How to Start Investing: The Rookies’ Guide For Investing in 2024

For many aspiring hustlers and ambitious individuals, investing is a daunting word. They think that investing is reserved to only a select few, with thousands and thousands of dollars at stake.

However, thanks to the internet, investing opportunities are more numerous and accessible than ever. If you are on the fence about investing, know that it’s not only easy to get into, but also a huge enabler for your financial success.

By the end of this investing guide, you will have learned why you should consider investing and how to start investing in stocks with little money.

What It Means to Invest

First of all, we should start this investing guide by defining what investing means. Generally speaking, investing means using money on something that is likely to generate an income in the future.

Investing comes in many different shapes and forms: acquiring shares in a business, buying stocks, loaning money, buying a house, etc. The return on investment (ROI) could be the interests generated from a loan or an increase in the value of an asset like a house or stocks.

Keep in Mind: Keep in mind that investing is closely tied to the notion of risk: you never have a 100% guarantee that your investment is going to make you more money.

Why A Risk-Benefit Analysis Is Important

Being a successful investor is all about being able to discern between the opportunities that are highly likely to yield a positive return and the ones that are more likely to end up in failure. This is why you should always take the time to do a thorough risk-benefit analysis before you commit your money to an endeavor.

Quick Fact: On a broader note, the term “investing” is used to describe any activity that yields a benefit that; people often talk about investing in their health or investing their time in useful activities.

Why Should You Start Investing?

This is a fair question that anyone considering investing asks themselves. First, you should know that simply saving a portion of your income in your bank account will not be enough to meet all of life’s demands.

By investing in profitable opportunities, your potential earnings build up over time and can make a huge difference in your life. Also, think about the education of your children in the future, your dream vacations, and all the other huge expenses you might have to face at some point.

Early Retirement Planning Is Crucial

Chances are a regular job or a side hustle won’t make you enough money to finance your dream life. On top of that, the earlier you start planning for your retirement, the more money you will end up with when it’s time to stop working – investing early sets you up for a soft, comfortable landing.

Your financial success depends not only on how much money you can make in the present but also on what assets you have and whether they can secure you sizeable returns in the future. In short, becoming an informed and patient investor in your 20s or 30s will protect you against the many uncertainties of life.

Pro Tip: Whether you decide to invest in the stock market, buy a rental house, or invest in anything else, the point is to build up your wealth over the years.

Is a Lack of Funds the Biggest Barrier to Investing?

Many would-be investors leave opportunities on the table due to one common misconception. They believe that they must have large sums of money in their bank accounts before they can start investing.

Thanks to the evolution of the internet and the many applications available today, you can start investing with little money, on your own and right away. As it turns out, the biggest barrier to investing is not money, but one’s own misconceptions.

Gone are the days where your only option was to put a huge deposit; you can get started with a small amount of money and as build up as you go. Moreover, when using the principle of compounding, a small investment can snowball over the years and bring large returns.

A Quick Primer on Investing Jargon

While you might find some of the terms surrounding investing confusing at first, you will quickly get used to them and find that they are not as complicated as you might have thought.

Let’s go over the most commonly used terms in the investing world:

Stocks and Bonds

In case you’re wondering, a stock is a tiny share of ownership in a company.

Stock prices go up and down depending on supply and demand, which in turn is influenced by factors like recent events, the state of the market, rumors, etc.

The essential strategy of investors is to buy stocks when prices are low and sell them when prices are high.

Good to Know: Picking the right time to buy or sell can be tricky and investors rely on educated guesses, their own knowledge, experiences, as well as their level of risk tolerance.

On the other hand, a bond is like a loan you give to a company with the promise of being paid back with an interest.

Interesting Fact: The main difference between a stock and a bond is that bondholders are given a higher priority of repayment in the event of a company being liquidated.

Another difference is that stockholders have a voting right, whereas bondholders don’t.

Both of these types of investments have their own advantage, and many investors include them both in their portfolios.

Stock Indexes

Also called stock market indexes, these are indicators that measure and report the evolution of the market value of a group of stocks. Below are some of the most well-known stock indexes – which you have probably heard of before:

• S&P 500: possibly the most widely known index, Standard & Poor 500 lists 500 companies that represent the overall state of the stock market.
• Nasdaq: also called the Nasdaq Composite, this index regroups more than 3,000 stocks of the world’s leading tech giants, most notably Google, Apple, Microsoft, Intel, and more.
• Dow Jones Industrial Average: one of the oldest and most tracked indexes in the world, the Dow the stocks of 30 large, publicly owned companies based in the United States.

