How To Start Investing With No Experience

Last Updated by Neiko Johnson on 
August 15, 2021
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How To Start Investing With No Experience

We have received requests to make a post about how to start investing with no experience.

Investing can seem overwhelming and it's way too hard to sum everything about investing into one blog post.

We are working hard to get out of debt, however, we do invest on a small scale. Certainly, once our student loans are paid off, we will increase our investing to 20% of our household income.

Currently, we invest around 10% of our after-tax pay every month, but this isn't that much.

P.S. We are not investing experts. We provide our opinions when it comes to personal finance based on our experience and knowledge, but we are not investments/financial advisors. If you have any advice on investing, please share.

When you start investing you are choosing to put your money somewhere with the goal of receiving a return down the road. In fact, the hope is the money you put into an investment will grow.

Certainly, there are many ways to invest but most people associate investing with the stock market. Ultimately, you can invest in your own business or real estate.

The end goal with investing with no experience is to earn money on that investment in the future. One of our favorite approaches to investing with no experience comes from Warren Buffet. He's a great investor and only invests in things he understands.

That is to say, if you don't know a lot about the technology industry, then you probably shouldn't invest a lot of your money in it until you fully understand it.

On the other hand, of course, not everyone can be the next Warren Buffet, however, we do feel that investing in things you understand can help you with your investment strategy.

Start investing as early as possible

Most importantly, a great way to see returns on your money is to start investing as early as possible. The key is to invest and benefit from compound interest. This is how your investments start earning money on their own.

Certainly, there will be ups and downs when you start investing. However, staying committed to your investments for the long run is very important. The longer your investments stay plugged in, the more money you will earn.

Investing is the path for building wealth and creating financial security. Even if you start on a small scale, that's better than not investing at all.

Related reading: Financial Security: The Secrets to Generational Wealth

Side note: We highly recommend that you check out Acorns if you are interested in micro-investing. Acorns uses your spare change to invest to the next dollar after any transaction you make. This will give you the opportunity to consistently invest.

Understand the available investment options

The beauty of investing that we love is that we get to choose what we invest in. To emphasize, as stated above stay away from investing in things you are not comfortable with.

To go further, just because someone else was successful with a certain investment doesn't mean you will be.

For instance, you can invest with no experience through a 401(k) or similar employer retirement plan. You can also invest in a traditional IRA, Roth IRA, or a standard investment account.

More importantly, each type of investment comes with a certain amount of risk and you must fully understand which works best for you.

Here are some popular investments for those just starting out:

  • Stocks
  • Bonds
  • Mutual funds

First off, a stock is a share of ownership is a single company. This can also be known as equities. We recommend purchasing stocks through mutual funds instead of buying single stocks. There is a lot more risk with purchasing single stocks. Second, a bond is a loan to a company or government entity. As a result, they will pay you back in a specific amount of time with interest. A bond is considered less risky since you know when you will get paid back your money and how much you will receive. On the other hand, the returns are normally lower. That is to say, it's a good idea to diversify your portfolio to maximize your overall returns. Third, mutual funds are a collection of investments mixed together. This allows you to pick a diverse group of investments instead of choosing single stocks or bonds.

Create an investment strategy

As you start to explore investing, you should create your investment strategy based on your savings goals. This means you should decide how much money you need in order to reach your savings goals for retirement.

If you start investing at a younger age you can be more aggressive with your investment portfolio. It can sometimes be complicated to choose your investments if you are not familiar with them.

In fact, it's usually best to invest through mutual funds, index funds, or ETFs.

Your savings goals will determine the strategy you choose. For more short-term goals, you may want to choose a less-risky route and keep your money in a money market account or an online savings account.

That is to say, for the money you need within the next 5 years, it's a better strategy to stay away from long-term investment options. You wouldn't want to risk losing money in the market if you know for sure you will need that money in the short term.

Start investing in yourself

A very important thing some people forget about is investing in themselves. Investing in yourself is just as important as investing in the stock market.

Investing in yourself could mean starting a side hustle, getting more education, or focusing more on your health.

This could lead to you increasing your income to take control of your life and a healthy body and mind make life much better.

Related reading:

Final words – how to start investing with no experience

In conclusion, the best investment strategy is to start as early as possible. It's crucial to have clear objectives and goals to make sure your money brings a return. You don't want to invest money to lose it. That's a waste of money.

As you move forward with investing, take some time to think about how you want to approach your strategy. You can find a lot of great resources and information if you are not sure where to start.

Most importantly, do the research before investing, make sure you fully understand what you are investing in, and stay invested for the long term.

Are you currently investing? If not, do you plan to start investing?

What are your investment strategies and thoughts?

Leave a comment below.

Article written by Neiko Johnson
Neiko is a personal finance expert and Co-founder of Secret to Finance. Along with his wife Alexis, they learned how to get out of debt and paid off $400,000 in 4 years.

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