Knowing how much you should invest in the stock market is incredibly important to figure out for your own financial sake. We’re all different in terms of our age, net worth, and risk-tolerance; A simple “invest 50% of your net assets in the stock market” recommendation is too vague for anyone to go by. So this article will show you what’s important when it comes to deciding how much money you should invest in the stock market.

Ultimately only you can decide what the right amount of money to invest in the stock market is. Nonetheless, these are the factors you need to consider when deciding how much of your money should go into stocks.

Take into Consideration:

Your Age

The younger you are the more aggressive you can be with your investments since you have more time to earn any money back that you may lose in the stock market. Retired and soon to be retired investors don’t have this luxury and have to look at investing much more cautiously than say a 25 year old. Since retired individuals usually rely on the dividends of their invested money to sustain their standard of living, they need to invest less to lower their risk.

How Aggressive You Wish To Be

In general, the more risk you take on the higher your potential gains and losses are. The more money you invest, the more risk you are essentially taking on (even if you invest in low risk stocks). So ask yourself what your goals are for the present and for the long term, and determine how aggressive you are on a 1-3 scale (1 being non-aggressive, 2 being neutral, 3 being aggressive).

How Good of An Investor You Currently Are

I’m a firm believer in the more experienced and skilled you are, the more you should invest (up to a certain point). In my case, I only invest 25% of my net assets. However as the years go on, I will consider myself worthy of taking on more risk given that I have more knowledge, skill, and experience under my belt.

Always remember:

Don’t invest money you can’t afford to Lose

The money you invest in the stock market should never, ever, ever, ever be money that you can’t afford to lose. Regardless of how much of it is invested, if you invest with money you need to sustain your standard of living you are putting too much risk and pressure on your portfolio and yourself.

Invest only as much as you are comfortable losing

While we all hope that we are successful in our investments, it is unrealistic to assume we couldn’t possibly lose every cent we put in. So when asking yourself “how much should I invest?”, remember that you need to be more comfortable with the fact that whatever amount of money you invest can possibly all be lost. Not only will this help you determine the level of risk you want to take on, but it will also keep you humble about your investments.

With all of this taken into consideration, you should have a rough estimate of how much of your money should be invested. However please speak to a non-commission based financial advisor/financial planner if you still feel unsure of how much you should invest.