If you are just starting on your investment journey, whether you invest in one asset, such as property or stocks, or you hold a diversified portfolio that includes a variety of assets, you may be wondering what the optimal amount is to spend on your investments. Here we will discuss how much is beneficial to spend on investing. 

Finances and Income

The first consideration when deciding how much to put toward investing is your financial position and income. There are differing thoughts on what is the correct amount to set aside for investing, but according to experts, around 15% of your income before tax is ideal. If you are a novice investor, this figure may feel a little high and out of reach.

If you are in a financial position where you are only making ends meet and have no additional or extra income, you could first prioritize saving and paying off debts. If you have debts, it is advisable to meet at least the minimum required payments before starting to set aside a percentage of your budget for investing. Having also an emergency savings account is another aspect of good financial health to maintain while investing. Keep in mind that even if you are not in a position to reach 15% of your earnings towards your investment portfolio, it is a goal to work towards. 
You should also take into consideration not just income but also potential tax benefits. In particular, when deciding how much to spend on stocks and shares, take into consideration Capital Gains Tax. An investment ISA or stocks and shares ISA is a tax-efficient investment portfolio. The best stocks and shares ISA accounts allow you to invest up to £20,000 without paying Capital Gains Tax. Whatever amount you invest, you can choose between a lump sum deposit or smaller monthly instalments.

Investment Goals

Everyone has their own specific and personal investment goals. Carefully consider why you want to invest. Is your end goal to have a comfortable retirement fund or to invest in your children’s education and future? Whatever your aim, set specific and achievable goals, both short-term and long-term. It is always best to take emotion out of your investment strategies as they will cloud your judgement, make it difficult to set realistic and achievable goals, and protect you from making risky and costly decisions. 

Risk tolerance also plays a big part in deciding your investment goals and strategies. Although there is always a degree of risk with trading and investing, traditional well-established stocks or bonds are a good place to start. The most advisable strategy is to diversify your portfolio. Diversification may not be achievable immediately, but it is certainly the most practical goal. 

Assessing your financial situation and investment strategy periodically is vital if you are to keep track of and spend the appropriate amount of your income on investments. Ideally, as you grow more confident and skilled at investing, you will likely be able to spend more of your money on your assets of choice.