{"id":12973,"date":"2025-04-04T21:05:19","date_gmt":"2025-04-04T21:05:19","guid":{"rendered":"https:\/\/finderica.com\/?p=12973"},"modified":"2025-04-04T21:05:19","modified_gmt":"2025-04-04T21:05:19","slug":"complete-guide-to-getting-started","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=12973","title":{"rendered":"Complete Guide to Getting Started"},"content":{"rendered":"\n<div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"lazyload clicker_number\" style=\"position: absolute; height: 1px; width: 100%\" alt=\"ScoreCard Research\" data-count=\"104.245.38.58,104.245.38.58, 108.162.245.56\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\"><\/p>\n<p>You\u2019ve probably heard that <a href=\"https:\/\/partners.thepennyhoarder.com\/1000-checking-prt\/\" target=\"_blank\" rel=\"noopener\">investing<\/a> is one of the best ways to put your money to work.<\/p>\n<p>But if you\u2019ve never put money in the stock market, the prospect can be overwhelming to say the least.<\/p>\n<p>What investments should you choose? How much money does it take to get started? And what kind of account is right for you?<\/p>\n<p>We\u2019ll explore different types of investments, including stocks, bonds, mutual funds, certificates of deposit and retirement savings plans like 401(k)s.<\/p>\n<p>We\u2019ll also discuss where to actually invest your money, such as tax-advantaged investment accounts, robo-advisors and online brokers.<\/p>\n<p>Finally, we\u2019ll detail some key concepts and strategies to guide you on your investing journey.<\/p>\n<p>Investing for beginners doesn\u2019t have to be complicated. Here\u2019s how to get started.<\/p>\n<div class=\"adBorder\" id=\"thepe-1692094628\">\n<h3>Is Your Bank Holding You Back?<\/h3>\n<p>Got $1,000 in checking? These\u00a0<a href=\"https:\/\/partners.thepennyhoarder.com\/1000-checking-account-make-4-moves-prt\/?aff_id=384&amp;aff_sub3=1000-checking-account-make-4-moves-prt\/&amp;aff_sub4=191809\" target=\"_blank\" rel=\"noopener\">smart moves<\/a> could help you reach your next big savings goal. <\/p>\n<\/div>\n<h2>What Should I Invest In? 5 Types of Investments for Beginners<\/h2>\n<p>Investing is a way to build wealth by purchasing assets that you anticipate will grow in value over time.<\/p>\n<p>There are many different investment vehicles. Each carries its own potential risk and reward.<\/p>\n<h2>5 Best Investments for Beginners<\/h2>\n<ul>\n<li aria-level=\"1\">Stocks<\/li>\n<li aria-level=\"1\">Bonds<\/li>\n<li aria-level=\"1\">Mutual funds<\/li>\n<li aria-level=\"1\">Exchange-traded funds (ETFs)<\/li>\n<li aria-level=\"1\">Certificates of deposits (CDs)<\/li>\n<\/ul>\n<p>Below, we\u2019ve gathered all the important information on the five best investments for beginners so that you can make the best choice for your financial situation.<\/p>\n<h3>Stocks<\/h3>\n<p>When you invest in stocks, you\u2019re essentially buying a small ownership share of a company \u2014 and its profits.<\/p>\n<p>The earning power of a company drives its long-term stock price \u2014 for better or worse. Stock prices can be impacted by factors inside the company, like strong quarterly profits or poor revenue, and by events outside the company\u2019s control, like political turmoil or a broad economic recovery.<\/p>\n<p>You can make money from stocks in two ways:<\/p>\n<ul>\n<li aria-level=\"1\"><b>Your shares increase in value.<\/b> If the company\u2019s outlook is good, other investors will be willing to pay more money for your shares than you originally paid.<\/li>\n<li aria-level=\"1\"><b>The company pays you a dividend. <\/b>This means the company distributes part of its profit back to shareholders. (That\u2019s you.) Smaller companies issue dividends less frequently than larger ones.<\/li>\n<\/ul>\n<p>Shareholders are vulnerable to loss if things don\u2019t go as well as hoped. If the company loses money, your shares may lose value. Thus, when you buy stocks, you\u2019re making a relatively high-risk investment.<\/p>\n<p>Despite that risk, one of the most common beginning investor mistakes is selling shares in reaction to the daily news cycle. Constantly checking stock prices or tweaking your investments can lead to impulsive \u2014 and costly \u2014 decisions to sell.