Understanding Wealth Management: Minimum Investments to Grow Your Portfolio

Coins stacked in ascending order, each of which growing a plant to represent wealth management and minimum investments to grow your portfolio

 

While there are countless online articles talking about the theory behind investment strategies, it’s much harder to find concrete examples showing how these concepts are implemented in the real world. It’s an understandable gap. Investing is a world filled with conditionals, gray areas, and varying investor preferences. In addition, the market is often unpredictable, making it difficult to appropriately set expectations when creating examples.

Nonetheless, examples like this are needed to provide real-world examples of wealth management, minimum investments, and other investing practices. Today we will outline the budgets of three individuals making varying incomes (8k, 6k, and 4k a month, respectively), identifying:

    • How much they can afford to invest.
    • What those investments will likely look like over five years using an algorithmic trading engine.
    • Offer suggestions for investment platforms and the best solution for median income investors.

Readers should proceed by noting that these examples make certain assumptions, which include: 

    • An average level of risk on the part of each investor.
    • Their budgets remain relatively stable over five years. 
    • The average returns, as well as platform performance, reflect market information from the last five years.

How Much Should I Invest?

For new investors, it’s difficult to understand how much should go into investments vs. savings. Indeed, the two exist for different reasons, outlined below:

Investments Savings
  • Investments are not meant to be touched at all since they tend to grow over time.
  • Savings are meant to be relatively stable.
  • Savings are meant to be used when unexpected expenses exceed the regular monthly budget.
  • Investments involve a greater level of risk and loss in which the total investment can be lost when the market behaves unpredictably.

As a general rule, investors should put roughly 10-20% of their monthly income into investments, with more connoting a greater willingness to take on risk and loss. This would mean that our three investors would want to invest something along the lines of:

    • 8k/Month:$800-1600 a month.  
    • 6k/Month: $600-1200 a month.
    • 4k/Month:$400-800 a month.

These are ideal amounts. Of course, investors come from every walk of life and have varying circumstances that may affect their ability to put in these numbers regularly.

The truth is, concerning wealth management, minimum investments, and investments in general, anything helps. Whatever you put into those investments grows the long-term yield of your portfolio, so it’s essential to understand your finances and what you think you can risk. Consulting with a financial advisor in this regard is particularly helpful, and we highly recommend it.

Wealth Management: Minimum Investment Growth?

The two central approaches to investments are:

    • Traditional: Manually investing in stock exchanges based on personal experience and market knowledge using brokerage houses or direct intermediaries.

On average, quantitative investing has a greater performance than traditional investing, boasting average returns of roughly 30% compared to traditional investing, which usually sits somewhere between 5-10%.

Using these averages as a guide, let’s assume our three investors contributed the average between the ranges in the above section. For example, our 8k/month investor should contribute roughly $1200 a month since it is halfway between $800 and $1600. Over time, that is a total investment of:

    • 8k/Month:$1200×12 (months a year) x5(years): $72,000
    • 6k/Month: $900×12 (months a year) x5(years): $54,000
    • 4k/Month: $600×12 (months a year) x5(years): $36,000

These numbers are before the investment returns are added. Using the averages above, their total returns would look something like this:

5-year-return chart

In each case, the investors ultimately yielded a larger return using an algorithmic approach. This, of course, assumes average returns on the part of your platform. However, this can vary depending on what kind of platform you are using.

What Are My Platform Options?

Algorithmic platforms are available in a wide variety of options to suit the needs of different investors. The most popular platforms include:

 Platform  Description  Examples Pros Cons
Hedge FundsFunds are pooled from wealthy “accredited” investors to gain the highest possible profit.

Bridgewater Associates

Renaissance Technologies

High-reward strategies that generate the largest returns.

Employs consultants

Prohibitively expensive to buy-in

High risk strategies

Mutual FundsPooled fund managed by investment professionals specializing in diversified holdings.

Vanguard Short-term Federal

JP Morgan

Risk Management services

Employs consultants

High fees

Poor trade execution

Brokerage FirmsIntermediaries executing trades on behalf of clients for a fee or percentage.

TD Ameritrade

Charles Schwab

Fees are limited to trades; no monthly fees or dues.Likely does not offer consultation.
Robo-TraderApp or web-based service operating with limited to no human consultation.

Wealthfront

Betterment

Widely Accessible

Low cost for buy-in

Low returns

Few strategy options

Poor investor understanding

For our three investors, the recommendation would likely be the following:

    • 8k/Month: Hedge Fund/Mutual Fund
    • 6k/Month:Mutual Fund/Brokerage Firm/RoboTrader
    • 4k/Month: Brokerage Firm/Robo-Trader

The average trader is more likely to fall into one of the lower three platforms listed above. Hedge funds are notorious for their ability to generate profit, but their use of high-risk strategies like shorting limits them to wealthy “accredited investors” that have been approved by federal regulators.

By contrast, many new investors look to robo-traders due to their heightened accessibility and low cost. These options provide many doors into the world of investing, but they often don’t have a good understanding of their investors, who may have personal financial concerns affecting their ability to commit to the preset investment strategies. This puts a greater impetus on their users to understand their personal acceptable risk tolerance, which new investors often don’t understand well enough.

So What Next?

Between the drawbacks of various investment platforms, it may be tempting for new investors to consider the manual approach. After all, 5-10% is perfectly acceptable for most people. It is important to remember that these averages are assuming that the investor knows what they are doing, which means it may take new investors years to get to the point where they are earning returns at this rate.

The best thing to look for is an algorithmic platform that offers consultation. Having a hybrid model like the one available through RIMAR ensures that investors are able to enter into an investment strategy that they understand and can follow up on if they have further questions. In this sense, we not only grow your investment but also help you grow as an informed investor.

Getting Started With RIMAR

RIMAR Capital makes artificial intelligence-based investing broadly accessible to everyday investors who don’t fit the profile of a typical hedge fund client. With RIMAR, investors have the choice of several different trading strategies, all of which are backed by some of the industry’s leading experts. What’s more, RIMAR investors don’t need millions in assets to invest, nor are they subject to a battery of fees and prohibitions on when and how they can access their own money. So if you’re ready to pick up returns that are only possible with data-driven mastery of the market, RIMAR Capital is right up your alley.

Contact us today to learn more about wealth management, minimum investment amounts, and how RIMAR Capital can help grow your portfolio’s value with hedge fund-like returns earned using its AI-driven investing strategies and skilled quantitative trading staff.

Ryan Gordon

Ryan Gordon

Ryan is a qualified chartered accountant of South Africa. Ryan is an avid sportsman who also enjoys reading and spending time with friends and family in his down time. Ryan joined the RIMAR Capital team in 2019 as a business development manager.

Contact us today!

In a world where milliseconds matter for margins, you need to evaluate and act instantly.

RIMAR’s artificial intelligence investing platform combines quantitative models, artificial intelligence, and powerful machine learning to reduce risk, eliminate bias, and make the complex more simple. Act smarter and faster. Get real returns.

RIMAR Capital brings you world-class multi-strategy asset management by offering diversified investing strategies targeted to out-perform the benchmark in a variety of market conditions, while reducing volatility and costs for the investor.

We’re ready to start growing your wealth when you are, so contact our team today!

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