Simple Investing Tips For Beginners (2024)

Investing made easy: Tips for beginners

Investing is easier than the finance world wants you to believe, and we want to prove it by sharing these simple investing tips made just for beginners.

If you feel overwhelmed by investing, had bad investing experiences in the past, or just feel like you lack investing knowledge, then we are here to help by sharing what has worked for us!

As always, this is our disclaimer that we are not financial advisors or financial professionals and we are citing own personal experiences and opinions in this post.

If this is your first time reading Not Your Ordinary Plan (NYOP), welcome! We offer easy tips and tricks for everything related to investing, financial independence, and even world travel.

Now – here are our easy investing strategies as a beginner:

1. Know Your Investing End Goal

If you are starting to invest, you need to know your “why” before anything else! Our first simple investing tip when starting out investing is to write down what your goals are.

Write them down and let them shape your strategy for investing. Be clear and specific with what motivates you. You can put your wildest dreams into a virtual or physical vision board to help inspire you.

Goal setting (we think) is the most exciting part of investing. It is the first of our simple investing tips for beginners for a reason!

We discuss the best ways to set and achieve financial goals in our set financial goals post. Check it out for more financial goal setting suggestions!

questions to spark your own financial end goals:

• Why do you want financial independence?

• Do you want to spend your time differently than you do now?

• Are there people or things you want to dedicate more time to?

• What is pushing you out of a “traditional workforce” role?

• Do you want to be debt free?

• Do you want to pursue a passion project that could sustain your lifestyle?

• What have you been neglecting in your daily life?

• Are there hobbies you haven’t had time to try, but really want to?

2. Know If You are ready for investing

This is one of our most important investing tips for beginners. Many investors get ahead of themselves and start investing even though they have high-interest debt or lack an emergency savings fund.

You need to have your head above water before making big financial moves! Knowing where your next dollar can be stretched further is easier than you may think.

We have a straightforward strategy for beginner investors to know “Where Your Next Dollar Goes” (WYNDG, pronounced win-dig) in a separate post. If you do not know whether you are ready for investing, start here!

You should be working through Step 3 of the WYNDG before you’re considering other investments.

This means you have your medical and auto insurance deductibles covered (i.e. emergency savings), you’re getting your employer 401(k) match, and you’re paying off credit cards or other high-interest debt.

Don’t fall into the fear of missing out (FOMO) trap caused by investing peer pressure. Have your basic expenses covered before investing, and don’t let people convince you to invest in something before you’re ready.

We believe investing is a critical part of any financial plan, but there is an appropriate time for it. Be patient!

3. Invest For The Long-Term

Our next bit of beginner investing advice is to invest for the long-term (i.e. retirement).

If you remember anything from this post, invest for the long-term and hold your investments. You don’t have to worry about selling your investments at this accumulation stage and you need to focus on investing consistently for the long-term.

Investing for the long-term is one of the best tips for beginners in investing. This is how you will build wealth and reach financial independence!

What If I want to sell my investments early?

Retirement accounts put penalties on any withdrawals prior to retirement age, so they give you an incentive to let them grow, making it clear that investing is for the long-term game and gains.

We believe beginner investors should hold their investments for at least one year. If you think you will need that cash sooner, you should avoid investing it.

If you instead make investments that you hold for at least a year, you will qualify for the long-term capital gains tax rate. This is a substantially reduced tax bracket from ordinary income tax in the U.S.

For example, if you are married and filing jointly, your tax rate is 0% for the first $94,050 you make on gains during 2024! See just how much lower your capital gains could be taxed.

What about Day Trading?

On the other hand, day trading is the opposite of long-term investing. It is not a simple way for beginner investors to start investing.

If you really enjoy day trading, it should be a career choice instead of a side-gig because your effort is probably not worth it in our opinion.

Researching individual stocks is a mighty endeavor, so we recommend against it for the majority of beginner investors. And the worst part about day trading? – You are taxed on gains as if they were normal income, and lose out on the long-term capital gains rate.

4. Index Funds: One of our Favorite Investing Tips for Beginners

So far we haven’t mentioned what we are actually invested in – it’s index funds!

We recommend index funds for new and experienced investors for a plethora of reasons. Here is our post on why you should be invest in index funds.

What is an index fund? – Index funds are like a bucket full of individual stocks. There are many types of “buckets” (funds) out there, but they essentially track a particular section of the stock market (an index, hence the name).

When you buy a share of an index fund, you buy a little piece of every company’s stock that’s inside the bucket.

The short summary why we love index funds is that they are inherently diversified (more on what diversity means in a moment), the fees are very low, and they take the guess-work out of investing.

Overall, index fund investing is one of our favorite investing tips for beginners!

5. Choosing A Good Index Fund

But how do I know a good index fund from a bad one? The simplest way is to pick funds that are common.

Index funds that track popular indexes like the S&P 500 (our personal favorite), the NASDAQ, the DJIA, or even the total stock market are exceptional places to start. Again, check out our index fund post if you aren’t familiar with these indexes!

The other important tip we have for spotting a good index fund is to know what the fees are.

For us, a low-cost index fund will have an expense ratio of 0.05% or less. Brokerages like Vanguard, Fidelity, or Charles Schwab have many index options available that will fit our criteria.

