You don’t need to be a financial wizard to start investing your dough—these tips will get you started.
Investing even a little bit of money can help you reap some solid financial benefits. The sooner you start allocating your money intentionally, the more financial freedom you’ll have in the future. That said, investing can be intimidating if you’ve never done it. You may worry about making the wrong move. So, we asked experts to share top tips on how to begin your investment journey.
#1 Maximize your 401(k).
“The easiest way to start investing is by participating in your employer’s retirement plan if they have one,” says Bola Sokunbi, author and founder of Clever Girl Finance. Generally, this is a 401(k), a retirement savings plan, where money is directly withdrawn from your paycheck (before taxes) and invested in funds of your choosing, though it could also be a 403(b) or a 457(b). “Some employers even match what you put in, which means you are essentially getting free money to invest more,” says Sokunbi.
#2 Invest in companies you believe in.
When you invest, you are usually putting your money into stocks. Basically, you are purchasing a fraction (often a very small one) of a company. So how do you decide what to purchase? “I love a cute purse, so when I started investing, I bought Coach stock,” says Tela Holcomb, founder of Trade Your 9 to 5, a program that helps people learn to invest. “I always recommend that people start with companies they know and believe in.”
But also know this: No investment is a sure thing, and there’s a risk associated with any form of investing. If you work with a financial advisor, talk with them about whether you feel most comfortable buying stocks considered to be a mild, moderate or high risk.
#3 Play the long game.
When people think about the stock market, they often think of constantly buying and selling stocks. “But there’s a difference between trading and investing,” says Holcomb. “Think of it as marriage versus dating. When you are investing, you are making a long-term commitment. The idea isn’t to make money quickly, but rather to invest your money and watch it grow over years or even decades.” In that time, the stock may go up and down—but you’ll just be riding it out, hoping for ultimate gains in the long run.
Trading is when you buy and sell more quickly. Eventually, you may find yourself doing both. But long-term investments tend to be a more comfortable place for beginners.
#4 Start small.
“Getting started can be intimidating,” Holcomb admits. “You think you have to have a ton of money.” But now there are lots of different apps (such as Public.com and Robinhood) that allow you to start with as little as $10 or $20.
If even a small amount makes you nervous, Holcomb suggests you begin by creating an account on the app and getting familiar with it. “Simply familiarizing yourself with how the investing app of your choice works can help you feel more confident and secure,” she says.
#5 Consider automating the heck out of it.
At the beginning, you probably don’t need to hire a team to manage your money—at least not yet. “Using a robo-advisor is a simple way to get started,” says Sokunbi. “They will automatically invest your money for you based on your goals and objectives.”
A robo-advisor is a digital financial advisor that offers online financial advisory services. You’ll fill out a survey that will help assess your goals, budget and risk tolerance. From there, the system uses algorithm-driven financial planning services to help you meet your goals. Not only do they make it easy for beginners, they also tend to charge low fees (unlike working with a larger firm or personal consultant).
Written by Bethany Heitman; Photography by Jenna Gang/Gallery Stock