How Much to Invest?Investing basics
Investing can be an effective way to build long-term wealth. With a Savings Plan you can for example start investing on a regular basis. But you still need to choose how much to invest. First, it’s important to know that investing is no longer just for people with large budgets. You can get started with small amounts, as long as you find a budgeting strategy that works for you. In this article, we’ll show you how.
Allocate a budget
Choosing how much to invest depends entirely on your personal circumstances and budget. One of the most effective methods is the famous rule of 50-30-20, made famous by US senator Elizabeth Warren and her daughter Amelia Warren in a book dedicated to budgeting. This method involves dividing your monthly income into three categories:
- 50% for your daily needs (rent and utilities, food, healthcare, school fees, insurance etc.)
- 30% for entertainment, luxuries and hobbies.
- 20% for your savings, repaying credit cards and investments.
For example, if you have €2,000 monthly income, this means €400 per month for investments. Of course, we also recommend that you keep some aside for an emergency savings pot or pay off any debt.
Read more about how to pick the right investments.
How to allocate your money
Having a budget like this means you can also be flexible. If you spend less on your hobbies one month, you can increase your investment budget. Similarly, if you suddenly need money for an emergency, you can invest less that month. You can also readjust the amount of money you allocate within your portfolio. For example, you might invest more in stocks and less in ETFs one month, depending on your level of risk. This can help you manage fluctuations in your portfolio.
You can also benefit from investing in fractional shares or ETFs. This allows you to invest small amounts into stocks that are traditionally quite expensive, such as Tesla or Apple. Now you can diversify your portfolio even with expensive shares. Fractional shares are now available in the BUX Zero Savings Plan, which brings us to our next point!
By the way, want to know more about fractional shares? Read this article.
Use the BUX Zero Savings Plan
The monthly Savings Plan allows you to set a budget and invest a fixed amount each month into your favourite stocks and ETFs. Thanks to the logic of compound interest and the growth of the markets, this can be a great way to build wealth over time. You can even reinvest the gains to capitalise even more!
With BUX Zero, you can create a Savings Plan with whole or fractional shares, starting with as little as €10. It’s an effective way to diversify your portfolio and let your gains build over time. By allocating your investments to different assets, you distribute them equally over time.
Check out our Guide on setting up a Savings Plan.