6. Diversify your Investments

You’ve heard us say you should be investing, but should you invest in anything specific? (Other than index funds that is…) No – because you want a bit of everything in your investment portfolio!

This is what seasoned investors call “being diversified”. This beginner investing tip is very important and designed to keep you from losing everything. Don’t put all your eggs in one basket!

If you invest too heavily in a single company that winds up bankrupt, then you will have crushing financial losses. The total stock market is much (MUCH) less likely to fail as a whole.

Being diversified in your investments can mean different things to different people.

It can mean you hold a portion of both aggressive and safe assets (stocks versus bonds), or it can mean you hold stock in many different industries (technology, real estate, utilities, international, etc.).

To some investors, it might even mean buying precious metals, Bitcoin, NFTs, or digital artwork – none of these are recommended by NYOP as beginner investors, though!

The easiest diversification strategy for beginners and experts alike is index investing. When you buy a share of an index fund, as opposed to buying an individual company’s stock, you will own a small portion of many companies.

It makes owning many stocks much simpler for beginner investors, and diversification will happen naturally for you! Read this post on index investing if you want all the SPICY details.

7. Be Skeptical When Starting To Invest

This simple investment advice takes more intuition than any other tip we have. Hopefully, as you’ve read this post, you’ve had questions or different opinions with what we’re sharing.

Asking questions is a critical part of skepticism!

A healthy amount of skepticism will help you avoid scams or plain bad investments. Learn healthy skepticism and we might help you spot a fraud!

The first rule of being skeptical is understanding what another involved party might gain from your financial interactions. This includes brokers, financial advisors, or even tax planners.

Ask these questions to yourself:

• Are they making a commission off a product they sell?

• Do they make money from handling my investments?

• Do I actually need the service they are offering?

• Can I do their job myself?

• Are they trying to make this too complicated for me?

The next rule of skepticism – do your due diligence!

Do not take any single person’s opinion as the absolute truth- even ours!

You should research all aspects of a new investment style, fiduciary, stock choice, real estate deal, etc. before buying in. Use a diverse set of sources, then compare notes prior to making a decision.

The last rule of skepticism: know when it’s too good to be true, because it probably is! If an investing firm guarantees investing returns that beat the market every year, they are probably lying.

In fact, the majority of managed funds do not outperform the benchmark market index (this is another reason we choose index funds).

Set realistic goals for market returns and stock performance, that way you know what’s too good to be true.

8. Don’t Make Investing Complicated

This is one of the simple investing tips for beginners that can save you money, but more importantly, save you loads of time (time is money anyways, right?).

Complicated investing is not simple investing, and we know you are here for simple investing tips, right? Avoid complexity with the following: index investing and automation.

Have we mentioned we like index funds yet? I hope we didn’t forget… If we did, let’s just say they are NOT a complicated way to invest.

Picking a single index fund gives you ownership of many companies. You don’t have to research each company in the index because index funds will naturally drop underperforming businesses and pick up newly emerging enterprises.

Automatic adjustments like this are the key to simple investing.

Speaking of automation – it’s a fantastic way to reduce complexity in your investments. You can set up automatic stock purchases through your preferred broker and make monthly contributions to your account.

This is similar to how your retirement account is set up! Automation reduces the number of investing decisions you have to make and it frees up brain space for more important things in life.

9. There Will Be Stock Market Downturns – Don’t Panic!

The stock market will naturally have highs and lows. What’s important is that it always trends upwards if it’s given enough time (refer to our previous tip on investing for the long term).

This simple investing tip may be difficult for emotional investors, but we have some extra beginner investing advice to help you out and put you in a better investing mindset:

The only way to lose money in the stock market is if you sell at a low.

This phenomenon is all too common for panicked investors. Wait out the storm, and the markets will recover!

The global economy has already made it through the housing crisis, countless wars, the dot-com bubble, the Great Depression, the pandemic… you get the point. It will make it through the next crisis just fine.

If it doesn’t… we all have bigger problems than finances.

One suggestion to avoid panic selling is to only make investments you intend to hold for at least one year (we recommend at least FIVE years, though).

If there is a chance you need cash quickly and might sell before a year is up, you shouldn’t be investing that money in the first place.

Instead, put it in a high-yield savings account to earn interest. This will still allow you to access your cash on short notice.

For new investors that are very risk averse, there are other investing options, too.

Keep a select percent of bonds, CDs, or cash in high-yield savings accounts as a way to smooth out market volatility and keep your investments diversified.

These types of investments do not feel the same big swings as stocks. We recommend no more than 40% in these accounts, but if you have a long investing career ahead of you (greater than 10 years), we believe this should be closer to just 10% of your total assets.

Conclusion To Our Easy Investing Tips For Beginners

We hope these straightforward strategies for beginner investors will get you started on your investing path.

Remember to keep it simple. Investing doesn’t need to be complicated!

Stick to index funds, don’t panic sell during downturns, and invest for the long-term – simplicity will lead you to better investing results!

Check out our other posts!

• Financially Free in 5 Years: How To Achieve Financial Independence
• Barista FIRE: How to Semi-Retire Early and Enjoy Life
• Coast FI in Our 20s: The Best Type of Financial Independence
• How To Invest Your First $1000 (So You Can Retire Early)