If you want a shot at becoming wealthy, you need to do more than simply earn money.

You may be thinking to yourself – this is not the time to talk about investing.

You’re panicking about your job, that argument with your best friend, your cat behaving even more weirdly than usual – and don’t even get me started on your love life.

But really, there’s NO GOOD time to talk about investing. Ultimately, you have to be disciplined enough to hold onto the money you earn – to then take the next step in learning how to make your money grow.

And the best way to grow your money is by learning how to invest.

It’s as simple as that.

When you become an investor, you’ll be using your money to acquire things that offer the potential for profitable returns through one or more of the following:

  • Interest and dividends from savings or dividend-paying stocks and bonds
  • Cash flow from businesses or real estate
  • Appreciation of value from a stock portfolio, real estate, or other assets

As you learn to become an investor, you will begin to devote your limited resources to the things with the largest potential for returns. That may be paying down debt, going back to school, or fixing up a two-family house.

Of course, it may also mean buying stocks and bonds, or at least mutual funds or exchange-traded funds.

Thanks to advances in technology, you can start to invest with as little as $5 a month and a smartphone. It’s our job to help you filter out the noise, learn the basics, and make good investment decisions from the start.

With no fees on accounts with low balances and easy automatic investing, Wealthfront is our top pick for the best all-around investment account. If you want to learn more about them, read our Wealthfront review.

So here are the basics of how to invest — wisely.

Why you should invest

Investing allows you to significantly grow your money over time thanks to the power of compound returns.

Compounding can be called the Eight Wonder of the World. Thanks to the power of compounding, a single penny could grow into millions of dollars, given enough time. You may not live that long, but consider the following examples.

Say you start investing when you’re 16…

As unrealistic as it may sound to start investing that young, say you got a small inheritance and you decided to invest it—if you put $5,000 in an account with an interest rate of 7% and contribute an extra $200 a month, after 30 years you’ll have a little over $284,000.

Using a more realistic example, say you start investing when you’re 22, right after graduation…

You start out just putting $50 a month into your 401k, with a 50% company match.

If you raise contributions by the same amount as any pay raises, you’ll have more than $1 million by age 65. That assumes annual raises of 3.5% and an 8.5% return on 401(k) investments.

While there are many factors to consider – a simple example like this demonstrates the power of compound interest if everything goes right.

So if you want to start saving now, you could even have a whole year’s salary saved by the time you’re 30…Take a look at the chart below to see how.

How To Save A Year’s Worth Of Salary In Your 401(k) By Age 30
AgeSalaryYour 6% Contribution3% Employer MatchTotal ContributionsYear-End 401(k) Balance
22$30,000$1,800$900$2,700$2,889.00
23$30,900$1,854$927$2,781$6,123.60
24$31,827 $1,910$955$2,864$9,707.07
25$32,781$1,967$983$2,950$13,670.03
26$33,765$2,026$1,013$3,039$18,045.62
27$34,778$2,087$1,043$3,130$22,869.71
28$35,822 $2,149$1,075$3,224$28,181.14
29$36,896$2,214$1,107$3,321$34,021.95
30$38,003$2,280$1,140$3,420$40,437.60

When should you invest?

Now that you know why you should invest, how about when to invest?

The answer to that is pretty simple. The right time is now.


Investing sounds more intimidating than it is. Yes, there’s always a potential risk for loss, but there’s an even bigger potential for serious gain.

Doing anything for the first time can be terrifying, especially when it involves your hard-earned cash. But here’s some advice for first-time investors.

Investing for the first time

Investing is like religion—people have some strong opinions and may even belong to one of many sects or schools of thought. Here are a few that come to mind:

  • The Doomsday Preppers – these people are convinced our financial system will collapse, so they stick all their money in gold and real estate.
  • The Gambling Day-Traders – these are most often the people you see in movies, with their desks or walls covered in monitors and TVs, watching every second of the day and seeing how the stock market changes.
  • The Indexers – these are people who simply invest in everything in order to take advantage of the slow and steady increase in the overall value of the markets.

