Think you don’t have enough money to start investing? Think again! You can learn how to start investing for beginners today, even if you start your investing journey with just $100.
Table of contents
- What is investing?
- Why is investing important?
- When should you start investing?
- How to start investing money for beginners
- Expert tip: Take your time and don’t make impulsive decisions
- Investing money for beginners: Where should you invest first?
- What to remember as you learn how to start investing for beginners
- What type of investment style is right for you?
- How should a beginner start investing?
- Is $100 enough to start investing for beginners?
- Is $1,000 a good start for investing?
- Articles related to investing for beginners
- These tips make how to start investing for beginners a breeze!
Although you might start out by investing small amounts, it can be a turning point in your finances. Investing money for beginners doesn’t have to be hard either!
When you decide to start investing, the most important part of the process is educating yourself. Learning how to invest for beginners will help you ease yourself into it and avoid common mistakes. Once you have a better understanding of investing, you will feel more comfortable as an investor growing your investments over time.
If you are reading this, then you are in the right place to get started. In this post, you’ll learn about how to start investing for beginners. And this information applies whether you have just a little money to invest or a lot of money to invest!
(P.S. As a woman, studies show you can be an amazing investor!)
What is investing?
When you decide to invest your money, you are choosing to put it into a vehicle with the goal of receiving a return down the line.
At some point, you hope that the money you put into an investment will grow. In most cases, you plan for little ongoing involvement on your part once you’ve invested the money.
Although most people associate investing with the stock market, there are many different types of investments. For example, you could invest in real estate or your own business. Ultimately, you’ll figure out your own investment style as you go.
No matter what assets you choose to invest in, you hope to earn money on that investment in the future.
Why is investing important?
Investing can beat inflation
Saving money is an important place to start building a better financial future. However, your savings are diminished each day by the powers of inflation. Although your savings account might have the same balance ten years from now, that money will not have the same purchasing power that it has today.
Investing may seem like an expense, but really, with successful investments, you should be getting all that money back plus more. With investing, you are able to grow your money over time and keep the powers of inflation at bay.
Historically, the stock market has provided returns between 6% and 7%, with inflation factored in. Those returns can grow your savings dramatically over time.
Compound interest grows your money
The power of compounding can add to your nest egg. If you choose to reinvest your earnings over the course of many years, you’ll benefit from the compounding effect. Compounding is a process that grows your money over time by reinvesting your investment earnings.
Your money is always working for you
If you are just starting your journey of building wealth, then investing can help you reach your long-term goals faster. Instead of trading your time for money in order to build wealth, you can have your money work for you.
When your money starts to earn money through your investments, you won’t be completely dependent on your day job or your savings.
When should you start investing?
Before we dive into how to start investing, let’s talk about when you should start investing. Investing strategies typically involve a long-term timeline. With that said, the best time to start investing is as soon as possible.
The sooner you are able to start investing, the more time you’ll have to allow your investments to grow. Even when you’re investing for beginners with small amounts, it will add up over time.
Generally, you will use these investments to fund your retirement. So it is a good idea to start as soon as you can. You’ll want to give your investments plenty of time to build your wealth.
Learning how to start investing is an extremely important part of your financial journey. However, there are a few things that you should tackle before you start investing. Let’s take a closer look.
After you pay down high-interest debt
Paying off debt is the first step as you start thinking about investing for beginners. If you have any debt that is draining your resources each month, then you should focus on paying that down first.
Once you’ve paid down your debt, you’ll be able to invest more comfortably.
When you have an emergency fund
Living one paycheck from the edge is not a good feeling. An emergency fund can allow you to enjoy more financial breathing room in your life. Before you start investing, consider building an emergency fund.
Once you’ve paid down your debt and built an emergency fund, then it is time to revisit the topic of how to invest for beginners. If you start young, then the power of compounding can work in your favor. Even if you only have a few dollars to start investing, you should take action as soon as you can comfortably do so.
Keep in mind, if your employer offers a free match on your investments, you definitely want to take advantage of this match ASAP. It is essentially free money!
How to start investing money for beginners
Investing can change your financial future for the better. You don’t need a lot of money to start investing. In some cases, you only need a few dollars to get started.
Of course, you might have a goal of increasing your investments over the long term. But don’t let limited resources stop you from building your long-term wealth.
1. Learn about the different types of investments
There are many different types of investments, and it’s important that new investors understand all of them. Then you can choose the options that are best for you when you create your investment portfolio and financial plan.
Here’s a list of some of the types of investments you’ll encounter as you make financial choices:
Individual stocks are shares of a company you can buy and have partial ownership.
A bond is a type of loan that you can invest in and gain interest and your money back over time.
With mutual funds, your money is pooled with other investors and used to purchase many different types of investments like stocks and bonds.
