How To Start Investing (Complete Beginners Guide For 2024) (2024)

Written By

Matt Crabtree

Breaking into the stock market can be an overwhelming thing. There is SO MUCH to learn and so many different things to understand. Where do you even start? Do you invest in stocks, options, bonds, ETFs, mutual funds, or something entirely different?

We get it. It’s a lot to figure out. And that’s where we come in. We’ve put together this simple guide to use to learn how to start investing. We will share basic information about investing, steps to help you get started, and some tips to help along the way.

Let’s begin!

Start Investing: An Overview

What exactly is investing? Investing is defined as putting resources into an entity to generate income or profits. You are committing your own money into some sort of endeavour. In return, you expect growth, profit, or income to reflect on your investment.

Every investor has a different strategy or goal to accomplish, but the basics of every goal are to make money on your investment. Some people invest by purchasing real estate, while others might buy a bank CD for compounding interest.

And then, there are the souls that invest in businesses and enterprises by investing in the stock market. Mind you, it isn’t always stocks that they buy. There are many different types of assets in the investment world. And there is no one size fits all approach either.

When you invest, the company that you invest in can utilize those funds for their needs.

Nothing is ever guaranteed with investing. While the goal is income or profit of some sort, there is exposure and potential for loss.

While there are short-term investment strategies, the overall approach is typically meant to be used for long-term needs.

Understanding the Different Types of Investments

We could go on and on about the different types of investments. And as you grow in the markets, you will likely want to know more about some as well. Since this is meant to be a beginner’s investment guide, we’re going to keep it simple.

Stocks and Shares

Stocks and shares are really the same things. A share is a portion of the stock of any given company you choose. Stocks are priced at how much it costs to purchase a single share. And you can purchase as many as you please in most cases.

There are some stocks that have limited shares available and may be harder to get your hands on.

In most cases, you will purchase stocks one share at a time. There are some approaches and some apps that allow you to purchase fractional shares, but that is not the norm. Shares of stock give you ownership in that company. It may not be substantial, but you officially own a small slice of the company when you purchase a share of the stock.

That ownership will entitle you to be a part of growth with the company, as well as income that is paid out to shareholders. Not all companies push out income in the form of dividends, so this is also something to keep in mind.

There are thousands of stocks out there to choose from. There are also several different sectors of stocks. For example, you might find energy stocks, technology stocks, dividend stocks, etc. Stocks can be purchased from different exchanges as well. The various exchanges might have variations in the stocks they hold or offer.

Bonds

A bond is different from a stock. Rather than taking ownership of the company, you’re actually taking ownership of the debt of the company. Bonds are issued to companies from corporate lenders. The company then pays down the bond and pays interest.

As a bond holder, you get a nice kickback of the interest as the bond is paid back. As long as the bond holder and the company are reliable, you’re going to keep your principal investment and make money from the interest of the bond.

Bonds are considered to be a more conservative investment overall.

However, there are bonds that can be risky. If the bond holder goes under, or the company fails to pay, then you are on the hook and could lose some money, or stop making interest.

You’re loaning your funds towards the company and their cause. There are risks to doing so, of course. The key is to do your best to try to find highly-rated bonds and companies. This still does not provide any guarantee, but they are highly rated for a reason.

Funds

Funds come in the form of both mutual funds and ETFs. These are both similar in the sense that they are made up of a variety of different stocks and holdings. However, ETFs operate much like stocks do and will be purchased from the public exchange at whatever price they are the moment you buy.

With funds of any kind, it is a collection of different assets that are all pooled together to create the fund. Some funds are designed for growth, others are designed for interest, and so on. There are also funds that might be designed to hold specific types of assets. For example, a growth fund is going to hold assets that are focused on growth.

Every fund is professionally managed by individuals or groups that own the fund.

Companies like Fidelity, Vanguard, and tons of others create funds that you can then invest in. As far as how they are managed, this can vary. Some are actively managed and could adjust on a daily basis if needed. Others are passively managed, which saves costs. These are just rebalanced on a routine basis.

There are funds for every type of investment strategy.

Choosing the Investments That Work for You

In order to start investing, you have to be able to choose investments. How do you do that? Perhaps you have a company or fund that you’ve heard things about and had your eye on. The good news is that there are plenty of different ways to invest, and tons of tools to help you choose investments that work for you.

Here are a few things to consider.

Account Management

As a beginning investor, you don’t have to figure out everything on your own. In fact, you really don’t have to figure things out at all if you don’t want to. You can choose from different forms of management and go from there. You can also have multiple accounts and use different levels of management on different accounts.

It’s your call.

When it comes to management, you basically have four options.

The first option is to manage everything on your own. In this case, you can use research and tools, you can even get some basic advice. But in the end, you are the one making the decisions and then choosing what goes into your portfolio. You’re responsible for monitoring, buying, selling, etc.

The next option is a partially managed account. In this type of account, you’re still mostly in control. The way these work is to have an adviser that is reviewing your portfolio and making recommendations to you. Then, you can either act on or refuse their recommendations. The choices still are your responsibility, but you receive advice from a trained and certified professional.