ETF (Exchange-Traded Funds)

A term you’re likely to see thrown around in online resources dealing with investing, ETF is short for “Exchange-Traded Fund”.

Think of an ETF as a basket of securities (commodities, currencies, stocks, bonds, etc.) that follows the performance of a certain index and can be traded in the stock exchange.

Interesting Fact: ETFs came along during the nineties to make it easier for individuals to buy and sell securities in the stock exchange, by avoiding the hassle of buying different stocks and going through tedious procedures. They are also affordable, easily managed, and diversified.

As an up-and-coming investor, you may find yourself trading ETFs since they are so convenient.

Portfolio

The term portfolio generally refers to all the financial assets that you own: stocks, bonds, commodities, etc. A portfolio can also include assets that are not traded in a stock market, like real estate.

Pro Tip: If you are looking for an app that lets you find the best deals for rental properties, be sure to try Roofstock.

Portfolios can be managed either by the investors themselves or professionals called portfolio managers. In order to determine what your portfolio should be comprised of, you should first define your investing goals, and how risk-averse or risk-tolerant you are.

Compound Interests

Compounding is an important concept in investing, often described as almost magical.

Simply put, it means taking the earnings you made from an investment and reinvesting them to generate even higher earnings afterward, instead of using them to cover your living expenses.

By adding your earnings to your investment account, the subsequent earnings get higher year after year. The same happens when you take a loan from the bank with a compound interest rate.

Pro Tip: As an investor, the money you make over the years by following the compound approach will be drastically higher than if you opted for a linear progression.

4 Traits of a Smart Investor

Investors who hit it big all share some common traits that ensure their financial success.

• All successful investors have strong decision-making skills and never act on pure emotion.
• Also, whatever you choose to invest in, you have to be able to weigh in the potential risks and rewards to make the best choice.
• The principles below are not exhaustive, but they are essential for any aspiring investor.
• They apply not only for the stock market but all sorts of investing endeavors as well.

Set Clear Goals and a Stop-Losses

Before you start your investing journey, you should have a clear idea of what you intend to achieve – measurable goals are attainable goals.

First, divide your goals into short-term (two to five years) and long-term goals (beyond five years).

Your goals should have a clear amount attached to them with a set time limit.

For example, how much you do you want to have by the time you’re retired? How much does your dream house cost?

You should also define your risk tolerance – how comfortable are you with making risky investments?

Likewise, you should define the point at which you cannot afford further losses.

Pro Tip: To avoid having to track the market constantly, investors typically set stop-loss orders to their brokers to sell a stock once it drops to a certain price.

Diversify Your Portfolio

Putting all your money in one or a few stocks or bonds is too risky and the stress resulting from the fear of possible losses will take a toll on you.

To mitigate losses incurred from falling stock prices, investors generally agree that a portfolio should include a variety of securities, all of which show good potential for growth.

Pro Tip: Your portfolio should also include stocks whose performance does not affect each other, otherwise, it would defeat the purpose of buying different stocks.

Do Your Research and Know What You’re Getting Into

Never invest in something you don’t fully understand and be aware of shady people who make big promises.

Do not follow trends blindly; instead, conduct your own research and assess whether an opportunity is actually promising or just a fad. If you are interested in a company, try to learn as much as you can about it – there is plenty of information online on about any company listed in stock exchanges. Ask yourself: how well is it performing in the market right now, and what are its prospects for the future?

More importantly: Was there some recent event that may boost or hurt its reputation and stock value?

Keep an Emergency Fund at All Times

One golden rule of investing is to never invest money that you might need in the short term in a long-term venture. A critical mistake that some rookie investors make is that they blow up their savings to buy stocks and other securities.

If you don’t have an emergency fund and an unfortunate event happens – a sickness, an accident, property damage, you will find yourself in serious trouble. This is why the money you use for investing must never leave you vulnerable against the many hazards of life.

Pro Tip: The amount of that fund should be large enough to cover at least three to six months’ worth of living expenses, though you should probably aim higher.

How to Start Investing in Stocks with Little Money

Thanks to the internet, you have access to plenty of options when it comes to investing in the stock market with little money.

