5 Simple Steps to Start Investing Online

Written By Mary Beth Eastman
Last updated December 8, 2020

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September 25, 2017

Simple. Thrifty. Living.

What’s the most effective way to achieve financial security and build wealth? Unless you’re a very successful entrepreneur, it’s to save a healthy percentage of your income and invest. Even the best of entrepreneurs actively invest, too. Bill Gates parks — and grows — his money in stocks like Berkshire Hathaway, Caterpillar and Walmart.

The good news is you don’t need Gates-type money to start investing. You just have to follow these five simple steps.

Save a portion of your income and consistently pay your bills. This will position you best.

Depending on where you invest, you may need some money to open an account. For instance, Vanguard, a large investment management company, requires $1,000 to invest in its mutual funds. With as little as $20 (or less), you can buy individual stocks, though.

Online simulators like the one from Investopedia give you the chance to do a dry run. Remember that practice makes perfect.

In addition to learning from this practice, compare your performance to averages for index funds. For example, from 1928 to 2016, the S&P 500 had an average annualized total return of 9.8 percent.

You need your tax ID number or Social Security number, along with bank account information so you can send money to the account.

Additionally, most major investment management firms ask you to designate a beneficiary. Consider carefully who you’ll designate, and have their personal information on hand.

From individual stocks to exchange-traded funds to mutual funds, you have lots of options. Perhaps it’s best to heed Warren Buffett’s advice: “If you like spending six to eight hours per week working on investments, do it. If you don’t, then dollar-cost average into index funds.”

So, unless you’re ready be an active investor, researching and buying stocks you think will win, it’s advisable to invest in something like an S&P 500 index fund, which tracks the performance of the world’s largest companies.

From Fidelity to Ally, you have plenty of choices. Consider the sites and content that you like, as well as the level of support you need.

Also, consider the costs. Some online brokers just give you the bare-bones, with inexpensive fees. Others are more expensive but provide you with ample content, advice and data to make better investments.

Once you start investing, keep taking care of your personal finances and investment. Study along the way — and you’ll become a savvy investor with a growing portfolio.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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