<\/p>\n<p>For the average investor, you\u2019re better off investing in stocks long term. Historically, the average annual stock market return is 10%. Keeping your money invested allows you to weather the stock market\u2019s unpredictable ups and downs. As long as you don\u2019t sell when stocks are low, you won\u2019t actually lose money.<\/p>\n<p>Remember: Investing involves risk. However, you can offset the risk of owning individual stocks by purchasing multiple shares of different publicly traded companies and of companies across different sectors.<\/p>\n<p>For example, don\u2019t invest in only tech companies. Diversify with investments in energy, pharmaceutical and transportation companies.<\/p>\n<p>Investing in other assets like bonds is another way to help mitigate the risky nature of stocks while still profiting from their high returns.<\/p>\n<h3>Bonds<\/h3>\n<p>Bonds are debts issued by corporations or, more commonly, governments.<\/p>\n<p>When you invest in bonds, you\u2019re lending money to the bond issuer.<\/p>\n<p>Investing in the bond market provides a reliable return because bonds pay fixed interest payments at fixed intervals, often twice a year. That\u2019s why they\u2019re known as fixed income investments.<\/p>\n<p>Because bond issuers are legally obligated to repay their debts, bonds are considered safer than stocks. However, bonds don\u2019t have the growth potential that stocks do.<\/p>\n<p>The lowest-risk bonds are issued by the U.S. Treasury, such as I bonds. Municipal bonds, which are issued by state and local governments, are slightly riskier.<\/p>\n<p>Investing in Treasuries and municipal bonds also comes with tax breaks: You don\u2019t pay federal income tax on the interest you earn from municipal bonds, and the interest you earn on Treasuries isn\u2019t taxed by states.<\/p>\n<p>Lower risk and tax advantages are two reasons people often shift their asset allocation toward bonds as they near retirement. Bonds are a safe choice if you don\u2019t have much time to bounce back from market losses.<\/p>\n<p>Investing in corporate bonds is riskier than investing in government bonds. The safest corporate bonds are called investment-grade bonds, and the riskiest bonds are called junk bonds.<\/p>\n<p>Because investors assume a high level of risk when they buy junk bonds, they earn higher interest rates.<\/p>\n<div class=\"call-out-box\" data-post-id=\"108541\">\n\t\t\t\t\t\t<span class=\"call-out-box-description\">Still unsure about the difference between stocks and bonds? We&#8217;ll explain.<br \/>\n<\/span><\/div>\n<figure id=\"attachment_142169\" style=\"width: 1024px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" fetchpriority=\"high\" loading=\"lazy\" fetchpriority=\"high\" decoding=\"async\" class=\"lazyload size-large wp-image-142169\" src=\"https:\/\/www.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/investing_beginners-final-1024x683.jpg\" alt=\"In this illustration, a woman waters a tree that is growing money.\" width=\"1024\" height=\"683\" srcset=\"https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/24115736\/investing_beginners-final-1024x683.jpg 1024w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/24115736\/investing_beginners-final-360x240.jpg 360w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/24115736\/investing_beginners-final-768x512.jpg 768w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/24115736\/investing_beginners-final-100x67.jpg 100w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/24115736\/investing_beginners-final-222x148.jpg 222w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/24115736\/investing_beginners-final-314x209.jpg 314w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/24115736\/investing_beginners-final-363x242.jpg 363w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/24115736\/investing_beginners-final-467x311.jpg 467w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/24115736\/investing_beginners-final-649x433.jpg 649w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/24115736\/investing_beginners-final-750x500.jpg 