Do You Know How to Get Started with Investing?

by Miranda Marquit · 6 comments

Researching investments

One of the ways that you can grow wealth over time is to invest. Unfortunately, many Americans don’t understand how to get started.

According to a recent survey from NerdWallet Investing, 81% of Americans don’t know that a brokerage account is needed to invest online. (This doesn’t mean that 81% of Americans aren’t investing at all. For a number of Americans, the investing isn’t really recognized as such, since it’s done through their retirement accounts.)

If you want to invest on your own, however, you need a brokerage account — and the NerdWallet information seems to indicate that a large majority of Americans don’t understand this, or know where to go to open a brokerage account.

This is a shame, as many Americans could improve their financial fortunes if they knew that there were options for them. It’s really not too hard to open a brokerage account; as long as you have identifying information and a bank account for transfers, it’s possible to open a brokerage account and get started.

Do You Have Enough to Invest?

Another interesting piece of information from the survey indicates that 39.3% of Americans don’t have enough money to begin investing. Although this isn’t even half of Americans, it does represent a significant number of people who think that they don’t have enough to invest.

Despite the fact that technology has made it possible for nearly anyone to invest, it seems as though there’s still the belief that you have to be wealthy in order to begin investing. The good news is that this isn’t the case. In many cases, it’s possible to start investing with as little as $25.

It’s also relatively easy to set up an automatic investment plan that can help you stick with your efforts. The use of an automatic investing plan allows you to take advantage of dollar cost averaging in a way that gets you on the right track with building wealth.

One of my friends started investing by setting aside $25 each week in a savings account. Each month, $100 was then transferred out of that account and invested automatically through a brokerage account. Over time, he was able to set aside more each week (and invest more each month).

Chances are that you can find the money you need to become a regular investor. When you break it down, you’ll realize that there are plenty of discount brokerages willing to work with you.

Don’t Forget to Compare Fees

As you get started with a good discount broker like TradeKing, ETrade, Scottrade, Sharebuilder, or any number of brokers, don’t forget to compare fees. The NerdWallet survey indicates that many people consider fees a major issue when investing, but that only 10% of investors really compare them.

It’s easy to get started investing, but you don’t want to just begin investing with any broker. Do a comparison to see what fees are charged. Don’t forget to check into expense ratios on fund offerings, in addition to transaction fees.

With a little planning, you can beat the average American when it comes to your investing know-how.

How did you start investing? Any tips for beginners? 

Editor's Note: I've begun tracking my assets through Personal Capital. I'm only using the free service so far and I no longer have to log into all the different accounts just to pull the numbers. And with a single screen showing all my assets, it's much easier to figure out when I need to rebalance or where I stand on the path to financial independence.

They developed this pretty nifty 401K Fee Analyzer that will show you whether you are paying too much in fees, as well as an Investment Checkup tool to help determine whether your asset allocation fits your risk profile. The platform literally takes a few minutes to sign up and it's free to use by following this link here. For those trying to build wealth, Personal Capital is worth a look.

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{ read the comments below or add one }

  • I started investing when I was 21. Didn’t have a lot of money to start with at all and had the misfortune to buy my initial holdings right before the 2008-2009 market crash. But I learned a great deal and have been very successful ever since.

  • Martin says:

    I struggled to start investing due to issues you are writing about – lack of cash, get rich quick desire, etc.

    But I found a good way to start is with commission free ETFs (originally I used Non-transaction-fee mutual funds, but I didn’t like mutual funds). ETFs are a lot better (cheaper). When you pay no commission you can literally buy 1 share every month. Once you save enough, you sell a portion of your ETF holdings and buy a stock you want. Rinse and repeat as long as you build the desired portfolio.

  • Donald Antle says:

    In Canada we see a lot of people who have a hard time coming up with the money to invest as well. One of the things we try to do is help our clients create new habits that improve their credit scores and start managing their bills. After they have the habits established we then try to educate them on proper ways to manage their money and start investing.

  • Debt Blag says:

    I think the best way to get started is to just do it. Put $20 into a no-load index fund at Vanguard or Fidelity (or the Thrift Savings Plan, if you’re eligible) and you’ll be so motivated to learn a lot more.

  • These are some really great tips! I especially like how you pointed wealth isn’t a prerequisite to start investing. So many millennials bemoan how they have too much debt to think about investing. But it’s best to make your money start working for you at an early age!

    • True, except I would be very careful to tell people with a lot of outstanding debt to investing. If you have high interest rates loans, it makes no sense to put money in the stock market. Those people will be better off by focusing 100% on debt repayment and then channeling all that money into investments.

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