How To Know When You're Ready To Start Investing Your Money
Investing your money is an effective way to increase your net worth at a level higher than inflation. As a general rule, inflation is about 2 to 4 percent per year in a normal economy. The S&P 500 tends to generate returns of 11 percent per year. Let's take a closer look at when you should start investing and how to develop a portfolio. How Much Money Do You Currently Have? The good news is that you can start to invest regardless of how much money you have. Some companies allow you to invest in partial shares through a dividend reinvestment plan (DRIP). Most brokers will also allow you to purchase partial shares of a company or partial shares of a mutual fund. As a general rule, you will need about $100 to start investing and should plan on contributing a least a few dollars per paycheck to help your balance grow. Can You Afford to Risk Losing Your Money? The types of investments that you make will largely depend on how much you need your money in the near future. Those who want to see quick returns may want to buy and sell real estate or invest in options. Individuals who want to see their money grow over a longer period of time may benefit from purchasing index funds or shares in blue chip companies. It is important to note that all investments incur some level of risk, and you should never invest money that you can't afford to lose.