Investing

A Beginner Roadmap to Investing

A Beginner Roadmap to Investing

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Investing in the stock market has never been more accessible to the public than it is today. The resources made available for us to learn how to invest have never been more robust.

But despite that reality, investing can still be overwhelming and even scary when first starting out. This is our hard earned money we are talking about after all!

So let’s breakdown the roadmap to getting invested into 5 simple steps and questions that need to be answered before moving forward – from account opening to investment selection.

Step 1: What Type of Account Do You Need?

I wrote a previous blog post talking specifically about the many different types of investment accounts that one can open and why they would be appropriate for whatever you were trying to achieve. Please refer to that blog post for further details on each of the below accounts.

The major questions you need to ask yourself when determining what account to open are the following:

  1. Do I have a retirement account set up? If not, check with your employer to see what employer provided retirement option (like a 401K) they have available. In addition to your employer provided retirement account, you may also contribute to a Roth IRA (depending on your income levels) or a Traditional IRA as a retirement savings option.


  2. Am I self employed and looking for retirement options? Consider the idea of opening a SEP IRA or a Solo 401K. This may allow you to both save for retirement and receive a business deduction.


  3. Have I maxed out my retirement accounts and/or am I looking for an opportunity to invest without the restrictions around retirement withdrawals? Perhaps a taxable brokerage account may make sense for you. A taxable brokerage account is completely flexible in the way you contribute, invest and withdraw the funds in the account. If you aren’t looking for a tax advantaged retirement account – this may be your best option.


  4. Do I have kids that I am hoping to help through college or support a down payment on their first home? Consider a 529 college savings plan or an UTMA account to start investing for your kids future.


Step 2: Where Can You Open the Account You Need?

This will depend entirely on the type of account you need to open.


  1. Employer provided retirement plans will be set up directly with your employer. They will provide you with the information you need to set up and open an account at the brokerage firm that holds the employer 401K.


  2. Individual investment accounts like Roth and Traditional IRAs, Taxable brokerage accounts, UTMAs, SEP IRAs will be easily opened through major brokerage firms like Fidelity, Vanguard, Charles Schwab, Merrill Edge, ETrade to name a few.


  3. 529 College Savings plans are typically available through your individual state. Refer to the www.savingforcollege.com website for information around each states 529 offerings and all of your specific questions around the 529 Plan account opening process. Note: in many states, not all, you may receive a benefit to opening and contributing to a 529 Plan within your resident state.


Step 3: How Do You Fund the Account?


  1. Employer provided retirement plans will be funded from your paycheck. This will be set up directly through your employer and the brokerage firm and you will make an election as to how much you would like to contribute each paycheck. Those funds will then be directly contributed to your retirement account and invested in the investments you selected.


  2. For most, if not all, other accounts, you will likely be able to set up a direct deposit or easy transfer between your checking or savings account to your investment account of choice.


    Note: Setting up automatic transfers will be one of the easiest and best ways to create the consistent habit of investing going forward.


Step 4: What Can You Invest In Within the Account?

  1. Most employer provided retirement plans and college savings plans have a pre-determined list of investments and funds that are available for you to invest in. You will have the option to select the percentage in which you want to invest in each specific fund or investment.


  2. Most, if not all, other accounts will allow you to invest in a variety of investment options widely available on the stock market. These would include (but are not limited to)…


    • Equities/Stocks…in the form of:
    • Bonds…in the form of:
      1. Individual bonds
      2. Mutual Funds
      3. ETFs

Now the next question – which is a post for another day – would be, what are the best investments for YOU going forward and how do you determine that for yourself.


Step 5: What Happens Once I’m Invested?

Congratulations! You’re off and running. Watch the power that compound growth has over your investments over time!

Between the passive income generated from your investments in the form of interest and dividends along with the opportunity for your investments to increase in value over time through capital appreciation – you will be setting yourself up for future success.

Now I encourage you to commit to a dollar amount that feels comfortable to you going forward, or a percentage of your income, to continue to invest on a monthly basis going forward. Create the habit of investing!


Investing isn’t hard. It’s just new for some of you.

Investing for the average investor is not hard, nor is it complex. For many of you, it’s just new. Unfamiliar. Continue to actively engage in readings, articles, education around investing so that this very important part of your life no longer creates anxiety – but rather hope and excitement for its potential years from now.


Additional Resources:

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