How Much Should You Invest (Percentage) To Make A Safe Profit?
So how much should you invest to earn a safe profit from your investments, let’s take a look.
My recommendation would be to start investing whatever you have just so you can get started.
Then you will get that momentum behind you and can invest as much as you can, while really learning and mastering investment strategies.
Maybe that’s two, three, four percent, maybe five percent? Maybe it’s $50 or $100 a month? Whatever it is you can find some low cost mutual funds, or a quality ETF or eve start investing in REITs.
You can find some things to invest in where you can get started with some lower cost investments, some index funds, possibly exchange rate funds, different things you can look at as far as investment vehicles.
But to get started particularly, your employer maybe has a plan at work where they match up to the first 3 percent.
In the U.S. they call these 401k plans, but maybe other parts of the world you might have a similar work plan or government plan that you can contribute to.
The key is to get started and to start paying into your investments, because letting that time build up– even with a small amount invested consistently overtime, makes a huge impact.
This is because of compound interest.
So start with whatever you can and try to strive for that 10 percent return on investment, it’s a good rule for a reason.
So really learn and strive to get to that 10 percent, but then start going beyond that to get to 15 percent returns, and then beyond that to get even as much as 25% to 35% return per year.
I mean just think if you can get 30 percent return on your money invested, how much more impact will that be specially over a long time horizon?
We should also talk about risk and reward when building your investment portfolio. But for now really look to push your returns because it is really the biggest factor.
So strive for that 10 percent, but at least get started with something to use that powerful combination of time and money working together for you.
So where do we get this initial investment money?
How I got started was I didn’t have any money, I was actually $10000 in debt from student loans.
Most folks are actually worse off than me when I started, in many parts of the world. Even in western countries. Student loans are a real killer.
So where do you get money?
Well one is living below your means. Learning how to save your money so you then go and start investing it to earn residual income and capital gains.
That’s a real old adage of living below your means.
Probably I’ve heard this before too many times as well. Sometimes we tend to ignore sound advice when we have heard it a million times, but saving starts by first living below your your means.
Maybe you have give up some things, but the more you can then invest and put that money to work earning for you. Instead of always having to work for money, we will have money working for us.
Feel free to drive a little bit of an older car, if you live in an urban area maybe you really don’t need a vehicle. Instead use the subway, use the train, use a bus, whatever it might be.
Just start to live below your means.
Maybe you’re not going out as many times a week, maybe you don’t go out drinking and wasting money? You will see money being saved quite quickly if you follow that advice.
Look for those small things that can really add up, you know if you get large coffee, maybe you get a medium coffee from now on. It will pay off later.
You’d be surprised when to do the numbers, how much all this actually adds up and makes a difference.
But also some folks look only at the small things, because it’s true they do it up.
But then they might ignore these big monster expenses, like extravagant holidays and the like.
All of these things need to be factored in and you must save as much as you can.
For example, cell phone extra services. See what you can cut back or pay back in there, or maybe live without some of these things. You can then direct that money into your investments.
And one other thing that really works well, and did work for me over my whole career: is you know taking things like raises or bonuses, maybe you’re on a commission type thing, and taking that money and just piling it right into investing.
That doesn’t mean you can’t take a little bit and go out and have a nice dinner to celebrate your promotion, or something like that. Or maybe you get a nice bonus and you take a trip, just be frugal.
But many people when get a big windfall of money, or maybe they get a bonus, and they just blow it right away!
Was it worth it for that time, when you think about the power of compounding over time instead.
For example if you get a $10000 bonus, that’s great!
Well instead of blowing that all on some mind boggling trip, maybe I take a cheap trip, or I go out to eat… but only after most of that money is out into my savings and then invested over time.
So then later my life I can have these funds available to me. And even much more which is the whole idea behind investing.
We’re trying to grow that pot of money.
So my feeling is enjoy life now for sure. But also we are investing to have that secure income in the future too.
Some people do the other extreme too, where they live like a complete poorper, and that’s up to you.
It’s your own personal choice. You don’t have to go that far, but giving up some expenses so you can invest for the future is definitely a good idea.
Now that you know how to save money to invest for the future, what is the right amount?
One thing, don’t invest all your money because you should also build up an emergency fund for those unexpected bills.
It’s a health bill, or health care bill, or an automobile repair, or something. You may need some cash for a bill that you weren’t expecting.
That’s where your emergency fund comes into play.
You should have a way to track your expenses so you are prepared for any bill that might crop up, but you should also just have some reserve cash available.
It’s good to have six month of your expenses, not your income but six months of your expenses available to you in a cash fund reserve.
So start with the six months, but depending on your situation you can maybe move that down to three months. Or increase it up a year or more.
So the idea of emergency fund, is it’s there for emergencies. So create your emergency fund, get your expenses paid, start paying back whatever debts you may have and then get started with your investing.
Then simply let the power of investing over time work for you, and then build on that over your career and over your investing life cycle.
You get those two things together, those core principles, and just to start about saving and putting money into your investment fund is a great first step. It all starts with the thought of doing this stuff, before you actually start to change your life and put it into practice.
So get started, save, pay off any debts, create an emergency fund of cash and then start investing the rest and compounding your returns over time!