Beginner's Guide to Investing: How to Start Investing In 5 Easy Steps

beginner's guide to investing

Investing your money can be one of the best decisions of your life if you manage to pull the right strings. While it can be intimidating at first, it can also open a lot of doors for you, both in the present and especially in the future.

Learning the basics as a beginner will definitely save you time and money in the long run. Whether you’re just starting out your investment journey or looking for another source of income, we’re here to help!

Use this beginner’s guide to investing to help you get a grasp on your financial future. By the end of this guide, you will know:

  • How to begin investing
  • What you need to consider before investing
  • How to choose the right investments for you

 If you want to start your investment journey on the right foot, then keep reading!


Why Should You Start Investing?

The first step in this beginner’s guide to investing is to figure out why you should be investing in the first place. There are many advantages, but here are some of the main benefits that draw people in:


You Can Start Small

Investing doesn’t mean that you have to shell out a huge amount of money right away. The cost of your first investment is fully scalable and flexible, depending on what kind of company you decide to work with.

Contrary to popular belief, you can actually start investing in small costs. This allows you to cover your main expenses like rent and food while still having room for investments in your budget. 

You can do this by buying smaller units from small to mid-cap companies. This way, you can get a feel for how things work without jumping head first into something you aren’t financially prepared for.


High Returns for Your Investment

One of the main reasons why many people choose to invest is the high returns. Investing in stocks can make this happen much faster than other methods.

This is the point of investing, after all; you put your money into something and hope that your investment will be worth more in the future than what you put in.


Begin Building Your Wealth for the Future

There are many ways to make money through investing. The best part about it is that it’s likely that your wealth will only grow over time.


One of the most common ways that people make money through investing is by selling their stocks.


They often buy these stocks for a low price and sell them for a higher price. This is best done when the stock market value goes up, paving the way for profit growth within companies.

Investing also doubles as a stable source of income aside from your usual job. The earlier you start, the more you gain for your future.


Things to Consider Before Investing

While the benefits of investing are understandably exciting, before you actually begin, there are some steps you need to take to ensure that everything goes to plan. Before you start, here are some things you should consider checking on or doing:

  1. Research Before Anything Else: This is the most vital step to investing. You’re going to be putting your hard-earned money into something, after all, so you need to make sure that the investment will be well worth it in the long run.
    For example, let’s say that you’re thinking of buying shares in a certain company. Before working with them, you need to thoroughly research everything about them, such as their background, reputation, and current staff.
    Make sure that you’re buying from a trusted and stable company. Otherwise, you may end up losing more than you gain.
  2. Set Up an Emergency Fund: While investing is a great way to work toward a good future, keep in mind that it may also have its setbacks. After all, investing has its risks.
    Make sure that you have something to fall back on if things don’t go to plan. Set some money aside and begin building an emergency fund as you start investing. This will function as a financial insurance so you can rest assured that you can get back on your feet if your investments go downhill.
  3. Minimize Your Debts: You only want to jump into investing once you’ve cleared most, if not all, of your debts. Once you settle your loans, you can fully commit to investing.
    Think of it this way: You may be earning extra from investing, but if you owe the same or a larger amount to your debt, then you’re technically not earning anything at all.
    If you plan on investing to secure your future, then you should pay off your loans first. This way, you’ll be able to fully enjoy the profit growth and results that you generate.


Beginner’s Guide to Investing: Where to Start

Now that you’ve done the necessary research and properly prepared yourself to begin, it’s time to get down to business. So, what do you need to do to start investing?


1. Opening Your Brokerage Account

Opening your brokerage account is a quick and easy process, seeing as everything can be found online. There is a wide selection of online platforms you can choose from.

Below are some key things that you should be looking into before you choose a platform to open your account:

  • Is this platform safe and secure? What kind of features does it offer to secure your account?
  • How much is the commission fee? What other kinds of fees do you need to pay?
  • What are they offering? Is this the best you can find, or do you think there are better options elsewhere?

Don’t be afraid to dig deeper or contact a representative from the platform; ask as many questions as you want and find out as much as you can.

After all, you want to make sure that you are entrusting your hard-earned money to a secure and trustworthy platform that will support your growth, not hinder it.


