How much should I invest?

How much should I invest in stocks, shares, bonds or funds is one of the trickiest questions in investing. There's no set amount that works for everyone, and you need to consider various factors including your financial position, appetite for risk, and financial goals.

Not sure how to tackle the question? Here are some helpful things to ponder to get you up and running.

How much of my money should I invest?

The short answer is, it depends on your circumstances. But there’s a simple process to go through to make sure you’re prioritising your finances the right way.

First, do you have any high-cost debts? This is key when considering ‘how much should I invest’ – because if you have any debts with high interest rates, it’s important to prioritise paying them off first.

Next, do you have a rainy-day fund in case of emergencies? If not, you should think about building one up, preferably in an easy-access account paying the highest available interest. As a very rough guide, experts usually say you should aim to keep around three months’ fixed expenses handy.

Once you’ve paid off any high-cost debts and built up a rainy-day fund, you can consider how much to invest in shares, stocks, bonds or funds. To arrive at the right answer for you, here are some helpful questions to ask yourself:

• What are your saving and investing priorities? Some people have just one investing goal, but others have multiple. For example, you might want to save for a first home using a Lifetime ISA (LISA) while also building a retirement pot in a Self-invested personal pension (SIPP).
• What’s your investment time horizon and appetite for risk? Generally, the more risk you take, the more volatile your investment performance will be – particularly over the short-term. If your time horizon lies in the far future, you should be more able to ride out these short-term bumps in the road.
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• Are you investing to grow your fund, or to produce an income? If you’re building up a nest egg for the long term, you’ll probably be more focused on growing its value. But if you’re currently taking an income in retirement, you may want your investments to focus on paying dividends.
• Do you want to pick your own investments, or pay a fund manager to do it for you (in exchange for a fee)?

Whatever your priorities and preferences, it’s always important to make sure your investments are diversified. That way, you can avoid the risk of being a hostage to the fortunes of a particular stock, sector, or area of the world.

In addition, remember to keep a laser focus on costs and charges, keeping them as low as possible.

Episode 5: How much should you invest?

The belief that you need to be rich to invest is a common one - but it just isn’t true. Our experts talk you through regular investing and lump sums - remember, every penny counts.

Listen to our Investing Essentials podcast

What is a good amount to invest for beginners?

The question ‘How much should I invest?’ depends on a number of factors, some of which we’ve set out in the answer to the previous question.

So if you are a beginner, it’s important to go through that process and make sure you understand the risks you may be taking.

The good news is you don’t have to decide how much to put into individual investment like stocks, shares, bonds etc. If you prefer, you can invest in funds instead.

These can make your life easier because the investments are picked by a fund manager (in exchange for a fee). And you can usually also choose difference risk levels to suit your investing goals.

We offer our own multi-asset fund range – the AJ Bell funds. They’re managed by us for you, to make investing as hands-off as possible. You can invest for growth, income, or in responsible assets, and can choose the amount if risk you’d like to take.

Our specialists have surveyed the market and compiled the AJ Bell Favourite funds list. This contains more than 70 funds picked by our research team that you can search and short list depending on your investment goal or the type of fund you’re looking for. You can also view our complete list of funds by using our Fund screener tool.

How can I start investing?

If you’re ready to start investing, getting up and running is pretty easy. What account you choose should depend on whether you have a short-, medium- and long-term investing goal.

If saving for retirement is your priority, then a SIPP might be your preferred choice. Or if you’d prefer a bit more flexibility, you could opt for a Stocks and shares ISA or Lifetime ISA. Many investors hold more than one account to suit their needs.

It takes minutes to set up an account. And once you’re done, you can get in the savings habit by setting up regular monthly investments. Alternatively, you can simply top up your account with lump sums as and when you like.

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Whether you’re after a little help, or a lot. Our Investment Ideas are here to make it easier for you.

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