/links/vanguard-how-to-investThe team at Vanguard offers a Personal Advisor Service that provides one on one support throughout the investment process.  They’ll tailor an investment strategy that fits your needs and can help you learn all you could ever want to know about investing in stocks, bonds, ETF’s and a variety of other opportunities.

The minimum investment to utilize Vanguard’s Personal Advisor Service is $50,000 and the annual fee is just 0.3% (So $150 per $50,000 invested).

If you already belong strongly to one of the above camps, you may not find the investing resources on Money Under 30 useful. If, however, you have an open mind and are interested in learning simple strategies for successful lifelong investing — without any gimmicks—then read on.

If you’re on the fence about where and when you should invest, make sure you’re taking advantage of guaranteed interest rates.  High yield online savings accounts are currently offering over 2% with FDIC insurance (which means your money is insured by the federal government).

Marcus has always offered strong interest rates on their deposit accounts and they currently have a 1.05% APY on all balances for their online savings account. If you’re OK with putting your money away for a CD Term, they also have APY’s in the 1% range for terms of four and five years.

Marcus can also offer you a loan if you’re in the market for one.

Risk vs reward

It’s true: Investing involves risk. We’ve all heard stories about investors who lost half of their fortunes in the Great Depression or even more recently in the Great Recession. We’ve heard about the Bernie Madoffs of the world and investors who lost everything to a scam. Although you can never eliminate risk entirely, you can significantly reduce risk if you invest wisely.

The great thing about investing young, is you’re likely investing in longer-term investments—like your retirement account. These investments are less risky than quick-fix stock trading by people who really don’t understand what they’re doing.

While investing can be risky, it’s best to just deal with that risk, because not investing can cost you a lot more money than losing a little money on a bad investment.

We talked about compound interest above, and the key rule to that is — the sooner you start to save the more your money will earn over time. Take a look here to see the big difference between someone who started investing at 25 versus 35. You could be missing out on hundreds of thousands of dollars if you start saving later.

Wondering what to do with your investments when the stock market drops?

What do you invest in?

Our philosophy is to keep investing as simple as possible

Create broad diversification through a mix of low-cost mutual funds and ETFs, while keeping it fun by holding individual stocks with up to 10% of your assets.

The most important factor in being a successful investor is not the stocks and funds you pick. Successful investing depends on:

  1. Choosing proper asset allocation – the overall mix of bonds, stocks, and cash you hold in your portfolio.
  2. Making and sticking with an automatic investment plan – this way you avoid making terrible, emotionally-charged decisions – like selling at the bottom of a market crash.

The investing information on Money Under 30 barely scratches the surface of all the knowledge out there about investing, but that’s OK. We’re not trying to train the next class of hedge fund generations so much as give the average person enough knowledge and confidence to begin investing on your own.

Mutual funds

How to invest money - Mutual fund

A mutual fund is a type of professionally managed investment that pools your money with other investors. The fund’s managers then use the pooled money to buy securities for the group.

It’s best to start out investing in mutual funds or exchange-trade funds rather than individual stocks and bonds until you get your feet wet. These types of funds enable you to invest in a broad portfolio of stocks and bonds in one transaction rather than trading them all yourself.

They’re not only safer investments (because they’re diversified), but it’s often far less expensive to invest this way. You’ll either pay just one trading commission or nothing at all (in the event you buy a mutual fund directly from the fund company), as opposed to paying trading commissions to buy a dozen or more different stocks.

Although mutual funds can be purchased through any brokerage account, you’ll save money on trade commissions by buying funds directly through a mutual fund company like E*TRADE or You Invest.

Bonds

How to invest - Bonds

Whether it’s corporate, municipal or treasury, bonds are a great way to leverage your investment against the success of other entities.  Bonds are a debt security which raise capital for others.  They finance new companies, local projects and even the US Government.  While no investment is risk-free, government bonds (T-Bonds) are just about as close as you can get.

 worthy bondsYou might also want to consider investing in Worthy Bonds.  Worthy Bonds are $10 each, and offer a fixed rate of return of 5%.  Each bond has a 36-month term and interest is paid weekly.  Cash in the bond any-time you’d like (even before maturity) and you’ll never pay a penalty.

