for once you have decided to start?

Of course, there is no general acceptance of what is right, but I thought that in this article we would give some examples of how you as a beginner can think about this.

There are also different types of strategies in stock trading. Some trade for large sums but for short periods (various forms of trading), other currencies and some invest long-term.

Since this site is primarily about investing in stocks in the long term, it is primarily about different points of view regarding this that this article is about. For the sake of simplicity, lets say that you have $ 5,000 to invest.

how much money should you buy stocks for

Invest large sums on individual occasions

One way to think about how much to invest is to make large investments on individual occasions. The prerequisite for daring to invest all of your $ 5,000 at one and the same time is that you believe that the stock price is undervalued in relation to what the company is performing or will perform. Such opportunities often occur, for example, in recessions when the entire stock market is usually undervalued.

Some benefits of this can be:

  • There will be less commission fees.
  • If you hit exactly right, your investment will increase and if you succeed in selling your investment at the right time – you will make a good profit.

Some drawbacks can be:

  • If you pinpoint the completely wrong opportunity and misinterpret the market regarding the company’s valuation or economic situation or you have no cash (money to invest with) to buy the company even cheaper.
  • Of course, the risk is greater if you bet everything on one card.

Regular investment during periods

Another approach to getting started with stock trading and getting into the mindset of how much to invest is to split buying opportunities over certain periods. For example, if you then want to invest in limited company X for one or more months, you divide the investments during this period.

Some benefits of this can be:

  • You will probably get an average price during the period and reduce the risk of buying at an expensive opportunity.
  • You still have cash that you can use if the course goes down even more.
  • You can also wait with more purchases if the situation becomes unstable.

Some drawbacks can be:

  • When you buy in decline it is sometimes called to cut down (current price). There is of course the risk that the stock will instead continue downwards.
  • You have to pay more in commissions and fees.

Monthly savings in stocks

Modern online banks also have the option of saving monthly in stocks as an alternative to investing alone when you decide for yourself.

Some benefits of this can be:

  • If you know that you have difficulty disciplining yourself to set aside money for investments – can get more regular savings.
  • You reduce the risk even more of buying too expensive. You get an average that is similar to the rise or fall of the stock market over a long period of time.

Some drawbacks can be:

  • You can get a moderate rise on average with the stock market’s total average. If you underperform your stocks, you can even get a lower average than the stock market as a whole.
  • You miss being able to take advantage of even the major features of the clearest economic fluctuations.

Final idea about how much money you should buy for

As you can see, it is mainly about how risk-averse you are when you choose how much money to start investing. The more you invest, the higher the risk.

We also want to highlight two other factors that will surely come into play when you move forward. One is your own knowledge in the field. The more you know and the more confident you are, the higher risk you can certainly take. The other is also about your own interest and how much time you want to spend reading, investing and learning more. The better market surveillance you have, the more risk you can, possibly, take.

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