In 2024, the S&P 500 delivered an average annual return of 10.47% — far outpacing the 0.55% interest most savings accounts offer. That’s the difference between growing your $1,000 investment by $100 versus just $5.50.
Yet, many beginners hesitate to start investing, because they feel overwhelmed by the complexities of the stock market. The truth? You don’t need to be an expert to invest wisely.
This guide breaks down simple, effective strategies to help you start growing your wealth—without confusion or unnecessary risk. Let’s dive in.
Four Simple Ways to Invest in the Stock Market
Getting started is easier than you think! Here are four common ways to invest, along with simple steps for each approach.
Do-It-Yourself (DIY) Investing
If you like the idea of choosing your own investments, this approach gives you full control. You decide what stocks, ETFs, or bonds to buy and manage your portfolio yourself.
Getting started:
- Choose a brokerage (e.g., Fidelity, Schwab, Robinhood) and open an account.
- Fund your account (transfer money from your bank).
- Start with an index fund (like an S&P 500 ETF), which spreads your investment across many companies, reducing risk.
- If comfortable, try adding individual stocks—companies you know and believe in.
- Check your investments occasionally, but don’t panic over daily price changes.
Good for: People who like being hands-on and want to learn the market.
Understanding brokerage accounts
A brokerage account is your gateway to the stock market. Think of a brokerage as a middleman that connects you to stock exchanges.
Brokerages operate in different ways. The most common business models they follow include:
- Commission-free platforms (e.g., Robinhood). These make money from order flow (routing trades through specific market makers).
- Traditional brokers (e.g., Fidelity, Charles Schwab). These may charge fees for premium services.
- Managed accounts (like robo-advisors). These charge a small percentage (0.25%–1%) of your invested funds.
Robo-Advisors (Automated Investing)
If picking stocks sounds too complicated, a robo-advisor does the work for you. These are automated platforms that invest your money based on your financial goals and risk tolerance.
Getting started::
- Pick a robo-advisor like Betterment, Wealthfront, or Schwab Intelligent Portfolios.
- Answer a few questions about your age, income, and investment goals.
- The platform automatically builds a diversified portfolio for you (usually low-cost ETFs).
- Keep adding money over time—no need to manually manage your investments.
Good for: Beginners who want a simple, hands-off way to invest.
Human Financial Advisors
If you prefer talking to a real person and getting personalized investment advice, a financial advisor can manage your investments for you.
Getting started:
- Find an advisor through platforms like Vanguard or your local financial firm.
- You’ll typically need at least $50,000 to invest to work with a human advisor.
- They’ll discuss your financial goals and design a portfolio for you.
- Advisors charge a fee (usually 1% of your portfolio per year).
Good for: Investors with a larger portfolio who want expert guidance.
Company-Sponsored Retirement Plans (401k)
If you have a full-time job, your employer may offer a 401(k) plan. This is one of the easiest ways to start investing, and also the most common among employees.
Getting started:
- Ask your HR department if your company offers a 401(k) plan.
- Decide how much of your paycheck to contribute (start with at least enough to get any company match!).
- Choose an investment option (most 401(k)s offer low-cost index funds).
- Contributions are automated, making it an easy way to invest long-term.
Good for: Employees looking for a simple, tax-advantaged way to build retirement savings.
Tip: Keep in mind that getting started is the most important step. If you’re unsure about picking stocks, a robo-advisor or an S&P 500 index fund is a great first investment while you learn more about the stock market.
Choosing Investments Based on Your Risk Tolerance
Your investment strategy should match your comfort level with risk. For a more in-depth discussion on evaluating investment risk, check out this helpful post <link to blog on ‘passive income’>.
The table below offers a quick pointer on estimating your risk appetite, or tolerance for risk in investments.
| Risk Profile | Investment Type | Examples |
| Cautious (Low risk) | Stable, low volatility investments | Bonds, dividend stocks, index funds |
| Confident (Moderate risk) | Balanced mix of growth and income investments | ETFs, Blue-chip stocks, REITs |
| Challenger (High risk) | High growth, speculative investments | Tech startups, Crypto, Individual stocks |
Pro Tip: If you're unsure, start with index funds—they balance risk and reward effectively.
Understanding Stocks & How They Work
At its core, a stock is simply a small piece of ownership in a company. When you buy a stock, you’re becoming a partial owner of that business. If the company does well, its stock price usually rises, and you can sell your shares for a profit. If it struggles, the stock price may fall.
