So you have made all of the other decisions relating to your investment objectives. Now, how much will you invest? On the other hand, should that be how much can you afford to set aside for investment purposes?
The first area you should address is to set aside an amount within a liquid account such as a bank account. This you should view as your emergency fund, and it should be somewhere between 3 to 6 months worth of your net income. The exact amount will depend on your personal preferences, but somewhere between 3 to 6 months is typical. If you do not already have an amount you can set aside for emergencies, then you should consider this before looking to invest any other monies you may hold. If you are in the position where you already hold this amount, then ensure your other savings are catered for, such as your retirement, any education fee planning for your children etc. Unless that is, you are looking to invest for these purposes.
If after all this you still have excess cash to invest, you need to decide how much you wish to invest. You do not need to invest everything in one go. You could quite simply build up your portfolio over a period of weeks or months, which ever you feel more comfortable with.
How much does the typical investor invest?
Well, there is no typical investor. It all depends on your personal situation and comfort level.
Some investors invest as little as a few thousands (US) dollars, looking to build on this in the months and years to come. Whilst at the other end of the spectrum, some individuals and institutions invest millions of dollars.
You may of course prefer to save on a regular basis. There is a wide range of providers who offer contractual regular savings vehicles, starting from as little as $100 per month. However, these are a disciplined form of medium to long term savings, which need to be funded on a monthly or quarterly basis throughout your selected savings term, otherwise they may impose quite hefty penalties for early surrender fees.
In summary, make sure you first of all set aside an amount to act as your emergency fund, and then decide how much you feel comfortable investing. If you feel uncomfortable investing a large amount in one go, then spread (feed) your investments over a period of time.