Third, you could use a robo adviser. Robo advisers are managed by AI technology. Your account is monitored and managed by smart technology that watches the market, looks for triggers, and takes action based on that information paired with your account preferences. Most robo advisers work on a partially managed basis where you still get a say, but there are accounts that are 100% managed by AI in this capacity.

Finally, you can get a fully managed account to invest in. In this type of account, you provide your goals and your plans, you meet with the adviser on a scheduled basis, and they do the hard work. They create a portfolio based on your risk profile and your goals.

They are responsible for making changes, and then they just check in with you from time to time to review. These are typically more expensive because you’re paying something to be responsible for your account.

The thing is that we are all different and will have different preferences. While someone may want to dig in, learn the market, and become an avid trader, there are many of us who are just as content to say these are my goals and let someone else handle the details.

If you’re an anxious decision maker, this might just be a better choice so you aren’t hyper focused on the markets.

As we mentioned earlier, it’s 100% up to you.

How to Start Investing

We’ve shared a lot of information to get you thinking about your needs, your goals, and what your options are. Each of these details will be important as you start investing. This part of our guide is dedicated to walking you through the steps so you can get started.

1. Set Up an Account

First things first, you’ve got to have an investment account somewhere to even think about investing. There are plenty of choices out there, so take some time to do a little research and find an investment provider that seems like a good fit. Be sure to look at fees, account choices, management details, and how easy it is to use.

You don’t have to use the same thing as anyone else. You need to choose what investment provider really fits your needs.

2. Determine Your Risk Profile

As you set up your account, you’re going to answer a lot of questions about yourself in order to determine your risk profile and your goals for this investment account. User-friendly providers will make this process quick and simple, but know that it is required for any regulated provider.

Your risk tolerance is going to be specific to you. If you have high anxiety about the markets and you want to do everything you can to avoid losing money, you’re going to need to stick to things that are low risk and considered more conservative.

Remember nothing is guaranteed in the stock market, but there are certain investments that are categorized as low risk. If you are more aggressive, then you will have a higher risk tolerance and your preferences will portray that.

3. Set Investment Goals

Another part of your account setup is going to be setting some goals. Are you saving for retirement, investing for fun, saving for a specific purchase, or just saving in general? Knowing your goals can help ensure you are investing accordingly.

Are your goals short-term or long-term? These details can also make a difference. You can set a goal today, and then that goal can be adjusted if your outlook changes or if you accomplish your initial goal.

4. Start Choosing Investments

Now, you’ve determined your taste for risks, you’ve picked the type of account you want, everything is set up and ready to go.

It’s time to start making decisions. Most investment apps and trading platforms offer a variety of research and tools so that you can make informed decisions. If you chose a fully managed account, your job is done. Now it’s in the hands of your adviser.

Otherwise, spend some time looking into options, reading advice, and deciding just what you want to invest in. Remember you can choose from funds, bonds, and stocks. And there are a multitude of options in every category.

As you are choosing investments, don’t forget to diversify your portfolio.

While your goal may primarily be growth, it’s a good idea to add diversity. In a growth account, your holdings will be weighted in growth funds and stocks the most, but you might also add some income or some conservative pieces to round it out.

Diversification will help to reduce and control risk to some extent. If you’re starting with limited amounts, consider working your way into the market with ETFs and mutual funds to get started.

5. Understand Commissions and Fees

Every brokerage is going to charge fees in some sort of way. Even the free and discount brokers are going to be drawing in some sort of income from you. In a managed account, you’re charged a fee based on a percentage of your assets. So, a management fee might be 2%, which means you will be charged 2% of the total of your managed portfolio.

In other setups, you will pay fees for making trades or may pay account fees as well. It simply depends on the brokerage that you use. Many trades are charged commissions for placing the trade. This helps to offset the cost of using the exchange.

As you are investing, be sure to take a look at the fees your broker charges. Even if they are free, there are going to be costs somewhere so figure out where the costs are and how they will impact you.

6. Understand the Risks

Finally, don’t forget that investing is not without risks. Your money in the stock market is at risk, even with the most conservative of investments. With aggressive investing patterns, there are higher risks.

In the market, everything is rated for risk. For example, bonds are low risk and conservative. However, trading options is considered high risk and is an aggressive trading form. Different assets and sectors will pose different risks.

The biggest detail to keep in mind is that nothing is ever guaranteed. While you may feel solid in your investment decision, even some of the low-risk options have the ability to plummet and fail.

That being said, don’t be afraid of the market. There is risk, but seeking education and being familiar with the market will be helpful. Everyone has to start somewhere. Taking advantage of a robo adviser, or even just a partially managed account that offers advice could be a great way to learn.

There are also brokers out there that let you monitor and copy other people’s trades, and this could potentially be a good learning experience too.

Know the risk, and take actions to be educated as much as possible. Invest toward your goals and understand the market will always have ups and downs. Do your best to ride them out when you can, or make adjustments as necessary.

Final Thoughts

It’s really pretty simple to start investing. You just have to open an account, and then make some decisions about the type of investor that you want to be. You are in control, and you have the ability to create the type of account setup that really works for you, whatever that may be. There isn’t a right or wrong way to do it, which is perhaps the beauty of investing.

Related Guides:

Penny Stocks — A Guide To Investing On The Cheap
Best Investments for Beginners