How much should I start with?

How much is okay to start with? A very common question investment advisors get asked, and I think it’s a kind off an odd question to ask. I guess if it’s a question on people’s minds, then it’s an issue to them.

I guess, they are expecting a hard number but there isn’t any. Just start with whatever you have. After all, the market moves in percentage points. So if it goes up 10%, those with N100 will gain N10 and those N1m will gain N100,000.00.

However, there are a few things to note:

  • You should never invest more than you can afford to lose. So make sure that you have enough cash to cover all your other financial needs – including emergency savings – before allocating cash for investment.
  • You should only invest an amount that you would ordinarily not be needing in the next 2-years.

While you can start with whatever amount subject to the above conditions, investing more is always better. Investing more allows you to diversify properly. For instance, if you wanted to invest N5,000 across 5 companies, that’s N1,000 per stock. The price of NESTLE is above N1,000. Given its impossible to buy fractional shares, that’s an unwanted complication.

Also given that it probably takes the same effort to manage a N5,000 account and a N500,000 account, most stockbrokers would typically have some minimum threshold before they open an account for you.

 

 

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