This is not investment advice. The information provided is for educational and informational purposes only and does not constitute a recommendation to buy or sell any financial product.
Starting to invest is more straightforward than most people expect. You can open a brokerage account, fund it, and buy your first investment in less than an afternoon. The key steps are: deciding what you are investing for, choosing the right account type, selecting a broker that matches your needs, and starting with diversified, low-cost investments. This guide walks through each step.
What to Do Before You Invest
Before opening a brokerage account, address these fundamentals:
Build an emergency fund. Keep three to six months of living expenses in a savings account. This protects you from having to sell investments at a loss if an unexpected expense arises.
Pay off high-interest debt. Credit card debt charging 20% or more eliminates any reasonable investment return. Pay it down before investing beyond any employer retirement match.
Define your goal. Are you investing for retirement in 30 years, a house down payment in five years, or general wealth building? Your timeline determines how much risk is appropriate.
Investing should use money you do not need for at least three to five years. Money you need sooner belongs in a savings account or money market fund, where it is not exposed to market fluctuations.
Step 1: Choose Your Account Type
The account type you open determines how your investments are taxed and when you can access the money. The most common starting points:
Individual taxable brokerage account: The standard account. You deposit money, buy investments, and pay taxes on gains and dividends in the year they occur. No contribution limits, no withdrawal restrictions. Start here if you are new to investing.
Roth IRA: A retirement account. You contribute after-tax money, it grows tax-free, and withdrawals in retirement are tax-free. Contributions (not gains) can be withdrawn at any time without penalty. Income limits apply.
Traditional IRA: Contributions may be tax-deductible. Investments grow tax-deferred. You pay taxes on withdrawals in retirement. Withdrawals before age 59 1/2 generally incur a penalty.
If your employer offers a 401(k) with a match, contribute at least enough to get the full match before opening an IRA or taxable account. The match is essentially additional compensation.
Step 2: Choose a Broker
A broker is the company that holds your account and executes your trades. What to look for:
- $0 account minimum. Most major brokers have eliminated minimum deposits.
- Commission-free stock and ETF trading. Standard at all major US brokers.
- Fractional shares. Allows you to buy a portion of a share, which is useful when starting with small amounts.
- Accessible platform. The interface should be straightforward to use and navigate.
- SIPC insurance. Required for all US brokers — protects your securities up to $500,000 if the broker fails.
Our list of best brokers for beginners covers the top options. Fidelity, Charles Schwab, and Robinhood each serve beginners well for different reasons, which our broker selection guide explains in detail.
Step 3: Open and Fund Your Account
Opening a brokerage account takes about 10 minutes online. You will need:
- Your Social Security number or tax identification number
- A government-issued ID (driver's license or passport)
- Your employment information
- Bank account details for funding
After your account is approved — usually within minutes for a standard taxable account — you transfer money from your bank account via ACH transfer. The transfer typically takes one to two business days to clear.
Start with an amount you are comfortable with. Most brokers have $0 minimums, and fractional shares let you start with as little as $1.
Step 4: Choose Your First Investment
For a first investment, keep it simple. Three approaches that work for most beginners:
Broad market ETF: A single ETF like VTI (Vanguard Total Stock Market ETF) or ITOT (iShares Core S&P Total US Stock Market ETF) gives you ownership of thousands of US companies in one purchase. This is the simplest starting point — one fund, broad diversification, low cost.
S&P 500 index fund: Funds like VOO (Vanguard S&P 500 ETF) or FXAIX (Fidelity 500 Index Fund) track the 500 largest US companies. Slightly less diversified than a total market fund but still a solid foundation.
Target-date fund: A single fund that holds a mix of stocks and bonds and automatically adjusts toward more conservative investments as your target retirement year approaches. Available through most brokers' fund lineups.
Avoid the temptation to pick individual stocks as your first investment. A diversified fund spreads your risk across hundreds or thousands of companies.
Step 5: Place Your First Trade
In your brokerage platform:
- Search for the fund's ticker symbol (e.g., VTI).
- Select "Buy."
- Choose a market order (buys at the current market price — appropriate for ETFs during market hours).
- Enter the dollar amount (if the broker supports fractional shares) or the number of shares.
- Review and submit.
Place your first trade during regular market hours (9:30 AM to 4:00 PM Eastern, Monday through Friday) for the most efficient execution. After-hours trading is available at some brokers but carries wider spreads and less liquidity.
Step 6: Keep Investing Consistently
A one-time investment is a start. Consistent investing over time — regardless of market conditions — produces more reliable results. This is called dollar-cost averaging: investing the same amount on a regular schedule, buying more shares when prices are low and fewer when prices are high.
Set up automatic transfers from your bank account to your brokerage account, and — if your broker supports it — automatic investments into your chosen fund. $100 per month into a broad market ETF, sustained over decades, can grow substantially through compound returns.
Common Mistakes Beginners Make
Waiting for the "right time" to invest. Time in the market historically outweighs timing the market. A lump sum invested today has, on average, outperformed waiting for a dip over long periods.
Checking investments daily. Daily price movements are noise. Investing is measured in years, not days. Checking too frequently leads to emotional decisions.
Selling during market downturns. Markets decline periodically. Selling during a decline locks in losses. Staying invested through downturns has historically been rewarded.
Buying individual stocks without understanding them. A diversified fund removes the need to pick winners. Stock-picking adds risk without necessarily adding expected return.
Ignoring fees. Expense ratios on funds matter over decades. A fund charging 0.03% costs $3 per year per $10,000 invested. A fund charging 1.00% costs $100. The difference compounds.
Frequently Asked Questions
How much money do I need to start investing? Most major brokers have $0 minimums, and fractional shares let you start with $1. Our minimum investment guide covers this in more detail.
Which broker should a complete beginner use? Fidelity, Charles Schwab, and Robinhood are three common starting points. Our best brokers for beginners page compares them.
Should I invest in stocks or funds? For most beginners, a broad market ETF or index fund is more appropriate than individual stocks. It provides diversification without requiring stock-picking skill.
What if the market drops right after I invest? Short-term drops are normal. Over 20+ year periods, broad market investments have historically recovered from every decline. The most reliable approach is to continue investing on your regular schedule.
Is investing risky? All investing involves risk — investments can and do lose value. However, a diversified portfolio of low-cost funds held for the long term has historically delivered positive returns. Cash held in a savings account is "safe" from market risk but loses purchasing power to inflation over time.
Should I use a robo-advisor instead? A robo-advisor builds and manages a portfolio for you for a fee (typically 0.25% of assets per year). This can be appropriate if you want a hands-off approach. A self-directed account with a single broad-market fund achieves similar diversification at lower cost.
Where to Start
Open an account at a broker with no minimum deposit. Fund it with an amount you are comfortable investing for the long term. Buy a broad market ETF. Set up automatic monthly investments. Read our broker selection guide to compare brokers, and browse the account types overview if you are considering a retirement account.
Investing involves risk. The value of investments can go up as well as down and you may receive back less than your original investment. Past performance does not guarantee future results. This guide is educational and does not constitute investment advice.