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Investing for Beginners: 7 Steps You Need To Get Started

Chaunie Brusie  |  June 25, 2024

Investing can be a daunting task, even for those who consider themselves financially savvy. Here are tips to get you started.

I consider myself to be a pretty financially savvy woman. When I was in high school, I spent an hour on the phone arguing to get a 10-cent charge removed from my cell phone bill. A few years ago I paid off all of my debt, and I’ve since prided myself on running a tight financial ship. But despite my prowess in saving and paying down debt, I have long overlooked one critical piece of building a solid financial foundation: investing. If there was an easy way to start investing for beginners, I didn’t know about it…and I was missing out. 

The truth is, it doesn’t matter how much debt I pay down, or how much I save on my bills if I’m not looking forward to the future — and, most importantly, taking advantage of compound interest that will add up to major gains. I’ve known for quite some time that I should be investing, but honestly, I have no idea where to start. And I’m willing to bet I’m not alone.

So instead of feeling ashamed that I — a strong and independent woman — have no clue about investing, I talked to experts about the steps to take to get started. Here’s what they said.

Drop the shame and guilt

Every financial expert I spoke to assured me that no woman should ever feel ashamed about asking for financial guidance or education, especially when it comes to investing for beginners. 

“A lot of women feel embarrassed that they don’t know how it works,” says financial coach Juliana Valverde. She reminds her clients that “we aren’t taught this in school.” And, just like any other skill, learning how to invest is something any woman can learn how to do effectively.

Julie Ford, a CPA and certified financial planner with Ford Financial Solutions in New York City, echoes this sentiment. She also stresses that fear surrounding investing isn’t limited to women.

“Generally, the apprehension I run into is a lack of confidence and feeling under-informed about how much to save and where,” she says. “Running out of money later in life is a big fear that crosses gender lines.”

Get Clear on Your Financial Goals

Before you invest, it’s important to think about exactly what you want to accomplish. Do you want enough to be able to retire at the age of 63? Need to pay for your child’s college? Maybe you just want to earn more interest than you’re currently getting from your savings account. Knowing what you want to achieve will help you choose the right kinds of accounts and investments.

“You want to identify what goals you have and when you want to accomplish them,” says Kyle Tank, a financial advisor at Ameriprise Financial. “This is important to identify because it will help you determine what to do with the money.”

Krystal Covington, founder and CEO of Women of Denver, says that in her work with women business owners, she has noticed that women are often hesitant to put their money in the stock market because they want cash on hand for their families. And that’s an understandable concern. Investing isn’t something that should make you uncomfortable. It can (and should) be something that works for you.

Get Your Other Ducks in a Row

You’ll want to take care of other financial priorities before you begin investing. Establish an emergency fund, pay down high-interest debt, and try your hand at budgeting. Once you’ve checked off those items, review any retirement plans you have through work. If your employer offers any matching, you’ll want to take advantage of that. After all, it’s basically free money!

Unsure about the terms of your company’s plan? Call your HR benefits coordinator or the financial institution that manages your company’s plan. Ask them to explain the plan to you in plain language.

Also, check to see if you have any investment accounts or securities that you’ve lost track of. It may sound silly, but people often let little investments trail behind them because the amounts seem too little to be worth the trouble. Whether it’s a retirement account from your first job or a Treasury bill your grandmother bought for you, get a handle on all your finances. Then, explore whether you want to consolidate or liquidate these assets in your new investing plan.

Learn a Few Key Terms

When it comes to investing for beginners, sometimes the jargon surrounding the topic can sound like a foreign language. But by brushing up on a few key terms, you can avoid feeling like you’re behind before you’ve even started.

Securities – A financial asset that can be bought or sold. This is the catch-all term for most investments you know, including stocks, bonds, money market instruments, and other assets.

Stock – A small piece of ownership in a corporation’s assets and earnings.

Bonds – A debt security. More simply, a bond represents a loan that you (the investor) have granted another entity (usually a corporation or branch of government) for a set period of time. Bonds pay a set interest rate.

Mutual fund – A type of investment in which multiple investors’ money is pooled to invest in a collection of stocks, bonds, money market instruments, or other securities. They are typically managed by money managers and are not sold directly on the open market, but instead through the fund manager or an intermediary. They are priced once a day.

Market index – Market indexes are designed to represent the overall performance of the stock market. Think of it as a baseline to how your portfolio should be performing. A common market index is the S&P 500.

Index fund – A mutual fund that’s designed to match the components and performance of a market index, like the S&P 500. Index funds typically have broad market exposure, carry less risk, and cost less, compared to more specialized funds. They are often well suited for beginner investors.

Exchange-traded fund (ETF) – Basically, a type of mutual fund that is sold on the direct market. An ETF is priced dynamically, throughout the day, like a stock. It is often managed to an index, so a fund can be both an exchange-traded fund and an index fund.

Portfolio – The collection of all of your investments. Your portfolio can be made up of stocks, bonds, exchange-traded funds, and/or mutual funds.

Consider Index Funds

Valverde often suggests index funds to her clients who are new to investing. These mutual funds typically have low minimum investment requirements, so you don’t need a lot of money to get started. They also typically charge low fees. 

You can invest directly with a fund company, or you can open an account with a financial company such as Charles Schwab or Fidelity. These firms offer features like automatic paycheck deduction and savings accounts, so even if you don’t yet have enough money to invest, you can easily start saving toward your goals. If you have an employer-sponsored retirement plan, you can open an account with that financial institution.

Hire a Fee-Only Advisor

If you’re in your 20s or 30s with no children and just have a little excess cash you want to invest, you can likely put together a solid investing plan on your own. Many sites offer online calculators and tools to help you make a plan. But, if your financial situation is more complicated or you just don’t feel comfortable going it alone, consider working with a financial advisor.

Some financial advisors earn a commission whenever they sell a new product to investors. So they have an incentive to sell a particular investment, whether or not it’s really the right solution for their clients.

For this reason, you’re better off working with a fee-only advisor. These professionals don’t work off commissions on their sales. Instead, they charge a fee directly to their clients. Check out professional organization sites like XY Planning Network or NAPFA to find a fee-only advisor in your area. 

It’s a smart idea to interview several in person and ask for references. A good financial advisor will respect your financial goals and help you identify appropriate solutions for your situation. Pay particular attention to how well the advisor listens to you and understands your goals and unique circumstances.

Just Get Started

Yes, investing for beginners can be overwhelming, and, yes, there are a lot of factors to consider. But don’t let these concerns paralyze you. The most important step you can take right now is to just start. Even investing a small amount of money can make a huge difference down the road.

Ford sums it up perfectly: “Small efforts matter.”

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