How much do I have to invest?

How much? Its a good question, don't you think?
First of all you must know how much you have. Let me explain, you must know how big your income is, how big your expenses are, do you have any savings, are you in debt, in other words it's called financial management plan. You must know how much you have so you could decide how much you can invest in stocks.

If you have money to cover your expenses in three to six months period only then you can go and invest your money. I'll explain you why.
For example you have $1000 dollars. To cover all your expenses in one month you need $950 dollars. The you decide to invest $200 dollars in stock market. After two weeks your friend invites you to a big party you spend extra $200 dollars on gift and clothes then you understand that you are running out of cash. If you haven't invested that $200 dollars you probably would make till next paycheck but now you must go and borrow money that you could survive till the end of the month. When you get your paycheck you pay down your debt which was $200+interest= $220 dollars in that same time your invested money has grown to $210 dollars in the end you lost $10 dollars.

We can continue like this forever. The message is before you invest your money you must have Sufficient savings. That means that the amount of readily accessible money or credit that you would need in case of an unforeseen emergency. This money, usually three to six months worth of expenses, should be kept in an easily accessible account, and collecting it should precede any investments.
And make sure that the profits you are making from your investments are not being used to pay higher interest rates on debt you are currently carrying. Determine where your money is best applied.

The best thing to understand how stock market works to you can try paper investing. It means that you are buying stocks with virtual money you can make your own portfolio and see how good your decision were.
Amassing a fictitious portfolio, of paper investing, based on information you have learned is a good idea for new investors. Analyze you portfolio's performance to determine how good your initial investment decision was

Free three tips

# Investments are only one part of responsible financial management.
# Before investing, you should have savings of three to six months of living expenses.
# Lower or get rid of debt. The interest you pay on it may negate any profits you make from your investments.

Why invest in stocks!

Out there are many ways where to invest your money. So why choose stocks? It's simple because socks are the best bet. Since its inception, the stock market has consistently delivered the best overall returns when compared with the returns of investments like real estate. Since the purpose of investing is to watch your money grow, the logical choice is to place your money where it has the best chance of doing that.

There are, however, several investing options that are attractive to investors like

# Bonds
# Cash
# Mutual funds

Let's compare all three of them with stocks

Stocks vs. Bonds

The big difference here is that you can make more money with stocks than bonds because in stock market there are no limit how large your investment may grow, no limit can likewise be placed on how small investment may shrink, that means if you want lower risk and more safety then bods will be your choice
In other words stocks have the potential to provide higher returns than bonds, however, bonds offer a higher degree of security for the principal amount invested

Bond vs. Cash

Cash, in financial terms, refers to any type of investment that is extremely liquid. A money market account, for example, is considered cash because the account holder can withdraw his or her money with relative ease, including drawing on the account with a personal check. Cash can also refer to the money in your checking and savings accounts or the money under your mattress.
The big problem with cash is that it makes no or very little profit. And in this case investing in stocks will almost definitely provide a higher return than allowing your money to remain in cash or investing it in a cash investment. However cash has a ddegree of liquidity not offered by stock.

Stocks vs Mutual Funds

Recently mutual funds have raised their popularity. In fact mutual funds are a good place for investment, but stocks are still better.

A mutual fund is a mass portfolio that has been collected by a mutual fund manager and is professionally managed for its owners or shareholders.

But this system has one black whole. Let's say that you want to invest your money in companies that are environment friendly, to find a mutual fund which is made from environment friendly companies is almost impossible due to diversification.

Stocks by default provide higher returns than mutual funds since management fees are not levied on stock owners. Mutual funds, however, offer a higher degree of diversification.

To make the list short

# Different investment options carry risks particular to them and may complicate comparison to stocks.

# Stocks provide the highest returns over cash investments but cash investments are most secure.

# Stocks historically provide higher returns than bonds but investment in bonds in more secure

# Stocks can provide higher returns than mutual funds but lack in their diversification

# As an investment's ability to produce higher gains grows, so, too, does the risk of loosing your money