750w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/24115736\/investing_beginners-final-793x529.jpg 793w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/24115736\/investing_beginners-final-300x200.jpg 300w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/24115736\/investing_beginners-final.jpg 1200w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\"><figcaption class=\"wp-caption-text\"> Getty Images<\/figcaption><\/figure>\n<h3>Mutual Funds<\/h3>\n<p>A mutual fund is a prebuilt collection of stocks and sometimes bonds. You are essentially buying small pieces of many different assets with a single share purchase \u2014 without all the footwork to research and buy individual stocks and bonds yourself.<\/p>\n<p>Typically, a mutual fund is designed and managed by financial professionals. However, some mutual funds are index funds, which means their makeup and performance are tied to a market index, like the S&amp;P 500 or the Dow Jones Industrial Average. We\u2019ll talk more about index funds when we discuss ETFs.<\/p>\n<p>A minimum investment can range from $500 to $3,000, though some offer a minimum investment of $100 or less.<\/p>\n<p>Mutual funds can be a good option for new investors because they offer convenience, instant diversification and access to professional money managers.<\/p>\n<p>It\u2019s important to keep in mind that actively managed funds carry fees. After all, you\u2019re paying someone else to do the work for you.<\/p>\n<p>While some mutual fund managers achieve impressive short-term gains, research shows that these funds struggle to consistently outperform the broader market over time.<\/p>\n<h3>Exchange-Traded Funds (ETFs) and Index Funds<\/h3>\n<p>Exchange-traded funds and index funds are similar to mutual funds in that each is a basket of different investment assets.<\/p>\n<p>One key difference: ETFs and index funds aren\u2019t actively managed by a live human being. Instead, these investments are passively managed.<\/p>\n<p>Index funds and ETFs are often used interchangeably. That\u2019s because many ETFs track a market index.<\/p>\n<p>The only big difference between the two is how they\u2019re traded. You can buy and sell an ETF throughout the day, while you can only trade an index fund at the price point set at the end of the trading day.<\/p>\n<p>Because they are passively managed, ETFs carry low fees. According to Investopedia, <a href=\"https:\/\/www.investopedia.com\/ask\/answers\/032715\/when-expense-ratio-considered-high-and-when-it-considered-low.asp\" target=\"_blank\" rel=\"noopener\">an expense ratio<\/a> of 0.5% to 0.75% for an actively managed portfolio is reasonable while you can expect a ratio of 0.12% for passive funds.\u00a0 Many ETFs seek to replicate the performance of the overall stock market or a major stock index.<\/p>\n<p>Many ETFs seek to replicate the performance of the overall stock market or a major stock index.<\/p>\n<p>Other ETFs are collections of companies in the same industry or geographic area. For example, Vanguard\u2019s International Equity Index ETF (VSS) tracks major non-U.S. companies, while the Health Care Select Sector SPDR Fund ETF (XLV) tracks U.S. health care companies like Johnson &amp; Johnson and Pfizer.<\/p>\n<p>ETFs can also focus on companies of a similar size and market share. Vanguard\u2019s Small Cap Value ETF (VBR), for example, includes companies with a market capitalization between $300 million and $2 billion.<\/p>\n<div class=\"adBorder\" id=\"thepe-2001026739\">\n<h3>Need Some Quick Cash?<\/h3>\n<p>If you\u2019re looking to boost your income this month, we\u2019ve got just the thing for you.<\/p>\n<p>From quick gigs to smart side hustles, check out <a href=\"https:\/\/partners.thepennyhoarder.com\/50-ways-sdyn-prt\/?aff_id=384&amp;aff_sub3=50-ways-sdyn-prt\/&amp;aff_sub4=191813\" target=\"_blank\" rel=\"noopener\">these 50 easy ways to make a quick buck<\/a> \u2014 there\u2019s something for everyone.<\/p>\n<\/div>\n<h3>Certificates of Deposit (CDs)<\/h3>\n<p>CDs, or certificates of deposit, are among the lowest-risk investments. You agree to let a bank or financial institution hold onto your money in exchange for a guaranteed interest rate.