5 Easy Ways for Beginners to Start Investing

Posted in Investments on April 27, 2020

There’s a common misconception in the world of investing, that if you want to grow your wealth for the future, you already have to be at least a little bit rich. However, you don’t need to have a bunch of cash just sitting in your savings account to begin building a good nest egg.

The barrier to entry for would-be investors is practically non-existent these days. It’s been knocked down by countless companies that have made it their mission to ensure that everyone has the right investment opportunities available to them – no matter if you’re a beginner or not.

Here, we’re going to look at some of the easiest ways for newbies to start investing.

1. Your Retirement Plan

If you have a retirement plan or 401k at work, then you don’t need to think about taking a loan out for a new investing strategy – you already have access to one. Your 401k is likely to be one of the first places you should consider putting your money, particularly if you’re being given an employer match by the person who hires you.

The great thing about a retirement plan is that you can start by putting away as little as 1% of your paycheck towards your future at first, then eventually work your way up. Of course, the more you can take advantage of your employer match, the better. Getting an employer match contribution is essentially like getting free money.

2. Robo-Advisor Investing

If you know you’re meant to be investing, but you’re not sure where you should get started, then a robo advisor could be exactly what you need. These tools are designed for people who want to make the most out of their cash in the long-term, but don’t want to learn much about investing.

Robo advisors cost very little to work with, compared to human advisors, and they can help you to open an account with virtually no minimum. These tools are excellent for beginners who want to start investing, because they don’t demand a lot of money or a great deal of background knowledge on your part.

Just keep in mind that this probably isn’t the kind of investing that you’ll want to do if you’re the kind of person who wants to control where every penny of your money goes by buying stocks individually.

3. Target Date Funds

Mutual funds are some of the most valuable investment opportunities for beginners, because they allow you to diversify your portfolio, without spending too much extra cash. Target-date mutual funds are particularly useful, because they automatically invest when keeping your retirement date in mind.

With target-date mutual funds, you get to tap into the benefits of having your cash in a bunch of different stocks and equities, for a minimal price. Depending on how far away your retirement date is, this investment strategy will help you to build plenty of cash for the future, without taking on an excessive amount of risk.

4. Index Funds

Index funds are very similar in nature to mutual funds. However, if you thought that getting involved with mutual funds was simple, then you’ll think of index funds as investing that’s almost on autopilot. Instead of hiring a professional manager for tracking and maintaining a portfolio of investments, index funds just track a market index, such as the S&P 500 for instance.

Index funds are a regularly recommended solution for beginners who don’t want to take a hugely active role in their investment strategy. These solutions take a passive approach to investing by tracking market indexes, rather than using professional portfolio management campaigns. This also means that you generally have a lower expense ratio to worry about.

5. Try Exchange Traded Funds

Finally, like index funds, Exchange Traded Funds are very easy for beginners to get involved with. These funds also track market indexes and take a passive approach to investing, and they come with much lower fees than you would expect from other investment opportunities, like mutual funds.

The biggest difference between index funds and exchange traded funds is that rather than using a minimum investment, ETFs are often traded throughout the day and purchased for a share price that can regularly fluctuate.

Because ETFs are traded just like a standard stock, brokers will often charge commissions to help you with buying and selling them. However, there are a lot of brokers on the market today that can give you access to ETFs without commissions too. It’s definitely worth doing your research to see what kind of low-fee options are available.