Investing for Beginners | 5 Steps to Start Investing Today!

Are you looking to start investing your money but don’t know where to begin? You have come to the right place. Investing for beginners can feel extremely overwhelming and daunting at first. There are countless options and strategies to choose from! You probably have a lot of questions – How do I start? What should I invest in? How much money do I need? These are probably only scratching the surface of everything going through your head – don’t worry! This blog post will break everything down into simple, actionable steps to help you confidently begin your investing journey.

Here are 5 steps for beginner investors to take if you want to start investing today!

1. Determine Your Financial Standing.

Before you start investing any money, you need to understand where you are at in your financial journey. You need to know how much money you have coming in every month (income) and how much money you have going out (expenses). Starting a budget is a great way to do this. By starting a budget you can determine your financial standing, figure out where your money is going, and how much you can afford to invest – an essential step in investing for beginners.

It is important to be realistic about how much money you have that you can invest. It’s best to start a habit of investing every single month. Personally, I use the ‘pay yourself first’ principle and treat investing as one of my monthly bills. This ensures that I not only save money, but also put money into my investments every month – even if it’s a small amount! This is, of course, not going to be true with every investment vehicle. However, if you decide to use index or mutual funds, it’s a great way to start. You need to consider your regular income and expenses, savings, and other financial resources you may have at your disposal.

2. Figure Out Your Investing Goals.

You must understand what you are wanting out of investing – your ‘why’ to investing. If you set clear objectives for what you want out of your investing journey, it will guide your investment decisions, help you to stay focused, and will make it much easier to achieve them.

It is important to figure out what your goals are. This way you can decide the best investing tool that will get you where you want to be. Maybe your goal is to start saving for a safe and secure retirement. In this case, an IRA or Roth IRA is probably your best route. Do you want to increase your net worth? Then maybe real estate is the way for you to go. Or maybe you want something that requires as little work as possible but will give you consistent returns over a long period of time? If this is the case, maybe you should look into mutual or index funds. Whatever your goals are, there is a tool and path out there for you to achieve them. These examples are just a small amount of the options you have when it comes to investing for beginners. In order for you to achieve your goals effectively, it’s important to know what you are wanting out of investing.

Here are some tips when it comes to figuring out your investing goals:

Be as specific as possible when it comes to your goals. These goals should include some kind of dollar amount and a deadline at the very least. This could be something along the lines of “I want to have $250,000 of liquidity by the age of 45” or “I want to get $2,500 of passive cash flow every month within the next five years”. While these are both great goals, they will require very different investing strategies. So, it is important to be specific about what you want.

Determine the amount of time you have. I have said this (and will say it again) at least a million times. The sooner you start investing the better. The longer amount of time you have to invest your money, the more aggressive you are able to be with it. However, if you have a shorter time period then it is probably best to take a more conservative investing route. Determining your investment horizon is a crucial step in understanding what your options are.

3. Determine Your Risk Tolerance.

It is important to determine your risk tolerance is a crucial part of investing for beginners, as it helps you understand the level of risk you are comfortable taking on. The general rule of thumb – the higher the reward, the greater the risk. So, while an 80% return on investment (ROI) sounds great, it is also likely that it is an extremely risky investment and there is a high chance you may lose all your money. 

Remember, there is no zero risk investment. Even the most conservative investment options have a risk to them, this is the whole point (and the fun) of investing! Determining your risk tolerance is important as it will help you understand your comfort levels with the uncertainties that come with financial investing. Further determining your risk tolerance will also help you to determine which investment vehicle will be best for you.

If you are young and your goal is to become a millionaire by 50 years old then your investment vehicle is likely to be something that is a bit more aggressive and includes more risk. Opposed to someone who is older and their goal is to live a comfortable retirement, they probably want to invest more conservatively.

If you are young with little responsibilities other than yourself, it is likely you have a much higher risk tolerance. This meaning you are able to invest more aggressively. This is compared to someone who is older with a family they need to take care of. Who in this case is likely to need to invest a bit more conservatively.

4. Determine Your Investing Approach.

Since you have made it this far in reading this post, you are clearly interested in investing for beginners and taking the right steps to build your financial future. Now that you have figured out your financial standing, how much money you are able to invest, what your investing goals are, and what your risk tolerance is – you are ready to start investing your money! The only thing left to do is to determine which investment vehicle best aligns with all the factors above that are unique to you.

There are so many options out there when it comes to investing. To name a few you can invest in index funds, exchange traded funds (ETFs), mutual funds, real estate, individual retirement funds (IRA’s), which are different from 401(K)s, the ‘regular’ stock market, and so much more. 

The world of investing your money is huge. Now that you have figured out where you want to end up you can figure out the best path to get there. If you want to start small with the stock market – great! Find four to five stocks that you can start earning dividends on. If you want to get a monthly cash flow, start looking into different investment real estate options around you. The options are endless!

You don’t have to pick just one. In fact, when it comes to investing your money, the more you diversify the better! Start with one option, maybe the most conservative, least complicated, and lowest cost of entry. Once you get comfortable with that, move to another, maybe a bit more complex but with bigger rewards. You never want to ‘put all your eggs in one basket’. As time goes on and you continue to invest, you will get better at it. The scariest part of investing (with most things in life) is the first jump! However, once you see an ROI, you will get even more motivated to keep going and learn more.

5. Start Investing Today!

There is a saying in the investing and finance world. “The best time to start investing your money was yesterday”. This is especially true for investing for beginners who may feel hesitant about getting started. Obviously, we can’t turn back the clock, but to put it simply, the sooner you start investing the better off you will be. As I said earlier (and probably many other times in multiple posts), when it comes to investing your money, time is your best asset. Compound interest, which is essentially gaining interest on your interest, will be your best friend, it is one of the most powerful tools in investing. When investing your money and the more time your money has to work, the better!

Now, you may argue this saying ‘Well, I only have a couple dollars right now, I need to wait until I have more to invest.’ This is not true!! You can (and should) start investing as soon as possible! Even if that is with only a couple dollars. It is absolutely possible to start investing with a very small amount of money. Especially now, because you can buy small portions of shares/stocks – or fractional shares. Further, there are options out there with very low to no minimums. Such as mutual funds, index funds, and exchange traded funds (or ETFs). Whatever you choose is a great option as long as you do your research and start as soon as you possible.

Conclusion:

Investing for beginners may seem overwhelming at first, but by following these steps, you will gain the confidence and knowledge to build your wealth over time. Remember, investing for beginners is not about ‘getting rich quick’. It is about making smart and consistent decisions that will help you reach your financial goals. Whether you are starting with only a few dollars or a much larger amount, the key is to begin as soon as you can and to stay committed to your investing strategy. Over time, your investments will grow. So take that first step today – your future self will thank you!!

Disclaimer:

The investing information provided on this post is for educational purposes only. Perfecting the Money Game is not offering any financial advice or brokerage services. It also does not recommend or advise readers to buy certain stocks, securities, or any other type of investments.