<\/p>\n<p>CDs have a fixed term length and a maturity date. You lock funds in a CD for a certain time, usually three months to five years. You\u2019ll face a penalty for withdrawing funds early. After the term ends, you\u2019ll get your initial investment back, plus interest.<\/p>\n<p>Because the risk is low, so is the reward. CD rates may earn only slightly more interest than high-yield savings accounts.<\/p>\n<p>CDs aren\u2019t a good option for growth, but they are a good way to earn interest safely, especially when the federal interest rate is high.<\/p>\n<h2>How Much Money Should a Beginner Investor Start With?<\/h2>\n<p>One of the biggest misconceptions about investing is that you need thousands of dollars to get started.<\/p>\n<p>That simply isn\u2019t true. Some investing apps let you begin investing in the market with as little as $1.<\/p>\n<p>For new investors, it\u2019s more important to start as early as possible. Starting small is always better than not starting at all.<\/p>\n<p>If you\u2019re right out of college or working a low-paying job, you may not have much money left over to invest. Over time, you can invest more money, diversify your holdings and build a strong portfolio. For example, you can step up your 401(k) contributions at work after every raise.<\/p>\n<p>It\u2019s also important to build an emergency cash savings fund before you start investing. You don\u2019t want to use money you\u2019re saving for your future for unexpected costs like a sudden job loss or car repairs.<\/p>\n<h2>Where Do I Start Investing?<\/h2>\n<p>The best place to start investing depends on your financial goals, as well as how much money you can afford to invest.<\/p>\n<p>But if you don\u2019t have a few thousand dollars lying around, don\u2019t worry. There are plenty of avenues to get into the market, including online brokers, robo-advisors and retirement savings plans.<\/p>\n<figure id=\"attachment_153506\" style=\"width: 1200px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" loading=\"lazy\" decoding=\"async\" class=\"lazyload size-full wp-image-153506\" src=\"https:\/\/www.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/retirement_plan-final.jpg\" alt=\"Two cubicle workers push each other on a chair down the hallway at their office. \" width=\"1200\" height=\"800\"><figcaption class=\"wp-caption-text\"> Getty Images<\/figcaption><\/figure>\n<h3>Your Employer\u2019s Retirement Plan<\/h3>\n<p>If your employer offers a 401(k), contributing part of your wages should be step one. If it includes an employer match, be sure to contribute the level needed to qualify. It\u2019s essentially free money for your future.<\/p>\n<p>It\u2019s smart to start contributing to a retirement investment account as soon as possible. The longer you wait, the more you\u2019ll have to play catch-up later.<\/p>\n<p>Traditional 401(k) plans offer favorable tax treatment from the federal government. Your money is invested pre-tax, and grows tax-deferred until you withdraw funds.<\/p>\n<p>Your 401(k) plan will likely offer a handful of investment choices based on your target retirement date, mostly mutual funds and ETFs. You typically can\u2019t use your 401(k) to invest in individual stocks and bonds.<\/p>\n<h3>Roth or Traditional IRA<\/h3>\n<p>If you don\u2019t have access to a 401(k) at work \u2014 and even if you do \u2014 you can open an individual retirement account (IRA) with a financial institution or online broker to work toward building an even bigger nest egg.<\/p>\n<p>IRAs come with more investment choices than 401(k)s, including individual stocks and even alternative investments.<\/p>\n<p>Most people can choose between a Roth or traditional IRA.<\/p>\n<p>With a traditional IRA, all your dollars go into the account tax-free, but you pay taxes on the backend when you withdraw funds.<\/p>\n<p>Meanwhile, a Roth IRA withholds taxes when you deposit money at the beginning but offers you tax-free withdrawals on the backend.<\/p>\n<p>Contributions to a traditional IRA qualify as a deduction on your yearly tax bill. Contributions to a Roth retirement account do not.