One of the most popular kinds of mutual funds are index funds. They track a specific stock market index, like the S&P 500. When you buy a share of an index fund, you basically get a little piece of every stock within that index.
Also known as exchange-traded funds, these are similar to mutual funds, but are traded on the open stock market.
A target-date fund is another subclass of mutual funds. They’re designed for investors who have a specific date in mind when they’ll need to use their investment money.
Also known as Real Estate Investment Trusts, these allow you to invest in income-producing real estate (you are investing in the company that owns the real estate).
2. Create your plan for investing
Next, it’s time to sit down and create your basic plan for investing. Do you have debt to pay off first? Is your emergency fund where you’d like it to be? If so, you’re ready to begin investing for beginners.
As you familiarize yourself with the different types of investments, make sure to research their pros and cons. For instance, investing in individual stocks can be much riskier than a diversified S&P 500 index fund. Figure out what kinds of investments you want to focus on.
Do you already have some money saved up that you’d like to invest? Figure out if you want to put it in the market right away as a lump sum, or gradually by dollar cost averaging.
Lay out your personal goals for investing as well. For most people, one big goal is funding their retirement. But you may have other goals for investing too. Maybe you want to buy a house in ten years. Or send your kids to college. Investing can help you grow your money for those goals too.
3. Determine how much money you should invest
In this step, you’ll be crunching some numbers! First, you’ll want to figure out how much money you’ll need for your goal. Then, you’ll calculate how much you’ll need to invest over the years to reach that target.
Some experts advise saving 10% of your income for retirement. But is that really enough? It depends on how much you make, when you want to retire, and how much you want in your accounts by then. Here’s how to figure out if 10% is enough.
If your target numbers are a lot larger than the amount you can realistically afford to invest, you’ll need to look into ways to increase your income.
4. Begin investing money into employer-sponsored accounts
You may work for a company, where you likely have access to some employer-sponsored investment accounts. In general, these accounts are aimed at helping you save for your retirement in a tax-advantaged way. Many employers offer a 401(k) or 403(b).
If your employer doesn’t offer a retirement account, then consider opening an IRA to start saving for your retirement. When it comes to investing money for beginners, these are some of the easiest and most accessible options—and some of the most powerful, too!
5. Try a robo-advisor (a great way to start investing for beginners)
Robo-advisors are one of the simplest ways to begin investing money for beginners. A robo-advisor is essentially a virtual financial advisor. The use of algorithms and technologies eliminates the need for a human financial advisor.
It will provide automated financial management services and tailor your investment recommendations based on your goals. Using one can definitely give you a bit of a shortcut as you learn how to start investing money for beginners.
The benefit of using a robo-advisor is that the fees are typically low, even though you are getting customized portfolio recommendations. It is a great way to get started with building wealth with little money.
Most robo-advisory firms offer low account minimum requirements and take care of portfolio rebalancing for you automatically.
If you are interested in trying a robo-advisor and want to learn how to invest for beginners with one, then check out our favorite investment apps below:
- E*Trade: An award winning app that makes investing easy.
- M1 Finance: A highly rated app that allows you to automate your investing.
- Wealthfront: Allows you to automatically diversify your portfolio for long-term investing.
- Ellevest: This app focuses specifically on female investors’ goals and takes your values into account for investing.
- TD Ameritrade: Allows you to trade your investments easily.
- Acorns: Allows you to start investing with just $5, and it has the feature of a round-up savings account.
- Betterment: A solid option with automatic investing in index funds.
- SoFi: Begin with just $1 and no management fees.
6. Seek out a brokerage account
If you’re opening an IRA or another personal investment account, you’ll need to do it through a brokerage. There are many online brokers available on the market today. Each offers different services and charges different fees.
As you sift through your options, consider what matters to you most. In some situations, you may want to buy and sell stocks on a regular basis. Transaction fees for this can add up quickly at some brokerage firms.
In other situations, you might choose to invest in index funds with fees built in. Either way, you’ll want to find a brokerage account that minimizes fees for your investment style.
Many brokerage accounts are set up so you can learn how to start investing with little money. Here are a couple of great online brokers to start with:
- Interactive Brokers: Award-winning broker without the high cost.
- E*Trade: Offers a quick and easy process to open an account.
- Webull: There are no deposit minimums with this well-reviewed broker.
- Charles Schwab: An incredibly popular broker that can help you with your investing needs.
- Fidelity: Known for its decades of investing experience.
- TD Ameritrade: Offers low rates and plenty of investment strategies.
7. Consider certificates of deposit (CDs)
Certificates of deposit (CDs) are a safe place to grow your money if you have a low risk tolerance.
Although you will likely miss out on bigger returns through the stock market, you won’t have to worry about any dips along the way.
