Investing can seem intimidating if you're starting with little or no money. However, building wealth through investing is not reserved for the rich — it's accessible to anyone willing to learn and take action. In this article, we’ll walk you through a step-by-step guide on how to start investing from zero, including actionable tips, real-life examples, and practical strategies.
Why start investing early?
- Power of compound interest: If you invest $100/month at a 7% annual return, in 30 years you'll have over $120,000 (source: Investor.gov compound calculator).
- Financial freedom: Investing helps grow your money faster than traditional savings accounts.
- Inflation protection: Keeping all your money in cash leads to loss of purchasing power over time.
Step 1: Define your financial goals
Before investing, clarify what you want to achieve. For example:
- Retirement in 30 years
- Buy a house in 5 years
- Build an emergency fund
Each goal will influence your investment strategy and risk tolerance.
Step 2: Build an emergency fund first
Before investing, save 3–6 months’ worth of living expenses in a high-yield savings account. Example:
- If your monthly expenses are $1,500 → aim for $4,500–$9,000 emergency fund.
- Use services like Ally or Marcus by Goldman Sachs that offer 4.5%+ APY.
Step 3: Pay off high-interest debt
Focus on paying off credit card debt or personal loans with interest rates above 8%. Example:
- $5,000 debt at 18% APR → pay it off before investing because returns would likely be lower than the interest you're paying.
Step 4: Choose the right investment account
Here are common options for beginners:
- Brokerage account: e.g., Robinhood, Webull, or Interactive Brokers — great for full control.
- Robo-advisors: e.g., Betterment, Wealthfront — automated investing with low fees.
- Roth IRA: Tax-free growth; ideal for long-term goals like retirement.
Step 5: Learn the basics of asset allocation
Diversify your investments across asset classes to reduce risk. A simple beginner-friendly portfolio could include:
- 60% stocks (e.g., S&P 500 ETF like SPY or VOO)
- 30% bonds (e.g., AGG or BND)
- 10% international stocks or REITs
Step 6: Start small and stay consistent
You don't need thousands to begin. Here’s how to start small:
- Start with $20/month using apps like Acorns or Stash.
- Use dollar-cost averaging: invest a fixed amount regularly regardless of market conditions.
- Example: Invest $100/month in VTI (Vanguard Total Stock Market ETF) — even modest contributions grow significantly over time.
Step 7: Keep costs low
Watch out for fees that eat into your returns:
- Avoid mutual funds with high expense ratios (>1%).
- Prefer index funds and ETFs with expense ratios below 0.2%.
- Check total cost of ownership: trading fees, management fees, and withdrawal penalties.
Step 8: Educate yourself continuously
Stay informed but avoid information overload. Recommended resources:
- Books: “The Simple Path to Wealth” by JL Collins, “I Will Teach You to Be Rich” by Ramit Sethi
- Podcasts: The Motley Fool, Afford Anything, ChooseFI
- Websites: Bogleheads, Mr. Money Mustache, Investopedia
Asset returns over the past 20 years
How different asset classes performed in the long term.
Equities delivered the highest long-term returns, especially in the US. Safe assets like bank deposits lagged behind inflation.
Sources: Bloomberg, MSCI, S&P, Bundesbank, Bank of England, IMF
Final thoughts
Starting to invest from zero is entirely possible with the right mindset and tools. Focus on consistency, keep costs low, and let time work in your favor. Remember, the best time to start was yesterday — the second-best time is today.
FAQ
Can I start investing with $100?
Yes! Many platforms allow fractional shares. For example, you can buy a portion of a share of Amazon or Apple for just a few dollars.
What’s the safest way to invest as a beginner?
Index funds and ETFs are considered safe due to their diversification. Avoid individual stocks until you understand the market better.
How much should I invest each month?
As little as $20/month is fine to start. Aim to increase it gradually based on your income and financial goals.