<\/p>\n<p>While you can open an IRA through either a bank or a brokerage firm, we suggest going with a brokerage. Bank IRAs are usually limited to super-conservative investment options, like CDs. Opening an IRA with a brokerage firm will give you access to a full array of investments.<\/p>\n<h3>Taxable Brokerage Account<\/h3>\n<p>With a few exceptions, money in your retirement accounts is off limits until you turn 59.5. You\u2019ll face a 10% tax penalty from the Internal Revenue Service if you withdraw funds earlier.<\/p>\n<p>If you plan to tap your investments before retirement, opening a taxable brokerage account may be a good option.<\/p>\n<p>You don\u2019t get the tax benefits of a retirement plan, but you get a lot more flexibility with this type of investment account. Capital gains tax is assessed differently, depending on how long you own a stock.<\/p>\n<p>If you sell a stock you\u2019ve owned for less than a year, the profit will be subject to the short-term capital gains tax rate. Stocks owned for a year or more are taxed at a typically lower long-term capital gains rate.<\/p>\n<p>It\u2019s also important to keep in mind that some brokerage services aren\u2019t free. If you want a professional to manage your account, for example, you\u2019ll pay for this service.<\/p>\n<p>Here are some brokerage fees to be aware of.<\/p>\n<p><b>Trade Commission\u00a0<\/b><\/p>\n<p>Also known as trading costs, this fee is applied when you buy or sell stocks. Trading costs are becoming rare, and many discount brokers offer commission-free trading, including TD Ameritrade, Charles Schwab, Merrill Edge and Robinhood.<\/p>\n<p><b>Mutual Fund Transaction Fee\u00a0<\/b><\/p>\n<p>This fee applies when you buy and\/or sell a mutual fund.<\/p>\n<p><b>Expense Ratio\u00a0\u00a0<\/b><\/p>\n<p>This annual fee is charged by mutual funds, index funds and ETFs as a percentage of your investment in the fund.<\/p>\n<p><b>Management or Advisory Fee\u00a0<\/b><\/p>\n<p>This fee is usually a percentage of assets under management and is paid to financial advisors or robo-advisors.<\/p>\n<p>If you\u2019re a new investor, look for discount brokers with low minimum investment requirements and access to tailored investment advice.<\/p>\n<h3>Robo-Advisors<\/h3>\n<p>A robo-advisor is a type of online investment account that automates stock investing for you. It can be a great option for new investors because robo-advisors charge low fees and take the guesswork out of building a diverse portfolio.<\/p>\n<p>Robo-advisors \u2014 such as <a href=\"https:\/\/www.betterment.com\/\" target=\"_blank\" rel=\"noopener\">Betterment<\/a> and <a href=\"https:\/\/www.wealthfront.com\/\" target=\"_blank\" rel=\"noopener\">Wealthfront<\/a> \u2014 are online brokers that use computer algorithms and advanced software to build and manage your investments. There are typically five to 10 pre-made portfolio choices, ranging from conservative to aggressive.<\/p>\n<p>After you create an account, you\u2019ll be prompted to complete a questionnaire designed to evaluate your income, age, financial goals and risk tolerance.<\/p>\n<p>From there, the robo-advisor picks the right portfolio for you. You can choose a different one if you disagree with the algorithm, but you typically can\u2019t select the individual investments inside your investment portfolio.<\/p>\n<p>Robo-advisor portfolios are mostly made of low-cost index fund ETFs and sometimes other investments, like cryptocurrency.<\/p>\n<p>Robo-advisors let you choose between a taxable brokerage account or an IRA \u2014 and they\u2019ll help you choose the right account type for you.<\/p>\n<p>Most robo-advising companies charge annual management fees that range between 0.25% and 0.50%. Most robos accept account minimums of $500 or less.<\/p>\n<h3>Investment Apps<\/h3>\n<p>Only have a few bucks to spare? A micro-investing app may be a good option.<\/p>\n<p>Apps like <a href=\"https:\/\/www.stash.com\/\" target=\"_blank\" rel=\"noopener\">Stash<\/a> and <a href=\"https:\/\/t.thepennyhoarder.com\/aff_c?offer_id=2412&amp;aff_id=2\" rel=\"nofollow noopener\" target=\"_blank\">Acorns<\/a> make investing for beginners easier than ever.<\/p>\n<p>Investment apps are robo-advisors that let you start investing with as little as $5. Acorns and Stash invest your money into a custom ETF portfolio based on your age and personal risk tolerance.