There’s a common misconception that you need to have tens of thousands of dollars saved up before you’re able to start investing. Truth is, you don’t need much to get started.
There are ways to get into the market with more modest sums, from using low-cost brokerage firms to using a robo-advisor like Syfe, which offers $0 account minimums. With no minimum investment requirement, you can start with just a few hundred dollars and add more to your portfolio over time.
Don’t underestimate the power of starting early, even if you can’t contribute a lot just yet. That’s because the power of compounding allows your investment returns to earn more returns on itself. So in the long run, a small amount of money invested earlier will end up being more than a large amount of money invested later.
The right amount to invest
The right investment amount for you could be very different from the right investment amount for your neighbour. It all depends on your personal financial situation and your investment goals.
Generally, here’s what to take note of when deciding the right initial investment amount for yourself:
- Adequate emergency savings covering about three months of your income
- Adequate insurance coverage
- Minimal high-interest debt like credit card debt
Many people also find it helpful to create a budget that determines how much money they can set aside for investing each month. A general rule of thumb is to allocate 50% of your salary to essential needs, 30% to discretionary spending, and 20% to savings and investments.
After considering the above factors, you should be able to find an amount you can commit to investing every month. That could be $500 a month, or maybe $2,000 a month. The overall amount doesn’t really matter as long as it is an amount you can keep contributing regularly, regardless of market moves. This is also known as dollar cost averaging, a strategy that averages out the cost of your investments and helps you build wealth over time.
How to invest with $500 a month
One benefit of using a platform like Syfe is that with a modest initial sum, you can start to build a diversified portfolio with exposure to thousands of companies.
Say you’ve decided that $500 each month is the right investment amount for you. It will be difficult to get a multi-asset portfolio with this initial investment if you were to invest through traditional brokers.
But with Syfe’s Global ARI portfolio, your $500 investment will get you a diversified portfolio consisting of stocks, bonds and gold. In essence, you’ll be investing in thousands of companies from around the world, and across a broad range of industries, with just one portfolio.
If you stick diligently to your $500 a month investment plan, here’s how much it can grow to after 15 years with our 25% risk option portfolio. As you can see, you can potentially earn three times more by simply investing, rather than leaving your savings in the bank.
Of course, you can also boost your returns with ad-hoc investment amounts, such as when you get your bonus. Because Syfe has no minimum investment amount and no brokerage fees, you can invest any amount you prefer at any time.
The key takeaway is that it’s never too early to start investing. You don’t need to wait until your salary is “enough” to begin your investment journey. If you’re ready to get going, open an account now and enjoy six months free investing with the code “SYFEWAIVER”.