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Investing 101: How to Get Started
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How to Start Investing: A Guide for Beginners
To get started investing, pick a strategy based on the amount you'll invest, the timelines for your investment goals and the amount of risk that makes sense for you.
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6 years of experience Expertise Investing for beginners financial advice long-term investingAlana Benson is an editor who joined NerdWallet in 2019. Historically she has covered a wide variety of investing topics including stocks, socially responsible investing, cryptocurrency, mutual funds, HSAs and financial advice. She is also a frequent contributor to NerdWallet's "Smart Money" podcast. Alana has appeared on FOX Houston and the "PennyWise" podcast and has been quoted in MarketWatch and The Sun. Before joining NerdWallet, she wrote two books on identity theft and several young adult nonfiction titles. Her work has been featured in The New York Times, The Washington Post, The Associated Press, MSN, Yahoo Finance and MarketWatch.
Alana Benson is an editor who joined NerdWallet in 2019. Historically she has covered a wide variety of investing topics including stocks, socially responsible investing, cryptocurrency, mutual funds, HSAs and financial advice. She is also a frequent contributor to NerdWallet's "Smart Money" podcast. Alana has appeared on FOX Houston and the "PennyWise" podcast and has been quoted in MarketWatch and The Sun. Before joining NerdWallet, she wrote two books on identity theft and several young adult nonfiction titles. Her work has been featured in The New York Times, The Washington Post, The Associated Press, MSN, Yahoo Finance and MarketWatch. Published in Editor & Content Strategist + more + more
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Expertise financial planning wealth management high net worth underserved communities retirement planning Raquel Tennant, CFP®, is a financial guide at Fruitful, a financial wellness platform providing members with unlimited financial advice and access to financial planning to the masses at a low cost. Tennant began her career in the fee-only RIA firm space, serving ultra high-net worth clients and is now proud to align her passion for helping younger, diverse and underserved clients, who often feel neglected by traditional firms. A graduate of Towson University, Tennant is one of the first 12 inaugural graduates of Towson's CFP Board Registered Financial Planning major and the first of her class to pass the CFP exam. She proudly collaborates with her alma mater as a writer and guest speaker to students, faculty and staff, bringing awareness to both the financial planning major and the RIA financial planning industry. She has been featured on 2050 TrailBlazer’s podcast episode “The Power of Partnership”, CFP Board’s "Stay on Your Path" video, and Towson’s College of Business & Economics “Finding the Right Fit” news feature. Tennant is also a CFP Board professional mentor. At NerdWallet, our content goes through a rigorous editorial review process. We have such confidence in our accurate and useful content that we let outside experts inspect our work. Certified Financial Planner® + more + more
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19 years of experience Expertise Retirement planning investment management investment accountsArielle O’Shea leads the investing and taxes team at NerdWallet. She has covered personal finance and investing for nearly 20 years, and was a senior writer and spokesperson at NerdWallet before becoming an editor. Previously, she was a researcher and reporter for leading personal finance journalist and author Jean Chatzky, a role that included developing financial education programs, interviewing subject matter experts and helping to produce television and radio segments. Arielle has appeared on the "Today" show, NBC News and ABC's "World News Tonight," and has been quoted in national publications including The New York Times, MarketWatch and Bloomberg News. She is based in Charlottesville, Virginia.
Arielle O’Shea leads the investing and taxes team at NerdWallet. She has covered personal finance and investing for nearly 20 years, and was a senior writer and spokesperson at NerdWallet before becoming an editor. Previously, she was a researcher and reporter for leading personal finance journalist and author Jean Chatzky, a role that included developing financial education programs, interviewing subject matter experts and helping to produce television and radio segments. Arielle has appeared on the "Today" show, NBC News and ABC's "World News Tonight," and has been quoted in national publications including The New York Times, MarketWatch and Bloomberg News. She is based in Charlottesville, Virginia. Published in Head of Content, Investing & Taxes + more + moreLearning how to invest can be a valuable skill, no matter what the stock market is doing at any given moment.
Learning how to invest can be a valuable skill, no matter what the stock market is doing at any given moment.As a newbie, you might also have a lot of questions: How much money do you need to start investing? How do you get started? What are the best investment strategies?
As a newbie, you might also have a lot of questions: How much money do you need to start investing? How do you get started? What are the best investment strategies?Our guide distills the basics into five easy steps to help you start investing.
Our guide distills the basics into five easy steps to help you start investing.Step 1: Start now, even if you have to start small
Step 1: Start now, even if you have to start smallInvesting as far in advance of your goal as you can is one of the best ways to see solid returns on your money. Compound earnings, which occur when your investment returns start earning their own return, allow your account balance to snowball over time. The longer you stay invested, the more compound earnings you might see.
Investing as far in advance of your goal as you can is one of the best ways to see solid returns on your money. Compound earnings, which occur when your investment returns start earning their own return, allow your account balance to snowball over time. The longer you stay invested, the more compound earnings you might see.How compound earnings work
How compound earnings workLet's say you invest $200 every month for 10 years and earn a 6% average annual return. At the end of the 10-year period, you'd have over $33,000. Of that amount, roughly $24,000 is money from those $200 monthly contributions. Around $9,000 is in investment gains you would have earned for merely parking it in the account to grow over time.
