{"id":1520,"date":"2021-08-26T11:09:36","date_gmt":"2021-08-26T18:09:36","guid":{"rendered":"\/blog\/?p=1520"},"modified":"2022-01-11T17:12:15","modified_gmt":"2022-01-12T01:12:15","slug":"cash-start-investing","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/cash-start-investing\/","title":{"rendered":"How Much Money Do I Need To Start Investing?"},"content":{"rendered":"\n

You know investing is the right way to build long-term wealth<\/a>, but how much cash do you need to get started? Figuring this out can feel especially daunting if you\u2019ve only recently begun to build up your savings. The right answer varies from person to person, but generally speaking, you should start investing once you have enough money to check a few important items off your financial to-do list. Here, we\u2019ll dig into the details.<\/p>\n\n\n\n

What you need to do before you start investing<\/strong><\/h2>\n\n\n\n

There are three things we think you should do before you start depositing money into an investment account:<\/p>\n\n\n\n

  1. Build a good emergency fund<\/li>
  2. Pay down high-interest debt <\/li>
  3. Get health and disability insurance<\/li><\/ol>\n\n\n\n

    Once you\u2019ve saved up enough to do those three things, you\u2019re in a good position to start investing any extra cash you have left over after paying your regular living expenses. <\/p>\n\n\n\n

    Build a good emergency fund<\/strong><\/h3>\n\n\n\n

    An emergency fund<\/a> is money you set aside for unexpected emergencies like sudden job loss, medical bills, home or car repairs \u2013 you name it. We\u2019re big believers that a solid emergency fund is the cornerstone of any good financial plan. It can also give you some peace of mind.<\/p>\n\n\n\n

    As a rule of thumb, your emergency fund should contain between three and six months\u2019 worth of living expenses. But your age, profession, total investable assets, and the degree to which you are (or could become) financially responsible for others should also play a role in determining how much is in your emergency fund. You can read more about how to build the emergency fund that\u2019s right for you in our blog post on the subject<\/a>.<\/p>\n\n\n\n

    Pay down high-interest debt<\/h3>\n\n\n\n

    Even if you\u2019re eager to start investing, you\u2019re likely better off tackling your high-interest debt first. We consider high-interest debt to be any debt with an after-tax interest rate (taking into account any student loan interest that qualifies for a tax deduction<\/a>) that\u2019s higher than the rate of return you\u2019re likely to get on your investment. In the case of a diversified portfolio of low-cost index funds, it\u2019s reasonable to guess your long-term rate of return might be in the neighborhood of 5% annually. (Wealthfront\u2019s recommended portfolios have outperformed that estimate<\/a> by a lot, but as you know, past performance is no guarantee of future returns.) When you pay off debt, you\u2019re effectively getting a guaranteed rate of return on your money:  the interest you won\u2019t<\/em> have to pay in the future.<\/p>\n\n\n\n

    We don\u2019t think you need to eliminate all of your low-interest debt before you start investing, but you should at least make sure you can cover the minimum payments on all<\/em> of your debts before you start putting money in the market. For more help navigating the tradeoff between paying off debt and investing, check out this blog post<\/a>.<\/p>\n\n\n\n

    Get health and disability insurance<\/h3>\n\n\n\n

    If you\u2019re currently employed, you probably receive health and disability insurance through your employer, so this should be easy. But if you don\u2019t have this insurance, we think it\u2019s wise to buy coverage before you start investing. The reason? Insurance is likely to be more valuable to you than an investment portfolio or even a cash reserve if you have a serious health problem. It\u2019s good to be prepared, because this can happen at any age.<\/p>\n\n\n\n

    Can you start investing with $500?<\/h2>\n\n\n\n

    The short answer is yes. Once you\u2019ve tackled the items above and you\u2019re ready to start investing, there\u2019s no magic amount of cash you need to get started beyond the account minimum of any investing service you plan to use. At Wealthfront, you can get started with a diversified and automated portfolio of low-cost index funds with as little as $500. If you\u2019re a new investor, we think you should get started as soon as you have $500 saved up beyond the goals outlined in this post.<\/p>\n\n\n\n

    Some people might feel tempted to save up a larger amount of money and invest it all at once, but there\u2019s really no benefit to doing this. When it comes to investing, time is on your side \u2013 and the sooner you can get in the market, the better. More time in the market gives your returns more time to compound<\/a>, and it also decreases your probability of loss. The key is to start investing early and keep putting money in, no matter what the market is doing. If you do this, you\u2019ll be well on your way to building long-term wealth. <\/p>\n","protected":false},"excerpt":{"rendered":"

    You know investing is the right way to build long-term wealth, but how much cash do you need to get started? Figuring this out can feel especially daunting if you\u2019ve only recently begun to build up your savings. The right answer varies from person to person, but generally speaking, you should start investing once you […]<\/p>\n","protected":false},"author":129,"featured_media":7224,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1282],"tags":[2420,1604,1605],"coauthors":[82],"class_list":["post-1520","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-cash-reserve","tag-emergency-fund","tag-rainy-day-fund"],"acf":[],"yoast_head":"\nHow Much Money Do I Need to Start Investing?<\/title>\n<meta name=\"description\" content=\"You know investing is the right way to build long-term wealth, but how much cash do you need to get started? 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