The money you invest in Worthy Bonds is used to fund American businesses and Worthy is very picky about which businesses to lend to.  They only invest in companies whose liquid assets far exceed the amount of the loan; making the risk low for a terrific 5% return.

Accredited and non-accredited investors are welcome and you can buy as many $10 bonds as you’d like.

Robo-advisors

How to invest - Robo Advisor

If you are trying to really get started as a first-time investor, one option for you is to go the robo-advisor route. The easiest way to understand the nuts and bolts of robo-advisors is that they are financial advisors that use algorithms to provide you with the very best advice about financial investments.

Robo-advisors are extremely popular at this point because they make investing accessible for everyone. These easy-to-use apps are more convenient, more affordable, and they have lower investment minimums than standard financial advisors.

Plus there’s no investment broker and the costs are lower as compared to traditional management firms.

There are a bunch of great robo-advisors out there, but as is true with absolutely everything, not every robo-advisor is right for every investor.

So we’ve put together a list of our favorite robo-advisors and who they’re perfect for.

How much do I have to invest? Where should I invest?
Beginner: I have less than $500 to investBetterment
Intermediate: I have more than $500 to investWealthfront
Advanced: I have more than $1,000 to investM1

Betterment

How To Invest: The Smart Way To Make Your Money Grow Betterment 210

With Betterment, there is no initial investment that you need to open up an account. There is an annual fee that is relatively low when comparing rob-advisor fees overall; the management of your entire account is only 0.25% each year.

You can invest in stocks and ETFs across thousands of companies both in the US and international markets. You’ll have a customized portfolio based on your preferences and risk tolerance, and your account is fully managed.

Wealthfront

How To Invest: The Smart Way To Make Your Money Grow Wealthfront 210

Here’s the great part about Wealthfront: if you’ve got $500 to invest, you can open an account with Wealthfront. And until your investment reaches a grand total of $10,000, there are no fees that you’ll have to pay at all.

This means that if you’re a new investor, the deal may very well be exactly the best enticement to get started. And if you’ve invested $10,000 or more, Wealthfront’s fee is quite competitive at 0.25% a year.

M1 Finance

How to Invest The Smart Way to Make Your Money Grow M1 Finance 210

If you’ve got $100, you can start investing with the M1 Finance which is a kind of combination of using a robo-advisor and a traditional brokerage, and the platform is super user-friendly.

M1 Finance makes it easy for new investors to get started because they are willing to chip in to help you buy stocks that may cost $200 even if you have $100. And there are no fees at all for either opening an account or trading.

Stocks

How to invest - Public Stocks

If you decide you want to DIY and venture out and buy individual stocks, we recommend you take a slow and steady approach. Don’t put more than 10% of your portfolio in individual stocks until you get very comfortable with what you’re doing.

A great place to start is by reading about value investing, where we focus on heavy amounts of research and a “buy-and-hold” mentality.

It’s important not to be afraid of the stock market, it really is one of the best places to grow your money.

So, if you want to DIY your investing, there are a lot of great brokerages for you to consider. You can typically do everything without ever having to speak to a person, which is nice for some people.

Webull

How To Invest: The Smart Way To Make Your Money Grow - Webull

Trade stocks, options, exchange-traded funds, or cryptocurrencies with Webull. You’ll pay no commissions, and there are no minimum deposit requirements. Just set up an account and start building your portfolio.

At the heart of Webull is its dashboard, which gives you an overview of your portfolio’s performance. You can add stocks to your watchlist, analyze charts, and place orders directly within the dashboard. It’s accessible through both the desktop and mobile apps.

You can open a cash or margin account through your Webull login. Webull also supports traditional, Roth, and rollover IRAs. There are restrictions as to the number of certain types of accounts you can open.

