If you’re new to investing and don’t know where to turn, look no further.
I’m here with decades of investing experience and expertise – plus plenty of “been there, done that” stories – to help guide beginner investors on your path to success.
Whether you just got your first job and want to learn more about investing, or you’ve been investing for a while and just need a refresher course, this article is for you.
Investing can be intimidating and even scary at times, but I’m here to take away the guesswork with advice tailored for investing newbies. So let’s dive in!
What is Investing?
Investing is the process of deploying your hard-earned money and watching it grow over time.
There are many ways to invest, but the most common is buying and selling stocks or bonds in the stock market.
Investing is a great way to build wealth for your retirement, especially if you start early.
Investing isn’t rocket science — it’s just a matter of carefully assessing potential investments and understanding the risks associated with investing in each one before you part with your hard-earned cash.
With patience, research, and a bit of getting used to it, you can be well on your way to investing success!
Why Should You Start Investing?
Investing isn’t just for the rich and famous. Investing is for everyone, regardless of income level or net worth. Investing allows you to grow your money and make it work for you!
Here are just a few benefits of investing:
- Investing can help you meet your financial goals.
- Investing helps build wealth over time.
- Investing allows you to increase your income and purchase larger items like a home or car.
- Investing allows you to diversify your portfolio, reducing risk and increasing rewards.
- Investing can provide tax breaks and other financial benefits.
It’s never too early (or too late) to start. The earlier you start investing, the more time your money has to grow. Investing in 2023 could be the best decision you make this year.
Considerations for New Investors
Before you start investing, there are a few things you should consider. Let’s look at some key points to help you get started.
How much risk are you willing to take when investing?
Jumping into investing with a low-risk tolerance might cause you to panic at first sight of a dip in your investments. This can result in impulsive decisions that hurt your long-term success.
If you think this might be you, low-risk investment options provide security that won’t leave you clutching your pearls when the market takes a turn.
On the other hand, being too aggressive with your risk tolerance can expose you to potential losses.
Understanding and assessing your risk tolerance will help you find the right investing method for you.
For investing newbies, setting financial goals is key.
Whether investing for retirement or a house down payment, it pays to plan ahead.
Before investing a single dollar, figure out your short- and long-term goals.
Everyone’s goals will be different, but some examples of good short-term goals include the following:
- Investing a set amount each month
- Investing in stocks, mutual funds, or ETFs
- Setting up automated transfers into your investment accounts
Longer-term goals could include:
- Investing for retirement
- Diversifying your portfolio
- Investing in real estate
- Investing in building passive income streams
Longer-term goals, like retirement savings, should be given more consideration. Investing for retirement should be done with an eye on your desired lifestyle in the future and how much money you’ll need to make it happen.
Setting goals can help keep your investments on track and allow you to measure your progress.
A little preparation can go a long way in helping you achieve your financial milestones.
DIY or Hiring it Out
For investing beginners, figuring out if you should hire a financial advisor or go the DIY route can be tough.
There are pros and cons to both choices:
- Investing on your own may incur lower costs upfront, but it also requires more research and effort to stay on top of your investments.
- Investing with a financial advisor may cost more upfront, but their experience can be invaluable in helping you reach your goals.
Consider the time and energy you have available when making this decision.
Investing is no small matter – ensure you’re comfortable and confident with your choice.
Active or Passive
Now you’ll need to decide whether you’re a passive or active investor.
Active investing is when you actively manage your investments, making decisions and trades to maximize returns.
Active investors may:
- buy stocks or bonds when they think the market will rise
- sell them when they think it’s about to fall
- and switch up their portfolios as needed.
Passive investing is a more hands-off approach.
Instead of actively managing your investments, you invest in a well-diversified portfolio and let the stock market do its thing. Hopefully, your money will grow over time.
Passive investors may:
- invest in a basic portfolio and let it ride
- maintain their portfolios with occasional updates
- choose to invest in a low-cost index fund or ETF.
- Set up automated transfers from their bank accounts into their investments.
Active investing is riskier, and some studies indicate it’s less financially beneficial. Passive investing is often a good jumping-off point for beginner investors.
Taxes and Tax Implications
For investing novices, taxes and tax implications can be intimidating, but it really doesn’t need to be!
Indeed, you will likely have to pay taxes on any earnings from investments. But investing can also come with its own tax advantages!
Investing in a tax-advantaged retirement account such as an IRA is one way to avoid these taxes entirely.
How Should a Beginner Start Investing?
Now that you’re armed with the knowledge of investing for beginners, you’re probably wondering how to get started.
If you’re just getting into investing, don’t feel overwhelmed! It takes time and practice to become a seasoned investor.
Let’s break investing down step by step so you can ease into the game.
