How to Start Investing in 5 Easy Steps: A Complete Beginner’s Guide

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Two years ago, I embarked on a mission to empower women in finance through my very own company, Female in Finance LLC. And let me tell you, the number one question that has consistently popped up is, "How do I start investing?"

After countless conversations and sharing tips on my Instagram page, I realized I owed it to my community to provide a comprehensive guide on investing. So, here it is - my guide to help you dip your toes into investing. 

So buckle up and get ready to make your money work for you. 

It's time to start investing!

There are two steps that need to be taken before you can start investing. 

Step 1: Pay off all high interest debt. Personally, I consider high interest anything above 5-6%. If the interest on your debt is outpacing any potential gains in the stock market, then there’s no point in investing until you’re done paying high interest debt. 

Step 2: Plan for the unexpected with an emergency fund.  Aim to have at least 3-6 months of essential expenses saved in case of unexpected events. As a precautionary measure, I have personally built a 12-month emergency fund divided into two parts. Emergency funds can be stored in a high-yield cash account, like one with Betterment for quick access, and some can even be invested conservatively, similar to Betterment's Safety Net for potential growth. 

Let’s get into what you’ll want to know as you start investing!

Need to know: What is investing?

Investing is like a boardgame of buying low and selling high, but instead of Monopoly money, you're using your hard-earned cash to purchase assets that you expect to go up in value. Think: real estate, stocks, or even vintage Beanie Babies (just kidding, please don't invest in Beanie Babies).

But let’s talk specifically about stock market investing—the OG of investing games. I promise to not bore you with a history lesson, but hang with me for, like, six sentences. 

Stock trading started in Amsterdam in the 1600s when the Dutch East India Company needed some serious cash to fund its trading expeditions. They came up with a wild idea to sell shares of their company to the public. People were like, “Wait, we can own a piece of your company and make money from it? Sign me up.” 

So they signed up. And thus, the stock market was born! From there, it was a wild ride of ups and downs, booms and busts, and traders trying to outsmart each other. Despite all the chaos, the stock market kept chugging along

Fast forward to today, and the market is a global phenomenon. It's an economic hot potato, with everyone hoping they're not the ones holding the spud when the market crashes.

When a company decides to go public, it's like a debutante ball: fancy shmancy, but also a little bit intimidating. But just like a debutante’s dreams can fade away, companies can also close up shop and disappear. 

Therefore, it's important to keep up with the times and adapt your investments as necessary. And that's where index funds come in. Think of index funds as a curated playlist of the stocks of the moment, so you don’t have to do any guesswork. This is handy, because investing brings up a lot of questions, one being: what do I invest in? No one wants to lose their hard-earned cash.

Index funds track a broad market index, like the S&P 500 or Dow Jones, which means that you're investing in a diversified portfolio of stocks across multiple industries. This diversification helps to spread out risk and minimize the impact of any single stock's performance on your overall portfolio. The goal being that, if one company in the index happens to tank, it won't drag down your entire portfolio. 

Plus, index funds can be a low-cost way to diversify your exposure to the stock market.

Of course, investing always carries some risk, and it's important to do your own research and consult with a financial advisor before making any investment decisions. 

Let me guess your next question… 

“How do I know which index funds to buy?” 

The age-old conundrum of index fund selection. This is likely the second most common query I receive, right after “are you single?” (just kidding). Anyways, as a humble finance writer on the internet, I’m not licensed to dish out specific investment advice, so I cannot give you a precise list of which index funds to invest in. But don’t despair, I have something that can help.

Entering the chat: Betterment, a game changing investment platform. 

Betterment is a robo-advisor where your only job is to open the account, tell them about yourself and your financial goals, and deposit money. I can already see your brain scrambling thinking to yourself, “that’s it?” Yes. That’s it. No more sleepless nights analyzing investment options or fretting over market trends. Betterment’s algorithm analyzes your information, your goals, and recommends an allocation accordingly- creating a customized investment plan!

When it comes to investing, you want it to be simple, low cost, diversified, and automatic. Who’s got all four of those things? You guessed it, Betterment. Let me break it down.. 

It’s simple: Takes as little as less than 3 minutes to sign up, and it’s easy to set up automatic deposits once you connect your bank account. 

It’s low cost: Betterment’s base price is $4/month or 0.25%. You can automatically switch to an annual fee of 0.25% on your investing account balance by setting up recurring monthly deposits totaling $250 or more or reaching a balance of $20,000+ across all of your Betterment accounts 

It’s diversified: Betterment’s portfolios were built with global diversification, relatively low costs and long-term performance in mind.

It’s automatic: Betterment offers a variety of automated features. Once your account balance is at or past the minimum threshold, they can automatically rebalance your investments to keep your financial goals on track. It's as simple as setting up automatic deposits and letting the robo-advisor do the rest. 

Here's the kicker – with Betterment, you still have the power to adjust your target allocation with just a few clicks of a button! Feeling bold and want to take on more risk? No problem, just increase your stock allocation. Feeling a little more cautious? Simply allocate more to bonds for a lower-risk investment. The choice is yours. 

So how do you create an account??

It takes a few simple steps:

Step 1: Click here to get to Betterment’s website. Once you go to their site you’ll click the blue button in the top right corner titled “Get Started” 

Step 2: Choose a goal that works for you. 

Step 3: Enter your email address and personal information to open your account. 

Step 4: Choose your portfolio.

Step 5: Deposit money. You can also set up weekly or monthly automatic deposits, which can come handy if you are as forgetful as me. 

That’s it! 

Now, let’s face it - DIY investing isn't for everyone. Sure, I may have spent thousands of dollars on my financial education, seven years in corporate finance, and many hours studying investments, but even I can attest to the difficulty of deciding how to divvy up your hard-earned cash across various funds. And for the average non-expert or newbie investor? Fuhgeddaboudit! How are they supposed to navigate the tricky waters of asset allocation without a captain at the helm?

But Betterment is there to help beginner and experienced investors. And let's be real: not everyone has the discipline to stay the course when market conditions get rough. That's where a low-cost, automated investing platform like Betterment can help stay you on track to reach your financial goals without the need for constant monitoring and adjustment. So if you're not a DIY investor or simply want to take some of the stress out of investing, give Betterment a try and get started in minutes. 

Cash Reserve is only available to clients of Betterment LLC, which is not a bank, and cash transfers to program banks are conducted through the clients’ brokerage accounts at Betterment Securities.

Cheers,

LP