How Often Should You Invest? (A Quick Reference Guide)

By Zach Buchenau

Last Updated: July 13, 2021

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How often should you invest? Candlestick investment chart| Be The Budget

If you are just stepping into investing, you need to understand that it is a long-term game. If you dive in with the idea that you can make a quick buck, you are setting yourself up for disappointment. Proper investing takes time, patience, and most importantly, consistency. So, when you’re just starting out, you need to determine a consistent investing schedule.

How often should you invest? At minimum, you should plan to invest on a monthly basis. Though, in the interest of convenience and consistency, many people choose to invest at the same frequency of their pay cycle. This is why automatic retirement contributions through your employer can be so effective.

The bottom line is consistency. Squabbling over a few dollars here and there is foolish. Rather, you should determine an investing schedule, and stick to it for a very long time. Whether that means investing weekly, bi-weekly, or monthly, your money won’t do you any good just sitting on the sidelines. Put your money in the game, leave it there, and let the power of compounding interest work its magic.

How Often Should You Invest? | Be The Budget

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How Much Of Your Salary Should You Invest?

While every person has individual goals and desires for their financial future, the commonly accepted percentage of money you should invest is 15% of your gross income. That means, if you make $50,000 per year, you should invest $7,500 per year ($625 per month).

Now, that is just the minimum. If you want to set yourself up for an ample retirement, you might want to invest 20%, 30%, or even 50% of your income. However, if you choose to invest this percentage of income, just be sure you aren’t having to go into debt to support your lifestyle.

The goal of investing is to earn interest. And a really good investment will earn 10% – 12% interest annually. If you are paying credit card payments with 20% interest, you are defeating the purpose of investing. You would be much better off waiting to invest until you are out of debt.

Where Should You Invest Your Money?

At Be The Budget, we like investing in index funds. They are one of the simplest forms of investing, with broad diversification, and low expenses. (All of which are very good things for you, the investor)

What is an index fund? Well, an index fund is a mutual fund that’s main goal is to mirror a particular index. For example, when you invest in an S&P 500 Index fund, you are essentially buying a small portion of every company in that index. So, your investment will mirror whatever the S&P 500 does. This is the most common example of an index fund, and a great option for any investor.

And, considering the S&P 500 has averaged an annual return of nearly 10% since its inception in 1926, an index fund that mirrors that return would be a pretty smart choice for your financial future.

If index funds aren’t really your bag, however, a mutual fund with a good track record over the last 10 years, and a low gross expense ratio is a solid alternative. They tend to come with a little more risk than an index fund, but with that risk, you can also see some higher returns.

How Often Should You Check Your Investments?

If you have the proper mindset, and have chosen to invest for the long term, you should check your investments infrequently. Yep, you heard me right; infrequently.

The problem with checking on your investments is that it can sway you to make emotional decisions. Investments take time to ride out dips, and if you want to be a smart investor, you need to take as much emotion out of investing as possible.

Too often, people will invest their money, and check their investments at the wrong time. Then, they will commit the worst mistake an investor can make and pull their money out of the market. Remember, the key is to buy low and sell high; not buy and freak out when the market drops.

Do yourself a favor and let your investments sit there. I recommend only checking your investments about once a month. Any more than that, and you are liable to make poor decisions.

As John Bogle says in The Little Book Of Common Sense Investing, “Don’t just do something, stand there.”

How Much Money Do You Need To Start Investing?

One of the most common misconceptions about investing is that you need a lot of money to do it. In reality, however, you can get started investing with just a few hundred dollars.

The road to wealth has to start somewhere. So if you want to start investing, the first — and most obvious — thing you need to do is start. Remember, throughout this entire post I have stressed the importance of consistency. If you consistently invest, month after month, for the next thirty or forty years, you will build wealth.

For example, if you were to invest $500 every month for the next forty years in an S&P 500 Index fund that averages a 10% annual return, your money would grow to over 2.75 million dollars. Seriously, investing isn’t about how much you start with. Rather, it’s about how long you stick with it.

Start investing, and take your first step towards wealth.

5 Tips Before You Start Investing

If you want to start investing, there are a few bases you should probably cover. I mean, investing should not cause a strain on your financial life. Investing should be a blessing, not a curse. So, before you dive in, and make any hasty mistakes, here are 5 important financial moves you should make.

Get On a Budget

Living on a budget is one of the most important financial habits you can adopt. Not only will it help you squeeze more money out of your income to put toward investing, but it will guide your spending habits, and keep you from making bad financial choices. For more on budgeting, be sure to check out our post: 50 Budgeting Tips To Improve Your Financial Life, and How To Make A Budget In 10 Simple Steps.

Get Out Of Consumer Debt

Before you start investing, you need to get out of consumer debt. In other words, you should pay off any credit card debt, car loans, personal loans, or any other money you owe, other than your mortgage. And honestly, if your mortgage is too expensive to allow you to invest, you should consider selling it and moving into something cheaper.

Debt is a monster that feeds on your financial future. So, get rid of it, quickly.

Build An Emergency Fund

Having an emergency fund is the best way to protect your investments. Think about it. If you put all your money into investments, and don’t leave any money in savings, what will you use to pay for an emergency? More than likely, you will have to pull money out of your investments, or go into debt; both of which undermine your investing efforts.

So, before you invest a single penny, set aside enough money to cover three to six months worth of living expenses. Your emergency fund is your only defense against investment-harming emergencies.

Know Your Employer Retirement Benefits

If your employer offers retirement benefits, you need to look into them. Moreover, you need to educate yourself on what they offer. Does your company offer any kind of retirement match? If they do, you should max that out every year. Do your research, and figure out exactly what they offer.

Side Note: As a general rule of thumb, you should invest in employer benefits in the following order: company match, ROTH, traditional. In other words, if your company offers a traditional 401(k) match, you should invest in that first. Otherwise, you should invest in a tax deferred account like a ROTH IRA, or ROTH 401(k). If you are able to max those out every year, then you should invest in something like a traditional 401(k), or IRA. Beyond those, you should invest in mutual funds (i.e. index funds, or regular mutual funds).

Learn About Personal Finance

I can’t encourage this enough. If you want to make the most out of your money, you need to educate yourself on the subject of personal finance. That means reading books about finance, following personal finance blogs, and taking personal finance courses. You get one chance in this life to make the most out of your money, and the more you know, the better decisions you will make.

So, do you do any kind of investing? If so, how often do you invest?

Be sure to leave a comment below! We love hearing from our readers.

In the meantime, happy investing!

Zach Buchenau

About The Author:

Zach Buchenau is a self-proclaimed personal finance nerd. When he isn't writing about budgeting, getting out of debt, making extra money, and living a frugal life, you can find him building furniture, fly fishing, or developing websites. He is the co-founder of BeTheBudget, and Chipotle's most loyal customer.

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