<\/p>\n<p>You can also set up regular, automatic contributions, which will fuel your portfolio\u2019s growth over time.<\/p>\n<p>In general, Stash is a good option for beginner investors who want a more DIY hands-on approach because the app allows you to select your own stocks and ETFs.<\/p>\n<p>Acorns tends to be a better fit for people looking for a more passive, automated experience because the app doesn\u2019t allow you to invest in specific securities.<\/p>\n<figure id=\"attachment_153503\" style=\"width: 1200px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" loading=\"lazy\" decoding=\"async\" class=\"lazyload size-full wp-image-153503\" src=\"https:\/\/www.thepennyhoarder.com\/wp-content\/uploads\/2019\/02\/investing_beginners-final-1.jpg\" alt=\"A woman with tattoos sits at a skate park. \" width=\"1200\" height=\"800\"><figcaption class=\"wp-caption-text\"> Getty Images<\/figcaption><\/figure>\n<div class=\"adBorder\" id=\"thepe-1414760166\">\n<h3>Can You Survive 10 Days of Budgeting?<\/h3>\n<p>If you need to wrangle your budget, it may be time to consider a savings challenge. Our\u00a0<a href=\"https:\/\/partners.thepennyhoarder.com\/organize-your-finances-prt\/?aff_id=384&amp;aff_sub3=organize-your-finances-prt\/&amp;aff_sub4=191763\" rel=\"false noopener\" target=\"_blank\">10-Day Savings Challenge<\/a>\u00a0will teach you how to make your money work for you with a high-yield savings account, stop overpaying on Amazon, earn money for trying out apps or watching movie previews and more.<\/p>\n<p><a href=\"https:\/\/partners.thepennyhoarder.com\/organize-your-finances-prt\/?aff_id=384&amp;aff_sub3=organize-your-finances-prt\/&amp;aff_sub4=191763\" target=\"_blank\" rel=\"noopener\">Start saving now<\/a>!<\/p>\n<\/div>\n<h2>Investing for Beginners: 4 Basic Strategies to Know<\/h2>\n<p>Now that you\u2019ve got the lowdown on your investment options, here are a few more things you need to know before you start investing.<\/p>\n<p>Since<i> all<\/i> investments involve some risk, it\u2019s imperative to be prepared and informed about how to mitigate those risks.<\/p>\n<h3>1. Maximize the Magic of Compounding Interest<\/h3>\n<p>The power of compounding interest can turn even modest savings into a sizable nest egg over time.<\/p>\n<p>If you saved $100 a month and tucked it under your mattress, you\u2019d have $36,000 in 30 years.<\/p>\n<p>But if you invested that same $100 a month and averaged an 8% return per year, you would end up with more than $140,000 after 30 years.<\/p>\n<p>Compounding occurs when the interest you earn on your money builds on itself like a snowball effect.<\/p>\n<p>To maximize this compounding magic, you need to invest early and consistently. Making smaller contributions at an earlier age gives you a leg-up over someone who gets a late start \u2014 even if that person invests a lot of money at once.<\/p>\n<p>If you start investing in your 30s or 40s, you can still benefit from compounding interest by simply letting your money grow. Avoid cashing out early so that your snowball of interest can gain momentum.<\/p>\n<h3>2. Diversification<\/h3>\n<p>Perhaps the most important investment strategy is diversification. A diversified portfolio means you have a wide range of assets, including different asset classes, companies, locations and industries.<\/p>\n<p>Why is diversification and asset allocation so important? Well, it\u2019s just like that old saying about not putting all your eggs in one basket.<\/p>\n<p>If one of the companies you own stock in goes under, for instance, you won\u2019t be as adversely affected if your money is spread across other companies and industries.<\/p>\n<p>It\u2019s also wise to diversify across asset classes by owning a mix of stocks, bonds and even alternative investments like real estate.<\/p>\n<p>ETFs and index funds are popular among new investors because they offer immediate diversification.<\/p>\n<h3>3. Understand Your Time Horizon<\/h3>\n<p>Your time horizon is how long you plan to hold an asset. Time horizons can range from a few months to several decades, depending on your goals.