If You’re a Beginner Investor, Use This Step by Step Guide To Get Started

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Investing isn’t just for other people. It’s for all people—regardless of their age.

Investing in the stock market can seem overwhelming, the best thing you can do is jump in — carefully. These steps can get you on the right track.

Investing helps your money work for you. By investing, your money can keep up with inflation and it can help you get on track for financial independence. 

“Investing is one way to achieve many monetary goals,” says Akeiva Ellis, CPA, CFP, and Founder of The Bemused, an online website for financial literacy. “Retirement or financial independence is one popular long term goal [or] planning for the next generation, such as children’s education expenses.”

The Sooner You Start Investing, the Better

It’s easy to put off investing for another time, especially as other bills and financial responsibilities start to pile up. But the sooner you start, the more you’ll have in the long run. The earlier you start, the more compound interest can work in your favor. That’s when your money starts making money on top of itself. 

Pro Tip

Getting started with investing involves a little leg work upfront but can have immediate results. Do your homework first.

You don’t have to learn the intricate ways of the market to start investing. Many platforms nowadays handle the hard work for you.

“You can get your feet wet with micro-investing,” she says. “This means you invest small sums of money, even as low as $5. There are several investing and robo-advising platforms that work well for this type of investing.”

How To Start Investing in 5 Steps

If you’re not sure how to get started, here’s how to start in 5 steps.

1. Set a budget

How much you put towards your investments can help you decide a lot of other parts of your investment strategy, like how much you can regularly contribute to your account, where you open your account, and the securities you invest in.

“The first step and most important component in achieving any financial goals is to thoroughly understand your expenses,” says Katie Coleman, Certified Financial Planner with Ameriprise Financial, a financial planning firm. “I also think it is extremely important to be realistic about what you are trying to accomplish.”

Don’t worry about starting out small. Even if you have other major financial obligations, there are ways you can invest right now. Even $5 is good enough to get started.

“In many cases, it’s a good idea to pay off any high-interest debt before investing large sums of money,” Ellis says. “However, this does not mean that you should not or cannot start investing at all.” 

2. Figure out the type of investor you are

The type of investor you are comes down to risk tolerance, how much time you want to spend managing your account, and when you plan to use the money.

“The longer your time horizon, the more risk you may be able to take over time,” Ellis says. “If you’re more of a set it and forget it type of person, you may be more inclined to invest in funds that give you exposure to multiple holdings instead of buying individual stocks, bonds, or other assets that you may need to monitor more closely.” Target date funds are good for the investor who likes the set it and forget it approach. These funds will automatically adjust your risk tolerance based on your age, and experts love them for this reason. But just because this approach means it will adjust itself, don’t forget to keep checking in on your investments and continue to invest money on a regular basis. 

3. Find the right platform

The type of investor you are will determine the platform you use. Most full brokerage and robo-advisors don’t have an account minimum but keep in mind that you’ll need a few dollars to start investing. Check NextAdvisor’s list of best online brokers to get started today.

If you’re new to investing, robo-advisors are a great option. These are software-run platforms that ask you a few questions about your risk tolerance and investment time to determine the best investments for you.

4. Open an account and invest

It’s time to open your account, deposit funds, and choose your investments. Don’t worry too much about your opening deposit, but remember and try to add funds regularly to your account.

“As a beginner investor, you can start with as little or as much money as you would like,” Ellis says. “Even small amounts of money, invested at a consistent pace that works for you, can result in a sizable portfolio balance over time.”

5. Keep checking back

Like anything that needs regular maintenance, you should always check on your investment portfolio regularly. Try to set a calendar reminder to review your investments once a month, or even every quarter.