Download the Webull app to open an account.

E*TRADE

How To Invest: The Smart Way To Make Your Money Grow - E*TRADE

One of our favorite online brokers is E*TRADE – a first-rate investment brokerage firm offering you the opportunity to invest in stocks, bonds, mutual funds, ETFs, as well as futures and FOREX trading.

Their pricing is excellent, charging $0 per trade along with $0.65 per contract and their trading platform is top-notch and they offer a ton of commission-free ETFs and mutual funds. Plus there is no minimum deposit required.

TD Ameritrade

TD Ameritrade Lgoo - TD Ameritrade

For young investors, TD Ameritrade is an option because there no minimum investment whatsoever to even open up an account. So you don’t have to wait to get started.

TD Ameritrade has an impressive number of tools available to use to do research about strategic ways to invest. You can also access a whole array of third-party platforms for free that will help you stay updated about trading and investing.

Real estate

Best Real Estate Investment Options

Real estate investing is one path to great earnings – even makes millions.

But what’s really changed is that you don’t have to be a millionaire to start investing in real estate.

Investing in real estate is a long-term investment that investors invest in for cash flow (the money you make from rental properties every month after all expenses are paid). Cash flow will also increase over time because rents will go up with inflation while your mortgage payments stay the same.

Like any investment, though, it’s important to know the risks. And consider if you have what it takes to be a landlord.

Roofstock

How To Invest - Roofstock

If you want to go the real estate route, check out Roofstock. Their motto is that you can build wealth through real estate. Indeed, they make the process of buying and selling homes easy. They even list homes that are already rented out so that you don’t need to go through the hassle of finding someone to cover the costs of your mortgage. Roofstock features all the current properties you can purchase – including the monthly rental income for each home, neighborhood ratings, and total yearly return you can expect.

But you don’t need to actually buy a home to get into the real estate market.

Fundrise

How To Invest - Fundrise

Another option you have available is investing through a crowdfunding company like Fundrise.  With Fundrise, you can start a portfolio with $500 minimum to invest in a diverse portfolio of U.S.-based real estate projects. For a real estate market traditionally available only to super-wealthy investors, Fundrise is allowing even beginning investors to tap in. And Fundrise offers a 90 day satisfaction period, which makes your investment even more stress-free if you decide that real estate is not the way you end up wanting to go.

Crowdfunding

Crowdfunding allows you to invest in peer-to-peer ventures such as lending and real estate.

How To Invest - LendingClub

Headquartered in San Francisco, Lending Club, a US peer-to-peer lending company, and allow everyday investors to give personal loans to others. These loans go towards anything from debt consolidation to funding a wedding. You can read our full review of Lending Club here.

Retirement accounts

Invest Money - Retirement

An IRA provides certain tax advantages as an incentive to save for retirement. The downside is there are limits on how much you can contribute to the account each year and when you can withdraw the money.

401(k)

A 401(k) with an “employer match” might be the ultimate investing vehicle, period. That “match” is key, though – many employers will fund your account dollar for dollar, matching any contributions you make yourself.

If you’ve got most of your investment money in a 401(k) account, we recommend giving blooom a spin. They’re a robo-advisor that’s totally dedicated to managing 401(k)s – that is, unlike other robo-advisors, they won’t touch the money you have in an IRA or other retirement vehicles.

You can get a free 401(k) analysis with blooom, and if you decide to move ahead with them they’ll charge you a reasonable $10 a month to manage your account on an ongoing basis. Right now you can also get $15 off your first year of Blooom with code BLMSMART

Traditional IRA

With this type of account, your contributions may qualify for a deduction on your tax return. In addition, there’s the potential that your earnings can grow tax-deferred until the time you need to withdraw them at retirement age. The primary argument with a Traditional IRA (vs. a Roth IRA) is that most feel they’ll be in a lower tax bracket when they retire, so paying taxes on this money at stage will be cheaper than paying them when they’re earned (considering the up-front deduction).