CDs can be a particularly good option to save up for short-term goals. If you anticipate needing money in a couple years, you might not want to risk investing it in the stock market, which has periods of ups and downs.
8. Invest in yourself (a big part of how to start investing)
Investing in yourself is just as important as investing in the stock market. You might choose to invest in your financial education, which could save you thousands of dollars over the course of your life.
You might choose to invest in your business, which could allow you to take control of your income.
Or you could choose to invest in your health. After all, a healthy body makes life more enjoyable. Here are some tips for living a healthy lifestyle on a budget!
9. Continue with investing over time
When it comes to investing money for beginners and seasoned experts alike, consistency is key! The more frequently you invest, year after year, the closer you’ll get to your goals.
These tips will help you stay consistent in life, no matter what habits you’re working on. Whether it’s investing for beginners, eating healthier, or staying organized, consistent action will make all the difference.
Expert tip: Take your time and don’t make impulsive decisionsWhen you first learn how to start investing for beginners, you’ll be reading through a lot of information. And it might even seem pretty straightforward! Just do X, Y, and Z, and you’re all set—right?
But it’s always different when you’re just reading about something vs. when you’re actually doing it yourself. There are a lot of feelings that can come with the territory of investing and money management.
Maybe your coworker told you about this “hot new stock” and got you really excited about it. Before you invest your hard-earned money, take a pause. Do your own research to decide if it’s really a sound move, or a risky gamble.
Similarly, there could be a day when the market has a slump and lots of people are panic selling. Will you let yourself get caught up in that, or will you stay calm, cool, and collected because you were already mentally prepared?
Since emotions are temporary, try not to base investment decisions on your feelings or what the people around you are saying. Make your plan based on research and facts, and stick to it! This way, you don’t have to be afraid of the stock market.
Investing money for beginners: Where should you invest first?
Now you know about some of the different investing options and how to start investing for beginners. That said, if you’re trying to determine where to get started with investing first, here are our suggestions.
1. Leverage tax-advantaged retirement savings accounts from your employer first
An employer-sponsored retirement plan is the best place to start investing money for beginners. Examples of these account types include 401k, 403b, and 457b. By leveraging tax-advantaged accounts, you can take full advantage of their tax benefits.
Taxes for employer-sponsored retirement account
Usually, your contributions to your retirement account will be taken out of your paycheck before your taxes are deducted (also known as your pretax income). This reduces your taxable income. As a result, the taxes on your income after these deductions (post-tax income) would be lower at the end of the year.
Also, these accounts offer a deferred tax benefit. This means you don’t have to pay taxes on your investments until you start to make withdrawals on the accounts once you reach retirement age (age 59.5). Or at the required withdrawal age set by the IRS (age 72).
2. Set up your own IRA
Next, you can go about setting up a traditional IRA or Roth IRA (Individual Retirement Account).
If your employer does not offer any type of retirement savings plan, an IRA is a great place to start. These account types also have their own tax advantages, which makes them particularly beginner-friendly. There is a contribution limit for these that you should be aware of, though.
Traditional IRAs have the same tax benefits as traditional 401(k)s. Roth accounts are a little different, because you pay taxes on your contributions the same year instead of waiting until it’s time to withdraw. Learn more about Roth IRAs and other 401(k) alternatives here.
3. Open your own brokerage account
Once you’ve fully leveraged the tax-advantaged accounts you are eligible for, you can also open a regular brokerage account. It will allow you to invest any extra money you have after you have maxed out your tax-advantaged accounts.
Keep in mind that while a regular brokerage account is a taxable account, you don’t have to pay any taxes until you actually sell your investments. These types of taxes are called capital gains taxes.
What to remember as you learn how to start investing for beginners
Investing is a great way to build a solid financial future. However, there are some pitfalls to look out for as you learn how to start investing. If you can avoid some of these mistakes, then you stand to save yourself thousands of dollars.
Understand the fees (and avoid them)
When you learn how to start investing and begin looking through funds to invest in, you’ll notice that each comes with a set of fees.
In many cases, the fees can range from 0.5% to 2%. Although that tiny swing in percentage points might not seem like an important detail, it can make a big difference in your portfolio’s growth.
In fact, a 2% fee could add up to hundreds of thousands of dollars over the course of your investing career. When you decide to invest, you should make sure to research the fees and minimize them wherever possible.
Prepare with your risk tolerance in mind
When you choose to invest your money, you should assume that you might lose some of your investment along the way. The market will rise and fall and there are plenty of fluctuations.
Although it historically has risen through the years, that is not an indicator that it will continue to rise steadily. It is likely that there will be some dips along the way.
It is important to understand your risk tolerance and consider that as you invest your money. Take our quiz to gain a better understanding of your risk tolerance. Researching your investments is also key when it comes to assessing risk.
