How much money is needed for the stock market?

Posted on

They say the stock market is for the rich. Only having a large capital, you can earn on investments in securities. However, this is not the case. Of course, the larger the capital, the more strict risk management rules are applied, as well as the diversification of investment objects. If there are few funds, the trader is forced to use more risky strategies in order to get a significant result, which means that the probability of an error increases significantly.

In this regard, the analogy with parcels of land applies. On six acres, you can grow a certain amount of vegetables and berries, but the resulting crop is only enough for your own table, and even then not for every day. The owner of six acres is forced to invest a lot of effort to conduct intensive farming. The larger the plot of land, the greater the yield. At some stage, managing a large farm becomes the main profession. If it becomes unbearable for one worker to cultivate a piece of land, it is time to attract additional labor resources.

So it is in the stock market. If the amount of the initial investment is small, the trader is forced to take an aggressive approach to investing in order for the profit to become noticeable. If the capital becomes large, it will need advisors, analysts and other investment professionals to manage it.

The amount of capital and features of work

As a rule, brokers advise you to start small, that is, the minimum amount for opening an account. This is necessary so that an inexperienced trader learns to understand the market and earn on it without the risk of losing a significant amount. After the process of making a profit becomes more predictable, you can begin to increase your investments. Amounts from 300 thousand to 3 million are quite working capital that can bring significant profit. Having secured an efficiency of 10% or more, you can feel that the income from operations in the stock market becomes significant for life.

When investments reach the size of several millions or tens of millions, work in the stock market takes up more and more free time, which makes investment the main profession. With such capital, it is already possible to fully cover your daily expenses from the profits received in the stock market. Money becomes the main instrument of labor. Of course, the standard of living is a rather subjective concept. However, if the return on investment is sufficient, it makes sense to fully focus on this difficult but very interesting profession.

When there is too much money

The more capital, the more time and effort it requires to manage. One person cannot fully cover the entire information space, as well as a large number of investment instruments. The investor simply does not have time to physically track all the changes. Therefore, the number of errors and their unpleasant consequences increases sharply. If you continue to speculate on a limited list of securities, then a large capital begins to have too much influence on the behavior of the chart of a financial instrument. Therefore, large portfolios tend to become deeply diversified and more conservative. To some extent, large investment funds are already small copies of the entire market. The only difference is that competent managers can determine which instruments are more promising.

Accordingly, in order to embrace the immensity, the investor needs the help of additional specialists . Such assistants are financial and economic media, investment consultants, analysts and just brokers who carry out transactions at the lowest cost. Large banks manage capital that is comparable to the budgets of some states. To do this, they have a whole staff of employees, including narrow specialists in certain sectors of the economy. This reduces the cost of subjective errors and improves the stability of return on capital.

You don’t have to mortgage your only apartment to get started in the stock market. It is enough to accumulate at least the minimum amount to open an account with a broker and start exploring the interesting and exciting financial world. Then, when experience and knowledge appear, it will be possible to gradually become an investor who receives his income from investing in securities. If you start immediately with large investments, but without experience and skills, you can lose everything and leave the market with nothing. The broker is not interested in the client going bankrupt, because the richer the client, the richer the broker.

 

Leave a Reply

Your email address will not be published.