There are two major variables that will help you determine this:
1. Risk -- How comfortable would you be if you invest in something in which the price of it changes everyday?
If you are considering investing in stocks, you need to determine how comfortable you
will be seeing your investment decrease in the near term while you wait *patiently* for
it to increase over the long term.
It is possible to learn to increase your risk tolerance for investing in stocks. Once you see the
returns you can generate over time, you'll come to realize that it really doesn't matter if your
stock drops or rises over the course of a few hours or days or weeks or even months. It may be
fun to check your stock prices everyday, but it does not mean much over the long term.
Just taking a small risk at first to get your feet wet will help to build your confidence in accruing
larger amounts of return when you invest larger amounts of money. This will be discussed
further in setting your goals.
2. Time -- How much time do you have?
How much time do you want to spend on investing?
Maybe you don't want to spend more than fifteen minutes a year on your investments, in which
case you would take on a more passive strategy in investing. Or maybe you enjoy pouring over
financial statements and don't mind spending eight hours a week on your investments, in which
case you could take on a more active strategy
When do you need the money?
As mentioned previously, if you need the money you plan on investing in less than three years, it
may be a little scary to invest in the stock market. In this case, you may want to choose a
different investment vehicle