Beginners Guide – How to Start Investing

Now that you have developed a strict saving habit and have paid off your debts. It is time to put your money to work. The posts that I make in the invest early section of my blog you should use more as a guidance tool. As I am not a professional financial advisor I will never tell you what company you should invest your money into or what you should buy as a real estate investment. In this section of my blog I will provide you with a wealth of information in which you can do your own research after I have explained it in detail.

The word “investing” can be scary, but if you’re just beginning investing can be simple with new tools and technologies. Almost all of the wealthiest Americans have large stock market investments, and some like Warren Buffett and Carl Icahn made their fortunes there.

Stock market basics

A share of stock represents a small ownership holding in a company. Publicly traded companies issue shares of stock in exchange for cash investments during an initial public offering, or IPO. Once those shares are issued, they can be sold on a secondary market, also known as a stock exchange.

The most important stock exchanges for you to know about are the New York Stock Exchange and NASDAQ. That is where shares are bought and sold on behalf of large investment firms and individual investors like you and me.

While the stock exchange trading floor used to be exciting and lively, most of the trading these days takes place on a computerized system where no human stockbroker is involved in the transaction.

The price of a share of stock that you see when searching for stock prices is the last trade price. Each time a trade happens, the price is updated to reflect the new market rate. Some stocks like Apple and Walmart trade tens of millions of shares each day. Other stocks, like Berkshire Hathaway’s A Class shares, only trade a few hundred shares per day on average.

Every stock on a major exchange has a ticker symbol, such as AAPL for Apple and WMT for Walmart. That symbol is what people enter when trading that company’s stock.

Single companies vs. mutual funds

Buying and selling a hot stock is exciting but not always the best financial move. Most individual investors only have enough cash to invest in a few companies. While that can be fun, if one of those companies has a bad earnings report, it can weigh down your entire portfolio.

As you learn how to begin investing in the stock market, you’ll find that many individual investors buy mutual funds. These allow you to buy a whole lot of stocks at once with only one trading fee.

When you buy into a mutual fund, a professional fund manager buys and sells stocks on behalf of every investor in that fund. That diversification means that if one stock goes down, you still have a lot of other companies to keep your portfolio stable.

In most cases for individuals, the best returns come from broad market investing such as a mutual fund or index funds. For many individual investors, the best way to start out is with an index fund, a type of mutual fund that tracks major stock market indices.

Legendary investor Warren Buffett suggests that individuals would be best served only investing in a low-fee S&P 500 index fund, and points to Vanguard as an example.

Beginning investing options

Now that you understand the basics, we’ll take a look at some options you have to start investing today.

Regular brokerage account

Big stock brokers like Charles Schwab, Fidelity, Scottrade, eTrade, and TradeKing offer competitive, low-cost stock and mutual fund trades. Signing up with one of these brokers only takes a few minutes, and once you fund your account you can start trading instantly.


For beginning investing without having to pick stocks, bonds, and mutual funds on your own, “robo advisors” like Betterment are a great option.

New Betterment investors fill out a survey about their investment goals and risk tolerance, and Betterment takes care of the rest for you, investing your account funds in a mix of mutual funds tailored to your goals.

For an alternative option, check out Wealthfront or FutureAdvisor.


Almost every time you use your debit or credit card, the transaction ends with a number of cents. Acorns lets you round up to the nearest dollar to fund your investment account. Those cents, and other funds you transfer in manually, add up fast.


Sir Robin of Locksley stole from the rich and gave to the poor. Robinhood, the stock brokerage named after him, has a similar aim: to help average investors avoid expensive trade fees so they can buy and sell stocks for free. That’s right, no trade fees here.

Honest Dollar

Now owned by Wall Street investment bank Goldman Sachs, Honest Dollar is focused on helping people save for retirement starting with a very small investment. It all starts with your first dollar, so if you don’t have a lot to invest, don’t be scared off by some traditional brokers’ minimum account fees. If you want to start small, Honest Dollar is a great option.


While they are known for student loan refinancing, SoFi also offers a wealth management product aimed at Millennial and Generation X investors. SoFi’s low-fee investment service gives you access to a human investment advisor. For SoFi borrowers, the wealth management product is free.

Beginning investing has never been faster

You don’t have to be a millionaire to invest. In fact, you don’t even need to be a thousandaire. Saving for retirement and your future is incredibly important, and thanks to the time value of money, the earlier you start investing, the better off you are.

So what are you waiting for? Your first investment may be less than an hour away!

“Never spend your money before you have earned it.”
– Thomas Jefferson –

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