How much should I start investing with? My answer after starting with 1.8 million yen in savings
Hello, this is Step!
“I want to start investing, but how much should I start with?”
“Should I wait until I have a lump sum saved up?”
When people decide to start investing, many likely have these kinds of questions.
I didn’t know the right answer to investing from the beginning either.
In June 2018, I started my current style of investing with about 1.8 million yen in savings.
My goal was to reach 100 million yen in assets within 10 years of starting.
And now, about 8 years later, my assets have exceeded 70 million yen.
However, the investment style I chose is high-risk, utilizing leveraged ETFs as well.
I don’t mean to recommend the same method just by looking at these results.
This time, based on my experience, I will consider “how much one should start investing with.”
1️⃣ I started by taking risks with 1.8 million yen in savings
The capital I had when I started investing was about 1.8 million yen.
From the beginning, I utilized leveraged ETFs and aimed to significantly increase my assets.
While leveraged ETFs have the potential for large profits if the market rises, losses can also be significant during downturns.
Depending on price movements, assets can decrease rapidly.
Even so, what I have prioritized is determining the purpose of my investment and acting based on my own reasoning.
My goal was to reach 100 million yen in assets within 10 years of starting.
Toward that goal, I have continued to invest while considering how much risk I am willing to take.
As a result, my assets have exceeded 70 million yen, but this is the outcome of the investment method I chose and the market environment combined.
Taking the same approach does not guarantee the same results.
📌 The fact that I started investing with 1.8 million yen and whether or not you should start with 1.8 million yen are two different things.
I believe that what is important in investing is not trying to replicate someone else’s success exactly, but thinking about a method that suits you.
2️⃣ Three things to decide before you start investing
So, if you are going to start investing now, what should you keep in mind?
If it were me, I would focus on the following three things.
1. Set aside the money needed for daily life
You don’t want a situation where the money you invested decreases and you struggle with living expenses.
That is a state you want to avoid.
First, secure the money needed to protect your livelihood, and then consider the investment amount from the remaining funds.
I think this serves as the foundation for continuing to invest for a long time.
In my case, when I started investing, I kept about 250,000 yen in cash as one month’s worth of living expenses.
At the time, I traveled frequently for work and paid for business trip expenses with a credit card.
I still clearly remember being careful not to fall behind on my credit card payments for the following month.
Do you feel that 250,000 yen is too little? Or do you feel it is too much?
For me at the time, that amount was sufficient.
Of course, I think some people might feel it is not enough to prepare for sudden expenses.
In my case, such situations surprisingly did not arise.
Besides, I also thought that if I absolutely needed money, I could just sell my ETFs or investment trusts and turn them into cash (laughs).
However, if the market is down when you need the money, you might end up selling at a loss.
Looking back now, I think the risk was high because I kept my cash reserves low.
② It is fine to start with a small amount at first
Once you have set aside the money needed for living expenses, the next thing to consider is how to allocate the remaining money to investments.
If you invest a large amount right away, you might find yourself worrying even over a small drop in value.
In such cases, starting with a small amount is one approach.
By actually investing, you will learn how you react to price fluctuations.
Even if you think to yourself, ‘It’s a long-term investment, so it’s fine,’ you might still feel anxious when your assets decrease.
First, get to know how much price fluctuation you can tolerate.
That experience should also be useful for continuing your investments.
By the way, I invested the entire remaining 1.5 million yen or so.
Looking back now, I think it was a start that involved taking quite a lot of risk.
As a result, my asset building progressed smoothly, but this is just my own experience.
Even if you invest in the same way, there is a possibility that you could have suffered a large loss depending on the market.
You do not need to start with the same amount or the same ratio as I did.
③ Decide in advance what to do when your assets decrease
When starting to invest, people tend to imagine what it will be like when they make a profit.
However, what you really need to think about is what to do when the market goes down.
How much of a decline can you withstand while continuing to hold your assets?
Will you make additional investments, or will you do nothing?
What kind of assets will you invest in, and in what proportions?
If you think about these rules in advance, it will be easier to make decisions when the market moves.
Of course, the rules you decide on are not necessarily always correct.
The important thing is to reduce the number of times you act solely on impulse, swayed by price fluctuations.
3️⃣ It’s complicated because the “money needed for living” varies from person to person
The “money needed for living” that I thought of at the time was about 250,000 yen, which is one month’s worth of living expenses.
I think some people might feel this is a small amount.
In fact, if it were me now, I would be nervous about living on just 250,000 yen.
Now, the environment surrounding me has changed significantly.
I am married and have a wife.
I also have small children.
I bought a house, too.
As I have gotten older, I have become more conscious of preparing for illnesses and sudden expenses than before.
The “money needed for living” that I currently set aside is 6 to 8 months’ worth of living expenses.
In terms of amount, that is about 2.5 million yen.
Do you feel that is a lot? Or do you feel it is a little?
For me, I feel it is an amount that suits my current living environment.
But from the perspective of my past self, 2.5 million yen is an astronomical amount (laughs).
If I had secured 2.5 million yen as an emergency fund back then just as I do now, the amount I invested and the way I proceeded with asset formation would have been different.
Of course, that doesn’t mean I would have failed if I had held more cash.
It just means that the environment I am in and my approach to risk are different now compared to back then.
The amount of money needed for living expenses is not determined solely by the total amount of assets. It also changes depending on family structure, income, work style, and future plans.
That is precisely why I believe it is important to think about the amount you need for yourself, rather than applying someone else’s standards directly to your own situation.
Regarding this approach to investing, I have summarized my own experiences in another article for those who are worried before starting to invest.
📋 Summary
How much should investment beginners start with?
My answer is, “Decide for yourself the range that can protect your own and your family’s livelihood.”
I’m sorry I can’t give you a specific amount (laughs).
You often see advice in public saying, “Keep six months’ worth of living expenses in reserve.”
Of course, considering the possibility of income being cut off or sudden expenses arising, it is important to keep a certain amount of cash on hand.
However, I don’t think six months’ worth is the correct answer for everyone.
The necessary amount should change depending on the stability of your income, your family structure, your work style, and so on.
In the past, I thought that about 250,000 yen, which was one month’s worth of living expenses, was enough.
And now, I keep about 2.5 million yen, which is equivalent to six to eight months’ worth.
I don’t think either is the correct answer; I think what is important is whether it suits your environment at that time.
The amount you start investing with and the investment method you choose will have different correct answers for different people.
That is why I believe it is important to approach investing with your own standards, rather than doing it just because “everyone else is doing it.”
I have written in detail about that way of thinking in this article as well.
If you are thinking about starting to invest, please try recording your monthly living expenses for a few months first.
If you know what you are spending your money on and how much, it becomes easier to think about the guideline for the cash you need.
Prepare the “money needed for living” that you are comfortable with, and let’s make a pleasant start to your investment journey.
If you found this article helpful, I would appreciate your support by liking or following!
👤 Author Profile
I started my current investment style in 2018 with the goal of “achieving 100 million yen in 10 years and reaching FIRE.”
I began investing with 1.8 million yen in savings and achieved over 70 million yen in assets in 8 years. I am currently continuing to invest with the goal of “100 million yen in 10 years and FIRE.”