Roth IRA

With a Roth IRA, your contributions are after-tax and the money can potentially grow tax-free while you save. The big benefit here is that withdrawals at retirement time are tax-free, assuming you meet the required conditions. This is my number-one recommended retirement account for most people.

Rollover IRA

This is an account that’s created by rolling over another account, such as a company-sponsored 401(k). For example, if you have a 401(k) with an employer who you leave, you can roll that money over into a Rollover IRA.

If you’re new to investing and want to begin putting money to work for the long-term, an IRA is where to start. Read more about the best places to open an IRA here.

DIY or get help with your investments?

Invest with Traditional human financial advisors

It’s important to know when it’s best to have a financial advisor and when it’s best to opt for a different investing platform. If you’re looking for real financial advice and you have quite a bit of money to handle, a face-to-face advisor will be much better at explaining things to you than any electronic form of advisor.

Some people may choose to invest with a financial advisor because they want face-to-face interaction, professional advice, and don’t mind paying a premium for someone handling their money. Oftentimes, people with large sums of money to invest will hand it over to a financial advisor so they don’t have to do the work.

How To Invest Money - Paladin Logo

So how do you find a financial advisor? One way is with a company like Paladin that helps match you with qualified financial advisors to move you forward with your investment decisions. Most of the time, it’s the “not knowing what to do” that slows you down or stalls you from doing anything at all. So having a company like Paladin helps you to get to that person to figure out what to do on the investment front. The key, obviously, is not to be in a stand-still ever.

How To Invest Money - Facet Wealth Logo

Another place to look for an advisor is through Facet Wealth. They’re an online financial planning firm that offers financial help for anywhere between $1,200-$6,000 each year.

Compared to other options, Facet Wealth is much more affordable. Plus, they charge no upfront fees to set up an account, and their advisors receive no commission, so you’ll definitely be in good hands.

Finding an advisor is relatively easy to do as long as you know the right questions to ask. If you’re a millennial and are looking for a financial advisor (although, make sure you really need one), here’s a roadmap of the best advisors for you.

Bottom-line advice

If you’re new to investing and can afford to begin putting money away for retirement, I recommend everybody begin investing with a Roth IRA.

If you already have a retirement account or need to invest money for another goal (like buying a home or starting a business), a regular brokerage account will do. Keep in mind that your capital gains – the money you earn when you sell a security for more than you paid for it – is taxable, as will be certain dividends you receive.

Next steps

These are the basics of investing—there’s plenty of directions you can take now that you know what you’re doing.


Need a financial advisor?

The above investment accounts are all great for do-it-yourself investors. However, if you find yourself wondering if it’s time to get professional help making a financial plan, it may be time to work one-on-one with a financial advisor. You can learn more about how to find a qualified financial advisor to help with your investment goals here.

Get Matched With 5-Star Financial Advisors In Your Area

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Recommended Investing Partners

  • Recommended M1 Finance gives you the benefits of a robo-advisor with the control of a traditional brokerage. M1 charges no commissions or management fees, and their minimum starting balance is just $100. Visit Site
  • No Minimum Low-fee robo-advisor with no minimum investment. Creates fully-automated portfolios based upon your desired allocation. Visit Site
  • $500 Minimum Wealthfront requires a $500 minimum investment and charges a very competitive fee of 0.25% per year on portfolios over $10,000. Visit Site

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About the author

Total Articles: 353
David Weliver is the founder of Money Under 30. He's a cited authority on personal finance and the unique money issues he faced during his first two decades as an adult. He lives in Maine with his wife and two children.

Article comments

We invite readers to respond with questions or comments. Comments may be held for moderation and will be published according to our comment policy. Comments are the opinions of their authors; they do not represent the views or opinions of Money Under 30. Comments have not been reviewed or approved by any advertiser, nor are they reviewed, approved, or endorsed by our partners. It is not our partner’s responsibility to ensure all posts or questions are answered.
14 comments
Wael says:

amazing guide. been through several guides and articles, but this is the greatest!!!!!! thank you!!!