Step 1: Do Your Research
Before diving in head first, do your due diligence. Investing is as much about understanding the markets and investments as it is about putting money into them.
While investing can seem like a magical way to get rich quick, actually investing successfully takes practice and requires a lot of knowledge about both investing options and the markets.
Researching investing options is essential for beginners because it helps determine what investing strategies best suit your needs.
A few key things to research when you just start investing include:
- Investing basics
- Different types of investments
- Investment vehicles such as stocks, bonds, and mutual funds.
- Investing strategies such as passive or active investing.
Once you have gathered information about investing basics, increase your investing knowledge by watching financial news television shows or reading publications about long-term investing strategies.
Do your research now – the longer you wait, the longer you put off making your money work for you!
Take some time to educate yourself on different types of investments and what makes a solid portfolio so you can be confident in your investing decisions.
Step 2: Get a Mentor or Fiduciary Advisor
Having the right support system in place when investing for beginners is essential.
After you’ve researched investing, you should seek a mentor to guide you through making wise investments that align with your goals.
There are many benefits to hiring a financial advisor:
- This individual can provide valuable assistance as you make important decisions.
- Their added knowledge and expertise can prove indispensable, ensuring your investing journey starts with a solid foundation and continued success.
- Having a real-life resource person to call upon gives investing newbies an extra boost of confidence – and who doesn’t love feeling more assured about their investments?
With support, you’ll have peace of mind knowing you’re making informed decisions and using investing to reach your ultimate financial destiny!
Step 3: Open up a Brokerage Account
Acquiring a brokerage account is the gateway to investing, allowing you to decide where and how you want your money to work for you.
A brokerage account is a type of bank account specifically for buying, selling, and managing investments.
If you’re an investing newcomer and don’t know how to find a broker, we recommend Sofi.
Sofi is a broker specifically catering to beginning investors and provides plenty of resources and articles that teach investing basics and tips.
With their investing options, you can easily start investing your hard-earned money and grow your wealth securely.
If you’re ready for something more advanced, opt for options trading by Sofi on their platform.
With a qualified broker on your side, you can safely navigate the world of investing and future-proof your financial decisions.
Step 4: Look Into Retirement Accounts First
Retirement may seem light years away from investing newcomers, but investing for beginners should start with retirement accounts.
Aside from securing a comfortable financial future down the line, there are many benefits of investing in retirements accounts, including:
- Investing in retirement accounts allows you to take advantage of tax breaks.
- Investing in a 401(k) or IRA can be done automatically, allowing you to set and forget your investments.
- Many employers offer matching contributions when investing in retirement funds, giving you an even larger return on investments down the road.
Retirement accounts can be a great place to start when investing for beginners in 2023 – and beyond!
Step 5: Balance Long Term and Short Term Options
When building your investment portfolio, it’s important to include a mix of both long-term and short-term investments.
- Long-term investments – such as stocks and mutual funds – help you use compound interest over time. Investing in these options can be risky, but the payoff is potentially larger than with short-term investments.
- Short-term investments – such as bonds, real estate, and cash equivalents – are generally seen as more stable options that offer lower returns in the short term. Investing in these types of assets can help you diversify your portfolio and offset any investor fatigue from riskier long-term investments.
Investing for beginners is all about developing a plan and understanding your risks. Investing should be both fun and rewarding, so take the time to get it right, and you’ll reap the rewards!
Step 6: Opt for ETFs and Index Funds
ETFs (exchange-traded funds) and index funds are some of the most popular investments for beginning investors in 2023.
Investing in ETFs and index funds allows you to diversify your portfolio with minimal effort, as they track the performance of multiple stocks and bonds.
ETFs and index funds also require less maintenance than other investments, so they’re a great option for investing rookies who don’t want to manage their investments daily.
Investing in these options can also help you reduce risk while still making sizable returns.
Step 7: Keep Learning and Saving
As a beginner investor, it’s important to continue learning and honing your skills. Investing for beginners takes time and effort, but the payoff is worth it.
Make sure you stay current on the latest investing news and trends, and save a portion of your money regularly to invest in different options.
Investing for beginners doesn’t have to be intimidating – if you stay patient and keep learning, you’ll soon see the rewards of your investments.
Step 8: Make Investing a Monthly Practice
Consistency is key when investing for beginners.
Investing each month allows you to take advantage of compound interest over time, and it also helps you develop a practice of saving every month.
If you find yourself feeling overwhelmed by trying to manage your investments monthly, try automating or delegating the process to a professional investment manager.
Investing for beginners should always be stress-free and enjoyable, so make sure to take the time and find a process that works best for you.
