What’s the best way for you to start investing?

So you want to start investing. But when you’re bombarded with a multitude of investment platforms, it can be difficult to determine which type is right for you.

Do not worry. I’ll help you determine which approach to take based on your financial situation, investment goals and risk tolerance.

But above all.

Make sure you’re ready to start investing

Before you start investing, make sure you have a manageable budget and a reliable emergency fund. Most financial advisers recommend setting aside enough to cover at least six months of expenses to cover the unexpected.

You also need to make sure that you have eliminated high interest credit card debt. If you’re only making the minimum payments on your credit card balance, it might be tempting to use your disposable income to invest in the stock market.

Despite the occasional market decline, the S&P500 — considered a benchmark for the entire stock market — returns an average of 10% over the long term. This dwarfs the average interest rate on savings accounts by less than 2%.

But consider this: the average APR for a credit card is 15%. So work on overcoming this hurdle, and then your investment dollars can really take the lead.

Know your investment options

The investment universe is vast and growing. But there are a few choices that may work for beginners:

Shares: Stocks represent ownership shares in a company. Depending on the overall performance of that company, the stock price may go up or down throughout the day. Stock prices can range from pennies to hundreds of thousands of dollars. Due to its inherent volatility, investing heavily in stocks is generally recommended for investors with the risk capacity to withstand dips and the time horizon to recoup losses.

Obligations : Buying a bond basically means you are lending your money to a company or government that promises to pay you back plus interest. Bonds are generally low-risk investments. So, if you’re investing for the short term, it may be worth devoting an adequate portion of your portfolio to bonds. But remember: low risk usually means low returns.

Exchange Traded Funds (ETFs): An ETF is a basket of various stocks or bonds. You can buy shares of an ETF just like you would an individual stock. ETFs are known for their instant diversification, low fees and low costs.

Mutual fund : Like ETFs, mutual funds invest in a variety of stocks, bonds and other securities. But they don’t trade like stocks and ETFs. Most require a minimum investment, which can be around $1,000 or more.

Index funds: An index fund is a type of mutual fund that aims to track the performance of a stock market index like the S&P 500 or the Nasdaq. This strategy is known as passive management. Because index fund managers want to mimic the performance of a benchmark rather than outperform it, index funds tend to have lower fees than their actively managed counterparts.

So, now that you know a little about what’s out there, you can search for the right brokerage account.

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Online investment apps

If you’re a beginner, one of the easiest ways to start investing is to download a discounted investing app. Most require no minimum investment.

If you’re saving for retirement, you can open an Individual Retirement Account (IRA) or Roth IRA. But if you’re saving for the short term, you can also open a taxable brokerage account. You can withdraw funds from these accounts at any time without penalty. But you may owe capital gains taxes.

Most of today’s popular investment platforms allow you to invest in a wide variety of stocks, ETFs, and options commission-free. So if you want to create and manage your own portfolio, online brokers offer an inexpensive way to do it.

Having patience and investing for the long term is generally best for most people. But if you want to try and be successful in day trading (and few people actually succeed), you have to know what you’re doing. Learn how to research stocks through techniques such as fundamental analysis and technical analysis.

Digital tools can help you do this. This is where some online brokers fail. Many don’t offer robust tools and platforms that can help you control stocks and ETFs.

More established brokerage firms may offer better solutions for your investment needs. Many portfolio management companies do not require a minimum investment to open a taxable brokerage account. And all the bells and whistles, like advanced stock filters and analysis tools, are free.

But if you don’t have time to spend all day looking at charts and tracking price movements, you can still be successful in investing. In fact, day trading is one of the hardest ways to try to make money in the stock market.


A robo-advisor is an investment management service that uses an algorithm to build and manage a diversified portfolio for you.

Here’s how it works: You take an online questionnaire about your financial situation, investment goals and risk tolerance. The robo-advisor then recommends a portfolio typically built with low-cost ETFs.

Because you won’t do any of the legwork, the company offering the robo-advisor may charge an asset management fee. But these are usually competitive at around 0.25%. Some brokerage firms may waive fees if your balance is below a certain threshold.

Additionally, many robo-advisors offer distinct features like automatic rebalancing. This means you won’t have to check your portfolio to make any necessary changes to your asset allocation. The robo-advisor does it for you.

Another common feature of robo-advisors is tax loss collection services. But the downside of robo-advisors is that you won’t be able to pick your own stocks. You are generally limited to a model portfolio built with ETFs or mutual funds.

The bottom line

Before you start investing, make sure you have a manageable budget, an emergency fund, and little or no high-interest debt. Once that’s cleared, you have a lot of options. If you want to analyze and pick your own stocks, consider an online investing app.

If you’re a decide-and-forget investor, a robo-advisor might come in handy. It builds and manages a wallet for you in exchange for a small fee. Online investing apps and robo-advisors can help the novice investor start building long-term wealth.

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