2. Understand the Different Ways of Investing

Investment is a broad term that covers several categories. This means that you’ll have a flexible list of options to choose from to match your needs and budget.

Here are some of the most common options:

  1. Stocks: These essentially mean that you acquire ownership over a portion of the company you’re working with. You can invest for as low as $5 thanks to services that offer fractional shares like Stash.
    When you invest in a company’s stocks, you may also gain privileges like voting power over the company’s business decisions.
  2. Mutual Funds: in a way, Mutual Funds can be considered a collective form of several investment types. You can purchase both stocks and bonds in one go, reducing the risk of investing by creating opportunities for diversification across several industries and financial instruments.
  3. Bonds: Bonds are a type of loan, except in this case, you are the lender. Your investment comes in the form of loans for companies or organizations. Your profit grows through interest as they pay back what they owe you.
  4. Exchange-Traded Funds: This is also a great and cost-efficient option for investment. It’s similar to a mutual fund, seeing as investments are grouped together. However, the minimum cost for Exchange-Traded Funds is lower than that of mutual funds, which is ideal for beginners.


3. Set Your Budget

How much are you willing to invest? It’s good to figure this out ahead of time.

While setting your budget, there are many things to keep in mind:

  • Are you still paying off any debts, like student loans or credit cards?
  • How much do you make in a month? 

Your decision ultimately depends on you. However, your investments should be made while keeping in mind what you want and your current financial situation.

As mentioned before, you don’t have to start investing large amounts right away. You can turn to fractional share services for lower rates or find a small to mid-cap company to work with.

If you have the capacity to invest larger amounts, then it’s completely fine! Just make sure that you’re considering all factors that play into your investment, such as platform fees and risk factors.


4. Seek Help from a Financial Advisor

This beginner’s guide to investing has covered most of the basic things you need to know before you invest. However, if you want to lean on the expertise of a professional, you can hire a financial advisor.


Financial Advisors are a great help when you’re just starting out. They help you set your goals, weigh your options, and figure out the next best step in your investment journey.


You will have to pay for their services, but the assistance they offer can contribute greatly to both your investments and your knowledge about the process.

You can also consider consulting a Robo-Advisor, which is essentially an automated assistant that is able to perform most of the tasks that a financial advisor would fulfill.

The popularity of Robo-Advisors has continued to grow steadily over the years; in fact, current trends suggest that Robo-Advisors will generate over 500 million users by the end of 2026.

Whether you’re more comfortable with a human guide or an automated assistant, hiring a financial advisor can save you from several mistakes and lead you down the right path with your investments.


5. Making the Right Decisions for Your Investments

How can you tell if an investment will be worth it in the long run? Since the market changes over time, it can be hard to determine how much you stand to make or lose.

However, there are ways in which you can identify whether you’re putting your money in the right place or not. This is why it’s important to invest in something you understand.

Research is an important part of figuring out where to invest your money. If you can’t understand how a certain company or product works, then it’s best to find other options.

Regardless of the product or company’s potential or current success, you will inevitably run into some difficult situations if you invest in something you have no idea about.

While researching, try to find answers to the following questions:

  • Is the success of this product sustainable
  • Can you see it dwindling as trends come and go?
  • Is it worth the amount that you’re investing?


Start Investing Today!

Investing is a great opportunity to earn an extra source of income. Even the smallest amounts can generate high returns as long as you invest in the right companies and make wise decisions.

Whether you’re managing your own investments or asking for help from a financial advisor, having the necessary knowledge about investment can grow your profits and help you secure your future.

When in doubt, you can always check this beginner’s guide to investment to help you out!


About 121 Financial Credit Union

When you have a reliable and trustworthy credit union on your side, moving forward with your investment journey is seamless and easy. We at 121 Financial Credit Union are always ready to help you with your financial needs in any way we can!

Our team is composed of seasoned professionals that have years of experience in the field. Rest assured that we have the necessary expertise to help you through any situation.

Whether you are looking for more tips and tricks about investing or seeking other financial services, we’ve got you covered. Feel free to visit our Financial Learning Center or contact us for more information.

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