<\/p>\n<p>Understanding your own time horizon \u2014 and investing goals \u2014 can help you pick the right investments.<\/p>\n<p>If you\u2019re young and investing for retirement, your time horizon is long. You can be more aggressive with your portfolio by investing in riskier securities, like stocks, because you have more time to recover from volatility and loss.<\/p>\n<p>While stocks can be volatile in the short term, over time, they historically outperform other investments. If you don\u2019t need access to your money anytime soon, consider stocks, ETFs and index funds for long-term growth.<\/p>\n<p>However, if you need to tap your money within the next three years, you shouldn\u2019t invest it in stocks. You\u2019re better off putting your money in a CD, money market account or high-yield savings account.<\/p>\n<p>That\u2019s because shorter time horizons give you less wiggle room to bounce back from market losses. If you need money for a down payment in two years, you don\u2019t want a sudden crash to derail your plans.<\/p>\n<p>Likewise, many financial experts recommend shifting your portfolio to less risky investments as you near retirement because your time horizon is shorter.<\/p>\n<h3>4. Risk Tolerance<\/h3>\n<p>Risk tolerance is the amount of volatility an investor is willing to stomach. It\u2019s sometimes referred to as your \u201csleep at night factor.\u201d<\/p>\n<p>In other words, how much risk are you willing to take within your portfolio before the thought of losing money keeps you up at night?<\/p>\n<p>Generally, younger investors are encouraged to take more risk and create aggressive portfolios. Investors nearing retirement, on the other hand, are encouraged to switch to safer securities like bonds to preserve their money.<\/p>\n<p>However, it\u2019s important to consider how market changes impact you on an emotional level. You can be in your 20s and still stress out when the market drops. Or you might be near retirement but still comfortable day trading.<\/p>\n<p>You can score your personal investment risk tolerance using this empirically tested <a href=\"https:\/\/pfp.missouri.edu\/research\/investment-risk-tolerance-assessment\/\" target=\"_blank\" rel=\"noopener\">risk tolerance assessment tool<\/a> developed by two university financial planning professors.<\/p>\n<p>Speaking with a financial adviser is one way to offset some of the anxiety many new investors face. Trained professionals can provide valuable insight<\/p>\n<h2>Frequently Asked Questions (FAQ)<\/h2>\n<p>Still have questions? Check out our answers to the most frequently asked questions about investing.<\/p>\n<div class=\"irc-faq-container\" itemscope=\"\" itemtype=\"https:\/\/schema.org\/FAQPage\">\n<div class=\"irc-faq-section\" itemscope=\"\" itemprop=\"mainEntity\" itemtype=\"https:\/\/schema.org\/Question\">\n<div class=\"irc-toggle-section\">\n<p>How Can I Learn How to Invest? <\/p>\n<\/div>\n<\/div>\n<div class=\"irc-faq-section\" itemscope=\"\" itemprop=\"mainEntity\" itemtype=\"https:\/\/schema.org\/Question\">\n<div class=\"irc-toggle-section\">\n<p>How Much Should a Beginner Investor Start With? <\/p>\n<\/div>\n<div class=\"irc-answer\" itemscope=\"\" itemprop=\"acceptedAnswer\" itemtype=\"https:\/\/schema.org\/Answer\">\n<div itemprop=\"text\">\n<p><span style=\"font-weight: 400;\">The exact amount that a beginning investor should invest is dependent on salary, savings and risk tolerance. While we don\u2019t see the exact dollar amount as important, what is important is to start now! In fact, it\u2019s worth it to start <\/span><span style=\"font-weight: 400;\">investing even just $5<\/span><span style=\"font-weight: 400;\"> if it gets you growing your money.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Figure out what you can afford now and keep adding to it over time to see the benefits of long-term investing.<\/span><\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"irc-faq-section\" itemscope=\"\" itemprop=\"mainEntity\" itemtype=\"https:\/\/schema.org\/Question\">\n<div class=\"irc-toggle-section\">\n<p>What\u2019s the Difference Between Passive and Active Investing? <\/p>\n<\/div>\n<div class=\"irc-answer\" itemscope=\"\" itemprop=\"acceptedAnswer\" itemtype=\"https:\/\/schema.org\/Answer\">\n<div itemprop=\"text\">\n<p><span style=\"font-weight: 400;\">Active investing is a hands-on approach to investing that involves buying and selling to try to beat the market. Passive investing is less reactive to the market and focuses on long-term investment income.