Let's say you invest $200 every month for 10 years and earn a 6% average annual return. At the end of the 10-year period, you'd have over $33,000. Of that amount, roughly $24,000 is money from those $200 monthly contributions. Around $9,000 is in investment gains you would have earned for merely parking it in the account to grow over time.If you’re hesitant to invest because you're unsure whether your contribution is enough, focus instead on what amount feels manageable given your financial situation and goals, and start with that. The important thing is to build the habit. You can always increase your regular contribution amount over time.
If you’re hesitant to invest because you're unsure whether your contribution is enough, focus instead on what amount feels manageable given your financial situation and goals, and start with that. The important thing is to build the habit. You can always increase your regular contribution amount over time.Investing with smaller dollar amounts is also easier than ever. Many brokerage firms offer low or no investment minimums, zero commissions, and the ability to buy fractions of stocks for a lower price instead of the whole share. There are a ton of other investments also available for more affordable amounts, such as index funds, exchange-traded funds and mutual funds.
Investing with smaller dollar amounts is also easier than ever. Many brokerage firms offer low or no investment minimums, zero commissions, and the ability to buy fractions of stocks for a lower price instead of the whole share. There are a ton of other investments also available for more affordable amounts, such as index funds, exchange-traded funds and mutual funds.» Curious to see how much your money could grow? Try our investment return calculator
» Curious to see how much your money could grow? » Curious to see how much your money could grow? Try our investment return calculatorBrokerage firms
Brokerage firms
Brokerage firmson Charles Schwab's website
on E*TRADE's website
on Vanguard's website
on Fidelity's website
Step 2: Learn about different investment accounts
Step 2: Learn about different investment accountsWhere you choose to invest your money can depend on your financial goals and timeline.
Where you choose to invest your money can depend on your financial goals and timeline.If you want to save for retirement: If your main objective is to save for retirement, experts recommend contributing to accounts like a 401(k) and an IRA first. Because these plans are meant to encourage long-term savings, they come with several built-in tax advantages that general investment accounts don't have. For example, when you contribute to a traditional 401(k) or IRA, you may be able to take a deduction on your taxes for that contribution. On the other hand, Roth 401(k)s and Roth IRAs are funded with money you've already paid taxes on, but you get to withdraw all your contributions and earnings on a tax-free basis once you've hit retirement. Retirement accounts generally come with annual contribution limits and withdrawal rules. (Learn how to choose the right retirement plan for you.)
If you want to save for retirement: If you want to save for retirement: If your main objective is to save for retirement, experts recommend contributing to accounts like a 401(k) 401(k) and an IRA IRA first. Because these plans are meant to encourage long-term savings, they come with several built-in tax advantages that general investment accounts don't have. For example, when you contribute to a traditional 401(k) or IRA, you may be able to take a deduction on your taxes for that contribution. On the other hand, Roth 401(k)s and Roth IRAs are funded with money you've already paid taxes on, but you get to withdraw all your contributions and earnings on a tax-free basis once you've hit retirement. Retirement accounts generally come with annual contribution limits and withdrawal rules. ( Learn how to choose the right retirement plan for you .)If you want to save for college and beyond: Saving for your kid's education or future can be daunting, but there are several accounts designed to help you navigate this goal. One of the most popular vehicles used by parents and caregivers is a 529 account. These tax-advantaged savings plans have high contribution limits, and the money you put in can be used toward qualified expenses such as tuition, textbooks, and room and board. If you're interested in saving for your child in other ways, you can also consider a custodial brokerage account or a custodial Roth IRA. (Learn more about investment accounts for kids.)
If you want to save for If you want to save for If you want to save for college and beyond: college and beyond: Saving for your kid's education or future can be daunting, but there are several accounts designed to help you navigate this goal. One of the most popular vehicles used by parents and caregivers is a 529 account. 529 account. These tax-advantaged savings plans have high contribution limits, and the money you put in can be used toward qualified expenses such as tuition, textbooks, and room and board. If you're interested in saving for your child in other ways, you can also consider a custodial brokerage account or a custodial Roth IRA. ( Learn more about investment accounts for kids .)If you want to invest for long-term goals: If you're looking for an additional place to park some money to fund longer-term financial goals, a brokerage account is the key to getting started. Brokerage accounts have no limits on how much you can contribute to them annually, and they offer a greater degree of flexibility than retirement accounts. You can choose your own investments, build your own portfolio, and buy and sell investments at will. Brokerage accounts also come in many flavors and variations: a traditional brokerage account allows you to have hands-on experience trading and purchasing your own investments, while robo-advisors (also known as automated investment management services) are more hands-off, meaning they can curate and manage your investment portfolio for you. Robo-advisors often offer IRAs, too. (Learn how to open a brokerage account.)
