Saving and investing involve setting money aside whilst getting on with your busy life. The critical difference between saving and investing is “risk”, which is the leading blocker when it comes to starting the journey of investment.
We want to minimize our risk when we first get started, which means investing as little as possible whilst building up knowledge and confidence. But is there a minimum amount that you should invest?
There are two parts to this question: What is the minimum amount required to open an investment account, and how much should you invest to begin?
In recent years, the democratization of the financial world has led to very affordable investment options. Some providers even let you invest CHF 1. Of course, this doesn’t mean you can invest in anything with CHF 1, as many investments have a minimum. ETFs, single stocks, and crypto are known for having low barriers to entry, but these can also go as high as several million for exclusive offers.
Also, it is harder to diversify and generate significant returns when your invested capital is small. If you are totally risk-averse and want to get the ball rolling, you can look at low-cost providers.
If minimum investments are not an issue, that doesn’t mean you should invest everything. Committing your money to investments involves not pulling your money out early to pay for unexpected bills and events. During an economic downturn in the market, there is a high chance of that happening. You will lose money and chances of gaining a return over the long term.
As a rule of thumb, before investing, you should make sure that:
- You have enough cash reserves to cover your regular and unexpected expenses, so you are safe even during adverse events.
- You have a carefully planned retirement strategy.
When starting, it’s important to look far into the future, but you will need a strategy to do this. Victor Cianni is Alpians CIO with over 12 years of experience in wealth management. He has assisted many individuals, families, and institutions in their financial journey throughout his career by providing tailored advice on their investments or managing assets on their behalf. Victor expands more on long-term strategy and is an advocate for methodical planning. Read more about long-term investment strategy here.