You should also think about your investments in terms of what is a long-term goal or a short-term goal. Make it part of your personal finance plan to know how much you’re investing for the near future and how much for retirement, as this can affect how much risk you take with investments.
Diversify with different types of investments
The best way to mitigate your risk in the market is diversification of your investments. You don’t want to pool all of your investments into one particular company that goes under.
Instead, you want your investments spread out in many sectors of the market. If one area of the market falls, then you will not be left with a badly sinking portfolio. As you learn how to start investing for beginners, try to get a mix of assets like stocks, bonds, mutual funds, and more.
Rebalance along the way
When learning how to invest for beginners, you should plan to stay on top of your investments over time. Make sure that you are still on track with your objectives and that the timeline still fits into your goals.
The market will rise and fall, you’ll need to rebalance to ensure that you don’t leave all of your eggs in one basket.
Automatic rebalancing can also be a great approach to ensuring your portfolio is always in alignment.
Don’t try to time the market
Remember, investing is a long-term strategy to build wealth. You should not try to time the market by buying low and selling high.
Not even the most advanced investors can consistently beat the market. Instead of looking for short-term wins, focus on long-term goals and gains.
Although you won’t build wealth overnight through the stock market, you can with many years of consistent investing.
Don’t forget about taxes
Remember taxes when you are planning out your investments. There are different strategies that you can use to lower your potential tax burden, but they require careful planning.
If you aren’t sure about the tax implications of your situation, then consider talking to a tax professional.
Don’t wait to invest
Although it is important to educate yourself before investing, you should not wait too long to get started. With investing, you want to have the value of time on your side.
The sooner you are able to start investing, the better, as your investments will have more time to grow. That time could lead to significant growth due to the power of compounding.
Avoid making emotional investment decisions
When you learn how to start investing, you will realize that you have some strong emotions attached to your investments.
After all, you are hoping that these investments will lead to a better future. And many people have a fear of loss that may make investing more challenging.
The stock market comes with highs and lows, and you should be emotionally prepared to weather these storms. When the market inevitably drops, you should not pull all of your money out of the market.
Instead, you should wait until it rebounds and you are ready to make a withdrawal. However, this is easier said than done.
In order to avoid a painful experience, make sure to understand your risk tolerance before you start investing. With that, you can choose investments that are less likely to cause panic in your life. Stick to what makes you comfortable, and always make your investment decisions with a clear head.
Remember, nothing happens overnight
You should not assume that your money will grow overnight when you start investing. In fact, it will rise and fall many times on the way to growth.
As you get started, realize that investing is a long-term strategy for wealth building. But it will not make you rich overnight.
What type of investment style is right for you?
The only person who can determine the best investment style for you is you.
You need to think about how old you are, how long until you retire, and what your risk tolerance is. Beyond that, think of your personality and what makes sense for you.
Robo-advisor options are best for people who like to have a little control over their own investments and like technology. Others who prefer some personal guidance may want to work with a financial advisor to discuss their options. After researching, choose what you’re comfortable with.
How should a beginner start investing?
Here are the key steps summarized when it comes to how a beginner should start investing:
- If your employer offers a retirement plan like a 401(k), talk to HR about setting up contributions.
- Whether or not you have a work retirement plan, you can also open an IRA through a variety of online brokers and invest in that.
- To make additional investments outside of retirement accounts, open a regular investment account with a brokerage firm or robo-advisor service.
These three options will allow you to invest as much money as you want!
Is $100 enough to start investing for beginners?
$100 is absolutely enough money to start investing for beginners! Many online brokers have low account minimum requirements to make investing accessible to more people. Some don’t have an account minimum at all, so you could even start investing with $10 if you want!
Furthermore, some brokerages offer fractional shares, sometimes called “stock slices” as a way to invest.For instance, if you want to buy a share of a stock or index fund that costs $200, but you only have $100, this would enable you to buy half a share.
Is $1,000 a good start for investing?
Reaching your first $1,000 invested in the stock market is an occasion worth celebrating! That’s a thousand dollars that can immediately get to work and start growing.
If you want to earn extra money so you can invest $1,000 every month, think about starting a side gig. Here are 30+ ways to earn an extra $1,000 a month.
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These tips make how to start investing for beginners a breeze!
The best way to build wealth through investing is to get started as soon as possible. You can learn how to start investing today! Even if you are just starting with $20, you can build your portfolio over time.
If you want to learn more and make good investment choices, then consider taking our completely free investing course.
You’ll learn more about how to start investing money for beginners, how to research your investments, and how to pick the right broker for you.
And remember that investing is one part of your overall financial health. There are many other things you should also learn about like saving, budgeting, and managing your money. It all fits together like a puzzle—and the picture it shows is a beautiful financial future!