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In other words, if you are an active investor, you are watching the market closely and making regular changes. Passive investing is more of a hands-off approach, like with a 401(k) plan.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Basically, through active monitoring, an active investor will try to predict the highs and lows of the market and then move money around to maximize its growth. Because of this, active investing tends to have higher fees and higher risks. But, these risks also bring the possibility of higher rewards.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Passive investing is more focused on the long run, usually relying on the fact that the market (and thus your money) will trend upward given enough time. Because there is significantly less active monitoring, passive investing tends to have lower fees. It also has less risk, but this sometimes comes with lower margins of growth. <\/span><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<p><i>Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The SS. She focuses on investing, retirement, taxes and life insurance.\u00a0<\/i><\/p>\n<p><i>Jamie Cattanach contributed reporting.<\/i><\/p>\n<p>        <!-- ACF Financial Disclaimer --><\/p>\n<p>        <!-- End ACF Financial Disclaimer --><\/p>\n<p>        <!-- Newsletter Signup Form --><\/p>\n<hr>\n<hr>\n<div class=\"mobile-ad-units\">\n<div class=\"unit\">\n<p>                        <img loading=\"lazy\" width=\"486\" height=\"437\" src=\"https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2025\/03\/18125533\/cards-dark.jpg\" class=\"attachment-full size-full\" alt=\"\" decoding=\"async\" loading=\"lazy\" srcset=\"https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2025\/03\/18125533\/cards-dark.jpg 486w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2025\/03\/18125533\/cards-dark-360x324.jpg 360w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2025\/03\/18125533\/cards-dark-300x270.jpg 300w\" sizes=\"auto, (max-width: 486px) 100vw, 486px\">\n                                <\/div>\n<div class=\"unit\">\n                                    <a href=\"https:\/\/t.thepennyhoarder.com\/aff_c?offer_id=7631&amp;aff_id=408\" target=\"_blank\" rel=\"sponsored noopener\" class=\"aff_id_override\"><br \/>\n                        <img loading=\"lazy\" width=\"486\" height=\"437\" src=\"https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2025\/03\/18125329\/auto-insurance-light.jpg\" class=\"attachment-full size-full\" alt=\"\" decoding=\"async\" loading=\"lazy\" srcset=\"https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2025\/03\/18125329\/auto-insurance-light.jpg 486w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2025\/03\/18125329\/auto-insurance-light-360x324.jpg 360w, https:\/\/cdn.thepennyhoarder.com\/wp-content\/uploads\/2025\/03\/18125329\/auto-insurance-light-300x270.jpg 300w\" sizes=\"auto, (max-width: 486px) 100vw, 486px\">                    <\/a>\n                                <\/div>\n<\/p><\/div>\n<div class=\"newsletter-signup-wrapper-for-digioh\">\n<div class=\"col-xs-12 newsletter-wrap flex-row\">\n<div class=\"container flex-container\">\n<div class=\"col-xs-12 new-newsletter-form\">\n<p class=\"text-subheading\">Ready to stop worrying about money?<\/p>\n<p class=\"text-get-daily\">Get the SS Daily<\/p>\n<p class=\"email-privacy-policy-blurb-white\">\n<\/p><\/div>\n<\/div><\/div>\n<\/p><\/div>\n<p>        <!-- End Newsletter Signup Form --><\/p><\/div>\n<p><a href=\"https:\/\/www.thepennyhoarder.com\/investing\/beginners-guide-to-investing\/\" target=\"_blank\" rel=\"noopener\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>You\u2019ve probably heard that investing is one of the best ways to put your money to work. 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