There is no one size fits all answer to how much money any one person should invest. Any investment amount should only ever be, at most, what you can afford to lose. However, the final amount you do eventually invest should also depend on several key parameters.
When drafting these criterion, it is best to start with deciding why you are investing and how you wish to receive the profits of your investment. Do you want an income stream? If so, how much do you need? Or, do you want to grow a pot of money by reinvesting profits and dividends? If you do, what does that final figure need to be?
Once these questions have been answered, an investment timeline, another key parameter, can be set. This is a fundamental point to lay out from the start. We will all have a time span in mind for when we want to reach an investment goal – retirement is an obvious one, or perhaps saving to put a child through university.
The investment horizon will then have an impact on the strategies which are suitable for use. Whilst it is true that riskier investments can reap larger returns, it follows that larger losses can also be made. So the longer you have to invest, the longer you have to gain back any losses and build on any profits. Yet, if you have a short period to achieve an investment goal, riskier investments may have to be made, depending on the final amount needed, to produce higher returns. However, your personal tolerance to risk also needs to be kept in mind.
At Hanover Merchant Capital, investments can start at as little as £5000 and go up to £10million. In offering such a broad investment range, we can provide options to an equally broad range of investors who we understand will all have individual needs.