Open a Brokerage Account

If you want to pick your own stocks and manage your investments on your own, consider opening a brokerage account.

There are many platforms online that let you open your brokerage account and start investing and trading in a quick and easy manner.

Pro Tip: Unlike traditional brokerage firms, the minimum amount that you have to deposit is either very low or non-existent. If you are looking for a low-cost online trading platform, Ally Invest can be a great place to start.

Additional details: You can find more about the best investment apps and tools in this post.

Use a Robo-advisor

Robo-advisors are platforms that take most the legwork from you, making investing easy and accessible. Robo-advisers give suggestions on what to invest in and track your investments for you with powerful data-driven algorithms.

What’s more, you don’t need prior investing experience and your investment account is easy to set up.

Pro Tip: Some of the most well-known robo-advisors include Betterment, Wealthfront, and Wealthsimple.

What Can a Platform Like Wealthsimple Do For You?

As its name says, Wealthsimple seeks to make wealth-building simple and accessible.

This platform takes off the heavy lifting as well as the guesswork from you and lets you start investing in the stock market with little money. Wealthsimple also keeps account management and portfolios fees to a minimum.

You just answer a few questions about your income, your goals, how much money you have ready for investing, the level of risk you feel comfortable with, and an algorithm figures out the best index funds for you. Wealthsimple then puts your money to work with diversified portfolios back by reliable data. Unlike some other platforms, you don’t need a minimum deposit to get started.

Additional Details: If you want to learn more about Wealthsimple, read our full review.

How to Make Money so that You Can Start Investing

Before you can start investing, you need to have money you can use to that end.

As we pointed out above, you should never compromise your present money needs or reach into your emergency fund to finance your investments.

So the more additional income sources you have, the more money you will have at your disposal to start investing. Below are some easy ways to accumulate extra money without spending a lot of time or effort.

Save Money and Win Prizes with Long Game

Long Game is a personal finance mobile app you can use to save money and earn extra cash by playing games. The way it works is that as you keep saving money, you get coins which you use to play games and win extra money.

Not only that, but you can also exchange the prizes you win for cryptocurrencies like Bitcoin or Ether. If earning extra cash while having fun sounds like a great idea to you, click here to get started with Long Game.

Become an Airbnb Host

Do you have a spare room in your place? If so, why not rent it to travelers? If you can welcome guests in your home, try becoming an Airbnb host. With good guest reviews, you will turn your apartment or room into an additional income stream, you can set some money aside for your future investments.

Earn Extra Cash with Survey Junkie

A platform used by many online hustlers, Survey Junkie pays you money for filling surveys – basically doing market research for companies that need it. In case you’re skeptical, you should know that unlike some survey sites that are scams, Survey Junkie is actually a legit platform – it’s listed with the Better Business Bureau. If you want to learn more about Survey Junkie, check our full review.

Become an Avon Representative

Do you want to know a cool way to earn extra money with little? For a $25 fee, you can start promoting Avon’s large array of beauty products, either online or offline.

You earn a percentage whenever a customer spends $50 or more. The commission you earn goes up the more a customer spends money and can reach 50% for orders of $1,575 or more.

(See this page if you want to check the full Avon earning charts.)

Pro Tip: If you’re interested in making money from selling beauty products, check these other companies that offer similar programs.

Set Challenges and Earn Money with Healthy Wage

HealthyWage is a cool app that helps you invest in your health and earn extra money.

The basic idea is that you make bets with your friends and you get money if you manage to lose a certain amount of weight during a set time period.

This sort of challenge holds you accountable for your efforts and helps you stay focused and motivated to lose weight. You can also become an affiliate and get $40 for every person you refer HealthyWage to. This is a fun way to earn extra cash while taking care of your health.

Wrapping Up

As you might have guessed after reading this investing guide, investing is not about getting rich quick but rather building a road to wealth. Investing is all about making time work for you rather than against you.

Aspiring investors have nowadays access to an incredibly large array of opportunities – you just have to know where to look and go for it. Remember that you’re in it for the long run and that, in the first years as an investor, are probably not going to be spectacular.

If you are willing to search for opportunities and learn from your mistakes, you will become a successful investor on his way to achieving financial freedom.

What are your investing goals? And what is your plan to start investing? Let us know in a comment below!