Best Investments for Beginners
Now that you’ve learned some of the basics of investing, it’s time to decide which investments are best for you.
Here are some common investment choices for beginning investors.
Investing in a 401(k) is an ideal investment for beginners.
Investing in a 401(k) allows you to take advantage of tax breaks, and many employers offer matching contributions when investing in retirement funds.
Investing in a 401(k) can also be done automatically, allowing you to set and forget your investments.
Investing in a 401(k) is one of the safest investments for beginners, as it allows you to take advantage of both long-term and short-term options. Invest regularly in a 401(k) and watch your retirement savings grow!
High Yield Savings Accounts
High-yield savings accounts allow you to safely save your money while earning more than a traditional savings account.
Investing in a high-yield savings account allows you to take advantage of compound interest, and many banks offer attractive interest rates for these types of investments.
Investing in high-yield savings accounts is usually low risk, so it’s a great option for beginning investors.
Certificates of Deposit
Certificates of deposit are a type of savings account that usually offer higher returns than traditional savings accounts.
Investing in certificates of deposit allows you to lock in your interest rate and access tax-free income.
Investing in certificates of deposit is ideal for investors looking for security, as these accounts guarantee that your money will be safe.
Investing in certificates of deposit can offer a safe way to increase your savings and take advantage of higher returns.
Mutual funds are an investment in which you can invest in a pool of stocks and bonds.
Investing in mutual funds allows you to spread your risk across multiple investments, reducing your risk of loss.
Investing in mutual funds is ideal for beginners as it allows you to diversify your portfolio without managing individual stocks or bonds.
Investing in mutual funds is a great way to start building your portfolio and diversifying your investments.
Trading ETFs, or Exchange Traded Funds, is rapidly becoming a popular investing option, especially for beginners.
ETFs provide an attractive way to invest in the market without purchasing individual stocks.
This easier method of investing can help newbies build their portfolios and learn more about the stock market without investing too much money or taking on too high of a risk.
So, if you’re ready to dip your toes in the investing pool but don’t want to be taken in by a “too good to be true” offer, trading ETFs could be just the way to start your investing journey.
Rather than investing in individual stocks or trying to pick the latest hot sectors, investing in index funds eliminates the guesswork as it simply follows a pre-set, “marketable” index.
The beauty of investing in these funds is that they reduce risk, have lower fees, and historical returns show they consistently perform better than other stock investing strategies.
And all of this – with remarkably less effort and worry than any other investing strategy.
So if you’re looking for a “set it and forget it” investing approach, index funds may be just what you were waiting for!
How Much Money do You Need to Start Investing?
For investing beginners, there is great financial news! You don’t need to be a millionaire to start investing — all you need is a few dollars and some know-how.
Most online brokers offered by the big firms have no account minimums at all, and those with smaller budgets can explore fractional share investing.
Plus, thanks to exchange-traded funds (ETFs), investing in a diversified portfolio of stocks doesn’t have to break the bank as you can purchase them for just a few dollars each.
If you’re really tight on cash, micro-investing platforms will even let you round up your regular purchases made through your linked debit card, so there’s always the option to get started investing, even if it’s just pennies at a time.
Is $100 enough to start investing?
One hundred dollars may seem like a drop in the bucket compared to experienced investors, but it certainly is enough to start investing.
With creative investing strategies and careful management, investing pros and novices alike will find that $100 might make more of an impact than they ever thought possible.
After all, slow and steady wins the race when it comes to investing!
Is $500 enough to start investing?
Starting investing can be intimidating, especially if you have little money.
But investing doesn’t have to be expensive – even with just $500, you can take proactive steps toward securing your financial future!
In fact, investing for beginners has never been easier; many banks and credit unions offer potential investors the opportunity to open an account with as little as $500.
So don’t let money stop you – investing is open to everyone!
Is $200 a month enough to invest?
Investing $200 a month is a great way for investing beginners to get their feet wet.
It might not seem like much, but that small amount can be the start of something truly incredible.
In as soon as twenty years,you could easily turn your money into an impressive $150,000 – if you keep investing consistently and wisely!
That’s not all; if you continue investing the same amount for another two decades while continuing to generate an average annual return on your investments, you could have more than $1.2 million in savings!
If investing for beginners seems intimidating, you aren’t alone.
Take a step back and remember that investing is an opportunity to build wealth and make progress toward your financial goals – it’s not something to fear!
Now that you have the essentials of investing fundamentals, you’re one step closer to investing.
Ready to start investing? Investing has never been easier.
With plenty of options available, the time to get started is now! Invest wisely and you’ll be able to achieve your financial goals with confidence.
After reading this article, what tiny step will you take today—if any—to begin investing? Leave your responses in the comments below, and get out there and make your money work for you!