How to Start Investing: A Comprehensive Guide for Beginners | Stash Learn

How to start investing: a guide for beginners

By: Cassidy Horton• Reviewed by: Heather Comella

Published: Jul 07, 2025

• Updated: Nov 10, 2025

Decoding investing: What you need to know first

Investing– it’s a word that might conjure images of high-flying stock traders, complex charts, and confusing terminology. But at its core, investing is simply about putting your money to work for you in a way that earns more money over time.

Why Invest? The primary reason is to grow your wealth. Essentially, it involves looking out for your future self. Whether saving for retirement, a down payment on a house, or your child’s education, investing is one of the best ways to reach these financial goals. Unlike putting your money in a savings account, investing offers the potential for higher returns, albeit with some level of risk.

How to get started investing

Investing means buying securities (which is an investment), like stocks, bonds, mutual funds and exchange-traded funds (ETFs), to make money as they grow in value over time.

Investors generally create a portfolio made up of these various investments and often hold them for years or even decades. Traders, on the other hand, generally buy and sell investments rapidly to generate many small profits as prices rise and fall.

If the idea of day trading makes you sweat, rest assured: investing is generally much simpler and less stressful. Remember that investing should be a marathon, not a sprint. Here’s how to get started.

1. Define your investment goals

Learning how to invest starts with a crucial step: defining your investment goals. It’s about understanding why you want to invest and what you hope to achieve. Are you saving for a comfortable retirement, a down payment on a house, your child’s education, or something else?
Defined goals help new investors stay focused and motivated, especially during market fluctuations. They act as a compass, guiding your investment decisions and helping you measure progress. Each goal will have a different time frame and risk profile.

2. Make sure you’re ready to invest

Before you start investing, you may want to first determine if you’re ready. Here are some indicators that the time may be right:

Disposable income. If you can pay all your bills with a bit left over, it might be time to put your dollars to work. If you’re not currently budgeting, now is the perfect time to get started.
No high-interest debt. Let’s say you earn 5% on your investment, but you owe 18% interest on a credit card balance. That cancels out your return and then some, so paying down high-interest debt before you invest may be a good option.
An emergency fund. Do you have three to six months of expenses in savings? If not, tying up all your extra cash in investments might force you to liquidate fast in case of an emergency, which may cause you to lose money on your investments.
Clear financial goals. Both investing and saving can be good ways to set aside money for the future; they each serve different functions. Investing is an opportunity to participate in the growth of the markets and build wealth over time, where saving provides security and liquidity as needed. Financial planning includes setting goals and determining the right financial tools to achieve them.

Even if you have $1,000 to invest, it may be better to put that money toward things like high-interest debt and an emergency fund if those aren’t in place yet.

3. Set up your investment budget

If you’re ready to invest, the next step is to decide how much you should invest and can afford to invest. It doesn’t have to be a large sum; even small, regular contributions can grow significantly over time, thanks to compound interest.

In fact, with many online brokers, you can often get started investing with as little as a dollar. While shares of stock and other securities can be costly, many brokerages sell them by the slice via fractional shares.

Once you start investing, you’ll likely want to keep adding money to your accounts, especially if you have long-term goals like retirement. Many experts recommend investing 10-20% of your income on an ongoing basis. But these are guidelines, not hard rules, and you can build up to this savings rate over time.

The 50/30/20 budgeting method allocates around 20% of your budget to savings and investments.

4. Choose the right investment account

The next pivotal step in your investing journey is opening an investment account, but it’s not just about picking any account. Your choice should be guided by the goals you’ve set.

For instance, if you’re saving for retirement, you might choose a tax-advantaged individual retirement account (IRA). If you’re saving up for your future dream house, you might consider a standard brokerage account.

5. Think about your risk tolerance

All investment involves risk, including the risk that you could lose money. But how much risk each person is comfortable with is very personal. Your age, income, financial goals, and other factors play a role. Investors typically sort risk tolerance into three categories:

Conservative. A conservative investor values stability over the potential for higher investment returns.
Moderate. Moderate investors aim to balance stability with higher reward potential.
Aggressive. Aggressive investors feel comfortable taking big risks and hope to earn big rewards.

6. Choose your investments

In this next step, you’ll choose investments based on your goals and risk tolerance. There are many types of stock market investments available; most everyday investors put their money in stocks, bonds, mutual funds, or ETFs. Cryptocurrency is also becoming a popular investment option, although it is a very risky investment. Additionally, you can even invest in real estate through a real estate investment trust (REIT).

7. Decide your investment approach – DIY or robo-advisors

As you learn how to start investing, another critical decision you’ll make is whether to manage your investments yourself (DIY) or use a robo-advisor.

8. Monitor and adjust your investments

Once you’ve laid the groundwork and made your investment choices, you’re officially investing. You no longer have to figure out how to start because you’re doing the thing.

Why is investing important?

Many experts agree that investing is a critical component of a brighter financial future. Here are some of the most common reasons people invest:

Retirement. Investing could help your nest egg grow faster than saving alone.
Combating inflation. Investing can be particularly important during inflationary times to preserve and grow the purchasing power of your money.
Lowering tax burden. Retirement and college savings accounts offer tax advantages that could lower your taxable income.
Growing wealth through passive income. Investing puts your dollars to work for you.

How early should you start investing?

As a general rule, the sooner you start investing, the greater your earning potential.

What’s the difference between active vs. passive investing?

In the world of investing, there’s a place for every kind of investor. Each approach comes with risks and benefits.

Common Questions About Investing

Is investing in the stock market risky?

Investing in stocks always involves risk. While you can make money by investing in stocks, bonds, funds, and other securities, you can also lose money.

How do I invest money in the stock market?

You can invest in the stock market by purchasing stocks, bonds, mutual funds, and exchange-traded funds (ETFs).

How much money do you need to invest in stocks?

You can start investing with as little as $1 thanks to fractional shares.

Is $100 enough to start investing?

Absolutely, $100 is enough to start investing.

What is the difference between trading and investing?

Trading is the process of buying and selling individual stocks, while investing generally implies buying stocks or bonds and holding onto them over a longer period of time.