If you want to invest for long-term goals: If you want to invest for long-term goals: If you're looking for an additional place to park some money to fund longer-term financial goals, a brokerage account brokerage account is the key to getting started. Brokerage accounts have no limits on how much you can contribute to them annually, and they offer a greater degree of flexibility than retirement accounts. You can choose your own investments, build your own portfolio, and buy and sell investments at will. Brokerage accounts also come in many flavors and variations: a traditional brokerage account allows you to have hands-on experience trading and purchasing your own investments, while robo-advisors robo-advisors (also known as automated investment management services) are more hands-off, meaning they can curate and manage your investment portfolio for you. Robo-advisors often offer IRAs, too. ( Learn how to open a brokerage account .)Step 3: Decide how much to invest
Step 3: Decide how much to investHow much you should invest depends on your financial situation, investment goal and when you need to reach it.
How much you should invest depends on your financial situation, investment goal and when you need to reach it.If you're saving for retirement and have a 401(k), your first investing milestone is easy: Contribute at least enough to earn the full match, if offered. A match is a contribution from your employer that's based on the amount you contribute — for example, an employer might match 50% of your own contributions, up to 6% of your salary. That's free money, and you don't want to miss out on it, especially since your employer match counts toward that goal.
If you're saving for retirement and have a 401(k), your first investing milestone is easy: Contribute at least enough to earn the full match, if offered. A match is a contribution from your employer that's based on the amount you contribute — for example, an employer might match 50% of your own contributions, up to 6% of your salary. That's free money, and you don't want to miss out on it, especially since your employer match counts toward that goal.After that, experts recommend that you aim to invest a total of 10% to 15% of your income into a 401(k) or other retirement plan. If that sounds unrealistic, you can work your way up to it over time. If you need some help, you can use tools such as our retirement calculator to help you estimate how much you might need (and how to get there).
After that, experts recommend that you aim to invest a total of 10% to 15% of your income into a 401(k) or other retirement plan. If that sounds unrealistic, you can work your way up to it over time. If you need some help, you can use tools such as our retirement calculator to help you estimate how much you might need (and how to get there).For other investing goals, such as purchasing a home, travel or education, consider your time horizon and the amount you need, then work backward to break that amount down into monthly or weekly investments.
For other investing goals, such as purchasing a home, travel or education, consider your time horizon and the amount you need, then work backward to break that amount down into monthly or weekly investments.» Not ready for long-term investing? Learn where to park short-term savings
» Not ready for long-term investing? » Not ready for long-term investing? Learn where to park short-term savingsStep 4: Pick an investment strategy
Step 4: Pick an investment strategyYour investment strategy depends on your saving goals, how much money you need to reach them and your time horizon.
Your investment strategy depends on your saving goals, how much money you need to reach them and your time horizon.If your savings goal is more than 20 years away (like retirement), almost all of your money can be in stocks. But picking specific stocks can be complicated and time-consuming, so for most people, the best way to invest in stocks is through low-cost index funds or ETFs.
If your savings goal is more than 20 years away (like retirement), almost all of your money can be in stocks. But picking specific stocks can be complicated and time-consuming, so for most people, the best way to invest in stocks is through low-cost index funds or ETFs.If you’re saving for a short-term goal and you need the money within five years, the risk associated with stocks means you're better off keeping your money safe in an online savings account, cash management account or low-risk investment portfolio.
If you’re saving for a short-term goal and you need the money within five years, the risk associated with stocks means you're better off keeping your money safe in an online savings account, cash management account or low-risk investment portfolio.» Learn more about index funds, ETFs and more: 5 best investments for beginners
» Learn more about index funds, ETFs and more: » Learn more about index funds, ETFs and more: 5 best investments for beginnersStep 5: Open an account and begin investing
Step 5: Open an account and begin investingOnce you've decided how much you'll need to invest to reach your goal and selected a type of account, the last step is to actually open your account of choice to get started.
Once you've decided how much you'll need to invest to reach your goal and selected a type of account, the last step is to actually open your account of choice to get started.When choosing a brokerage provider, consider what's important to you as a beginner investor. Do you value in-person customer support? Do you want to work with an intuitive and easy-to-use app platform? Do you think you'll want access to a financial advisor? All of these questions can help guide you toward the right brokerage firm for you.
When choosing a brokerage provider, consider what's important to you as a beginner investor. Do you value in-person customer support? Do you want to work with an intuitive and easy-to-use app platform? Do you think you'll want access to a financial advisor? All of these questions can help guide you toward the right brokerage firm for you.The process of opening an account is simple and straightforward — it's very similar to opening a bank account. You'll provide some personal information, then decide how to fund the account. This is often done through a bank transfer. Once you have money in your account, you are ready to begin purchasing investments that match your risk tolerance, timeline and goals.
The process of opening an account is simple and straightforward — it's very similar to opening a bank account. You'll provide some personal information, then decide how to fund the account. This is often done through a bank transfer. Once you have money in your account, you are ready to begin purchasing investments that match your risk tolerance, timeline and goals.» Ready to get started? See our list of the best online brokers for beginners
» Ready to get started? » Ready to get started? See our list of the best online brokers for beginners About the author Alana Benson Alana Benson Alana Benson is an investing writer who covers socially responsible and ESG investing, financial advice and beginner investing topics. Her work has appeared in The New York Times, The Washington Post, MSN, Yahoo Finance, MarketWatch and others. See full bio.Helpful resources
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