Martin liquidacom.com says:

This is huge. I like the calculator the most. I knew every single % matters. But when you type it and calculate it, it is really shocking how it all changes. We need to fight for every single percentage. In the long term, it will evaluate.

What I really miss here, is P2P lending. I am not saying it is the perfect and only way to invest, but it should nicely be added to the portfolio. Especially these days, when it is possible to get guaranteed appreciation and over 10% p.a.

Jonathan says:

Wow, that’s a very thorough guide! learned a lot! Thanks!

Raymond says:

Hi,
Most of them are limited to U.S only, it’s a challenge to me.

G.B. says:

You are writing there that it’s best to invest or whatever than to… lose a little bit of money on a bad investment? Let me take a look at those words again. Yes, I said that right. Guys, but what if people invest a lot of money or substantial money and lose all it? How do you know that all investment losses are small ones? Also I recently read that investors may lose more money than their investment capitals, is that true? You can get a heart attack by reading this. Forgive me, I’ve never invested in anything. Possibly losing how much more than investment capital? If a little bit more, it may not be a problem for a lot of people but what if we are talking about a serious problem?

Also I am a little bit puzzled by one thing that I probably read a lot about investing. “Invest money so that you will be rich in 100 years!”-that’s how all online investment materials sound like. Guys, there is certainly nothing wrong with living 100 years and being rich when you are 100 years old but PEOPLE HAVE GOT BILLS TO PAY WHEN THEY ARE YOUNG AND MIDDLE-AGED TOO! No one dreams to be poor in their 20s, 30s, 40s, and 50s, don’t they? People dream to have houses BEFORE they retire, people dream to go to college BEFORE they retire, people dream to have children and most people biologically can have children BEFORE they retire-aren’t all these things very expensive and require money? I know I saw websites online that promise people to earn thousands of dollars by investing in bitcoin, for example, within short periods of time but… Yes, we all want to have a bright future, provided we have one, modern world is so turbulent that we are not even guaranteed that we will live past our childhoods and young years. No, I am not pessimistic, this is reality but we all need to deal with lives presently.

Garry Harris says:

Just what I was looking for and needed

Austin Manning says:

Hello David, first off I want to say that this was a well constructed guide. However, I do have one question while I was reading through the post. You mention to use mutual funds when investing but I was curious as to why as it is my understanding that mutual funds can take away from your savings due to high expense ratios. Is there something that I am misunderstanding?

Abel Salazar says:

Hey Austin, first off, any investing is better than having your money in a regular savings account or just in cash, regardless of the expense ratio. However, mutual funds definitely can have high expense ratios. My suggestion is to look into index funds. Index funds are like mutual funds but are managed through algorithms and software as opposed to active people who need to be compensated for their work. This allows them to have significantly lower expense ratios (0.2 – 1.0%). Vanguard and Fidelity are competing right now in the index fund market. You might want to take a look at what they have. Good luck!

Grizzle says:

Great guide you have here to investing, except one thing I was uncertain about. You recommend mutual funds but I wonder why. They have high management expense ratios that eat away at your savings. Why not go for ETFs over mutual funds when they find that index funds outperform anyways?

Caroline says:

Best guide I have ever seen. thx.

Manu Yadav says:

Hi David, A really helpful blog and i personally do like the mutual funds. I have been investing in them for a while and also will son invest in the stocks as well. Thank you for this relevant and helpful information.

Bryan Bouchard says:

Great post! Full of useful information on the complex subject of investing. Personally, real estate is my investment class of choice. What is yours?

Kein Charlie says:

Hi David, Nice guide. I always recommend Investing to exchange market, because are probably the best way to invest bucks to grow financially big. There’s always risk/reward. I like the picture you added (from $5K to $245K in 10 years), because, growing financially big is not possible overnight. It’s actually much better to focus on long time investment. I expect a bitcoin related post (it’s may be going up again). Thanks

ERICK MADU says:

I like the online platform. It is very nice