How To Start Investing Money For The First Time

Learning how to invest money may be daunting, but it is simpler than you think, and you can begin regardless of how much money you have saved. So it really took me a deal of research and study for me to learn how to invest my money. What I learned is exactly what I’m going to show you here. 

Why should you invest?

If you want your savings to grow over time, you must invest. Although keeping money in a savings account appears to be a safe bet, the interest you’ll earn is insufficient to keep up with inflation over many decades.

While riskier in the short term, the stock market provides compound returns that not only keep up with but outpace inflation over the long term. If you take a moment to understand how compound growth works, you will quickly realize why you must begin investing right away.

Assume you received a small inheritance and decided to invest it—if you put $5,000 in an account with a 7% interest rate and contribute an extra $200 per month for 30 years, you’ll have a little more than $284,000.

Where to Invest – The Best Places to Put Your Money

Personal finance is just that: personal. The best way for you to invest money will be different from the best way for me to invest money.

Some things, on the other hand, are universal. Everyone should put money aside for retirement that they will not touch for many decades. When you’re in your twenties or thirties, it can be difficult to see the need to plan for retirement.

But we need to think about our future selves, and saving enough money to live comfortably in retirement is a difficult task. The earlier you begin investing, the simpler it will be.

In order to figure out how to invest money, you must first determine where you should put your money (see our full list of the best investments for any age or income).

Your goals and willingness to take on more risk in exchange for higher potential investment rewards will determine the answer. The following are examples of common investments:

Stocks: Individual shares (a stake in a company) that you believe will appreciate in value.

Bonds: Bonds are a type of debt that allows a company or government to borrow money from you to fund a project or refinance other debt. Bonds are fixed-income investments that pay out interest on a regular basis to investors. On predetermined maturity date, the principal is returned. (Learn more about bonds here.)

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Mutual funds: Investing in funds, such as mutual funds, index funds, or exchange-traded funds (ETFs), allows you to buy a large number of stocks, bonds, or other investments at once. By pooling investor money and using it to buy a basket of investments that align with the fund’s stated goal, mutual funds create instant diversification. Actively managed funds, in which a professional manager chooses the investments, or index-tracking funds, which follow an index. For example, a Standard & Poor’s 500 index fund will hold 500 of the country’s largest corporations.

Real estate: Diversifying your investment portfolio beyond the traditional mix of stocks and bonds is possible with real estate. You don’t have to buy a house or become a landlord to invest in real estate. You can invest in REITs, which are similar to mutual funds for real estate, or through online real estate investing platforms that pool investor funds.

A Step-by-Step Guide to the Best Ways to Invest Money

Everyone’s financial situation is different. Your best investment strategy is determined by your personal preferences as well as your current and future financial circumstances. When creating a sound investing plan, it’s critical to have a thorough understanding of your income and expenses, assets and liabilities, responsibilities, and goals.

Before you begin investing, make sure the rest of your financial house is in order. You must:

  • Be at ease with your monthly budget – how much you earn, spend, and save.
  • Be in control of your debt, with no high-interest credit card balances and a plan in place to repay student loans and other liabilities.
  • Set specific goals for what you want your money to allow you to do in the future.

How can I start investing my money the right way?

There are many investment platforms you can invest your money but to further help you begin your investment process the right way, here’s a five-step process for determining how to invest your money the right way now:

  • Determine your financial objectives, timeframe, and risk tolerance.
  • Decide whether you want to do it yourself or hire someone to do it for you.
  • Choose between a 401(k), an IRA, a taxable brokerage account, and an education investment account for your investments.
  • Choose investments that are appropriate for your risk appetite (stocks, bonds, mutual funds, real estate).
  • Create a user account. How much to invest with and where to invest
    How much do I have to invest? Where should I invest?

    Beginner: I have less than $500 to invest Betterment
    Intermediate: I have more than $500 to invest
    Wealthfront Advanced Intermediate: I have more than $1,000 to invest
    M1 Finance Advanced: I have more than $3,000 to invest  Vanguard Digital Advisor                      
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Wealthfront is a Robo-advisor that I highly recommend to first-time investors. Their fees are reasonable at 0.25 percent, but the best part is that your first $5,000 will be managed for free (specific to MU30 readers).

Wealthfront may be the way to go if you’re looking to start investing with a small amount of money. To get started with Wealthfront, you’ll need $500, so keep that in mind. As you gain experience with investments, you can select vetted ETFs or invest by category, such as technology, healthcare, or socially responsible investing.

M1 Finance

M1 Finance is a company that specializes in financial services.

If you don’t have that $500 starting balance, the Robo-advising space still has plenty of great options for you. M1 Finance does not charge commissions or management fees, and the minimum starting balance is only $100.

You can choose from one of their pre-made diversified portfolios or build your own using their platform to buy stocks and ETFs. The user interface is extremely simple to use.


Betterment, which has no minimum starting balance, maybe a good option if you’re starting out with less than $100. It’s great for beginners, just like M1, because it has a very simple platform and a no-hassle approach to investing. In addition, the management fee is only 0.25 percent.

Investing in Real Estate

Real estate can also be a good investment. To be clear, your primary residence should not be considered an investment. Apartments or commercial buildings that you own and then lease are referred to as real estate investments. The power of real estate investing lies in the cash flow from tenants, even though most real estate appreciates over years and decades.

Owning real estate can generate income that you can put in your pocket or reinvest if you can charge more rent than you pay in mortgage, taxes, and maintenance.

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We can’t cover everything there is to know about real estate investing in this article, but there are some ways to get started quickly on a small budget. Two real estate investment platforms, Fundrise and Roofstock, crowdsource investment opportunities. You can invest as little as $5,000 and share in the profits from large, multi-unit apartments or office buildings with other investors.

These investments are not without risk, and the fees charged by the companies reduce returns. They may, however, be appealing if you want to diversify your real estate holdings without the hassle and expense of buying and managing properties yourself.

Final Words

If you have a high-risk tolerance and can stomach volatility, you’ll want a portfolio that contains mostly stocks or stock funds. If you have a low-risk tolerance, you’ll want a portfolio that has more bonds, since these tend to be more stable and less volatile. Your goals are important in shaping your portfolio, too. For long-term goals, your portfolio can be more aggressive and take more risks — potentially leading to higher returns — so you’ll probably want to own more stocks than bonds.

Whichever route you choose, the best way to reach your long-term financial goals and minimize risk is to spread your money across a range of asset types. That’s called asset allocation. Then within each asset class, you’ll also want to diversify into multiple investments.

Asset allocation is important because different asset classes — stocks, bonds, ETFs, mutual funds, real estate — respond to the market differently. When one is up, another can be down. So deciding on the right mix will help your portfolio weather-changing markets on the journey toward achieving your goals.

Truth is, you don’t have to wait until you’re debt-free or have all the money to begin investing (in fact, you shouldn’t!). However, if you are unsure whether you are ready to begin investing, I hope this guide helps you.



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