You’ve probably heard more than a few times that you should be saving for the future. Investing, they say, is one of the best ways to build wealth. But those same people aren’t handing out advice on investing in stocks for beginners. Luckily, it’s easier than ever to get started.
Investing in Stocks for Beginners
If you’ve never invested in the stock market, you aren’t alone. According to the Statista Research Department, only 55 percent of adults have their money in the stock market in 2020, and this is a figure that has held steady over the past few years.
The reasons for not investing can vary. Some fear the risk that comes with an unpredictable economy, while others simply don’t know where to get started. Those struggling to pay bills may simply find they don’t have extra money to set aside for the future.
Read More: Basic Knowledge of Stock Investing
Investing on a Budget
No advice on investing in stocks for beginners will help at all if you don’t have the money. First, it’s important to understand that you don’t have to put hundreds or thousands of dollars a month into investments. Once you’ve accepted that, you can look for a few dollars here and there to put into your investments.
Here are some options for investing on a budget. You can even combine some of them to maximize your results.
- Low-cost investing: Some platforms have a minimum investment before you can even get started. But there are now plenty of platforms that let you join and start investing with as little as $1.
- Automated investing: Ideally, you’ll have your money roll into investments automatically. With the right app, you can set it up so that small amounts are taken out of your account with each paycheck and funneled into the stocks you’ve chosen.
- Robo-investing: Today’s tools make investing in stocks for beginners easy. Robo-investing, also known as automated investing, use software to manage your portfolio. You’ll typically be able to answer a few questions about your goals and risk tolerance, and the platform will take it from there.
- Fee-free investing: Fees can cut into your earnings. But there are plenty of platforms that charge no fees or commissions on your investments. This will help you ensure every dollar has the possibility of earning income.
- Fractional investing: Some of the best-known stocks come with a hefty price tag. Top names like Amazon and Facebook will cost thousands of dollars per share, putting you out of the running. Fractional investing lets you buy a fraction of a share. If a stock costs $100 per share, for instance, $20 would get you one-fifth of a share.
- Round-up apps: With these tools, also known as “spare change apps,” every purchase from a connected account is rounded up, with the change invested. If you spend $3.52 on coffee, a round-up app will put $.48 toward your investments. It’s a great way to invest without feeling the money coming out of your account.
- Educational resources: There’s plenty of information online to help you learn trading, but beginner-friendly investment platforms have these resources baked in. If you’re interested in learning, look for a tool that will give you access to an extensive library of educational materials.
Read More: Easy Stocks for Beginners
Choosing Your Investments
Whether it’s investing in stocks for beginners or for those with more experience, research is an important part of the process. This starts with deciding whether you’re going to use a robo-investor, a broker or try to manage things on your own via an online investment dashboard. Whichever route you go, you’ll need to take some time to make sure you’re investing in the right products.
There are plenty of stock types to choose from, but two are extremely popular with investors: market orders and limit orders. With a market order, you put in a request to buy or sell a stock as soon as possible at the best available price. A limit order is a request to buy a sell a stock at a very specific price, selling only for higher than that price and buying only for lower.
Read More: What Does the Price Type Mean When Buying Stocks?
Best Investing Apps for Beginners
For as little as $1 a month, Acorns lets you get started investing. You’ll answer a few questions about your financial situation and investment goals and Acorns will take it from there. As you make everyday purchases from your Spend account, Acorns rounds up and puts the extra funds into your portfolio.
2. Betterment Investing
Betterment uses a strategy called Modern Portfolio Theory to manage your investments. With MPT, the entire portfolio is constructed to minimize risk and maximize return, rather than focusing on individual stocks. With Betterment, you’ll answer some questions and let Betterment’s robo-advisor do the rest. One bonus with Betterment is that your portfolio is built to reduce your tax burden.
With Robinhood, you can get started investing in some of the biggest names on Wall Street with as little as $1. In addition to stocks and funds, you can also invest in cryptocurrencies through Robinhood. One standout feature of Robinhood is its watchlist, which lets you add stocks to your dashboard and keep an eye on them for a while before putting your money into them.
4. Stash Invest
Another investing app that allows fractional shares is Stash Invest. Plans start at $1 a month and include budgeting and saving tools, fractional investing and a bank account. You’ll also get a debit card that helps you earn stock in the businesses where you’re making purchases.
E*TRADE is perhaps one of the best-known robo-investor. The easy-to-use interface and commission-free trades are similar to competitors. But the variety of investment types set it apart. You can invest in stocks, bonds, mutual funds, exchange-traded funds, options, futures, FOREX and CDs. The minimum required investment is a little higher, though, at $500.
Another investing platform with a wide range of trading options is TradeStation. You’ll get commission-free trades and educational resources. TradeStation isn’t a robo-investor, though. You’ll need to set up your own portfolio and monitor your trades yourself, so it’s best for investors who want to jump in and start testing various investment strategies.
The biggest decision new investors will need to make is which platform to use. With the right solution, investing in stocks for beginners is as easy as answering some questions, linking a bank account and monitoring your portfolio to make sure everything’s going as you expect. With a little patience, you’ll not only start setting money aside, but you’ll also begin to learn enough about investing to do things on your own as you become more comfortable.
- Statista: Share of Adults Investing Money in the Stock Market in the United States From 1999 To 2020
- NerdWallet: What Is a Robo-Advisor and Is One Right for You?
- The Motley Fool: Fractional Share Stock Investing
- Acorns: How Do Round-Ups Work?
- NerdWallet: How To Buy Stocks
- Investopedia: Modern Portfolio Theory (MPT)
Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.