It is often asked how much money one should begin with when they first start investing. That's a great question, but will always fall under being a subjective one.
One way that has helped me to gauge how much I should start with is based on a formula of using future price targets to determine if I would be satisfied with the amount I initially invested.
Before I explain, I also use a test batch to get familiar with any new platform or market I'm new to. For example: when I first started trading stocks, I started out with around $100 just to get a feel for the platform. I did the same for crypto. Once I felt comfortable with the platform, I then began to add more based on my plan.
Let's look at the plan. If an asset is worth let's say $1, I will automatically start playing with future price points. If I have $500 to invest, I cut it in half. I now have $250 to invest. The question now will be, would I be satisfied with this asset if it grew 500%? My $250 would now be worth $1,250. That is a great return on my money. However, because I limited myself, the value isn't where I would want it to be. So from there, I create a scaling plan. This means I need to commit as much capital to the asset as long as price doesn't double. When you have less capital, you have to use more strategy.
Now let's say someone has $25,000 and it grew 500%, that's $125,000. That sounds better, right? But it's the same percentage gain. What I am showing you is that this is why the "how much money" question is subjective. What appears to be great numbers to you may not be for another.
In my opinion, I would initially feel like I let 500% go to waste by only investing $250. However, I can ignore that feeling by knowing that I'm committed to investing and I'll have other opportunities as my money grows over the years. This mindset is what sets you apart from those who are looking for the get-rich-quick type of investments.
If you're committed to the process, eventually you'll have the opportunity to add bigger capital at a later date. The key is to get started and play with some numbers to see what makes sense for you.
So how much should you start with? That depends on your risk tolerance, your investment acumen, and your personality -- all of which are also subjective.
What's small for you could be big for someone else. Investing is a journey to self. You know yourself better than anyone else. That's why the opinions of others are useless in this space.
Written by: Eric White