How Do Stocks Make You Money?
Stock price growth
If a company performs well, more investors want to buy its stock. This drives up the price. If you bought a share at $50, and it is now worth $70, you can sell it for a $20 profit—this is called capital appreciation. (Of course, you can also choose to hold onto the stock, if you gauge that the company is poised to grow and the stock value is likely to appreciate further.)
Dividends
Some companies share their profits with investors by paying out cash dividends at regular intervals (e.g., every quarter). If you own 100 shares of a company that pays a $2 annual dividend per share, you’d receive $200 per year—without selling your stock.
Evaluating the Suitability of Stocks
Unlike labels on a grocery shelf, stocks don’t advertise themselves as “growth” or “income” investments. But you can spot clues to identify what kind of stock it is; this will help you decide on whether or not a given stock aligns with your own profile and investment goals.
Growth stocks
These are stocks of companies focused on expansion. Rather than paying dividends, the companies focus on using investors’ money to grow and expand the business.
What to look for:
- Signs: High revenue growth, reinvesting profits, few or no dividends
- Examples: Tesla, Amazon, Nvidia (These companies focus on innovation and scaling).
Income stocks
These are stocks of stable companies that return profits to investors via dividends. Rather than operating in aggressive growth mode, they are focused on maintaining their size and standing in the market.
What to look for:
- Signs: Consistent earnings, long history of dividend payments
- Examples: Coca-Cola, Johnson & Johnson, Procter & Gamble
Value stocks
These are typically companies offering essential services such as banking and utilities, where demand is steady, irrespective of economic ups and downs. They are thus characterized by low but steady growth and consistent earnings.
Investors often overlook them in favor of high-growth companies, making their stock prices undervalued relative to earnings.
What to look for:
- Signs: Stock price lower than industry average, strong fundamentals, consistent dividends
- Examples: Banks, utilities, consumer goods companies during market downturns
Index funds & ETFs
Rather than individual stocks of any one company, an index fund or ETF includes a basket or bundle of stocks that spreads investment risk across multiple companies.
What to look for:
- Signs: fund’s holdings include many companies, tracks a stock index like the S&P 500, names such as “Growth Fund”, “Total Market Index” and so on
- Examples: Vanguard S&P 500 ETF (VOO), SPDR S&P 500 ETF (SPY)
Beginner’s Tip: If you’re unsure where to start, index funds are a great first investment—they grow over time without requiring stock-picking skills. Start out with a mix of index funds and stable companies before adding riskier stocks.
Basics of Stock Investment Analysis
If you've tried looking at a company's Quarterly Financial Report, the chances are that you've felt a bit overwhelmed.
The good news is that it isn't necessary to plough through pages of numbers to decide whether or not to invest in a stock–not initially, anyway.
Before investing, it is of course necessary to evaluate whether a particular stock is a good choice to invest in. The section below lays out two simplified ways to do this.
#1 Simplified Analysis: Company Fundamentals
This answers the question, “Is this a strong, reliable company to invest in?”
Think of fundamental analysis like checking a company’s report card. You’re looking for signs that the business is financially healthy and growing.
Key metrics to check
- Revenue Growth – Is the company making more money each year?
- How to Check: Look at the “Revenue” section on Google Finance.
- Profitability – Does the company earn profits, or is it losing money?
- How to Check: Look at “Net Income” in financial reports.
- Debt Levels – Too much debt can be risky.
- How to Check: Compare total debt to assets—lower is better.
Example: If a company has rising revenue, strong profits, and manageable debt, it’s likely a good investment.
#2 Simplified Analysis: Stock Technicalities
This helps answer the question, ” Is this the right time to buy this stock?”
Technical analysis looks at past stock price movements to help decide when (and how much) to invest.
Best stock price graphics for beginners
When tracking stock prices, knowing which charts to look at and what to look for can make all the difference between a quick, insightful study and a bewildering session.
- Line Charts – These are by far the best for beginners, because they show simple price trends over time. They make it easy to spot uptrends, downtrends, and sideways movement without distractions.
- Where to find them: Google Finance, Yahoo Finance, and most brokerage apps offer default line charts.
- Candlestick Charts (Basic Use) – These are useful once you’re comfortable with stock movements. Candlesticks show daily price fluctuations. For a beginner attempting to gain familiarity, it's best to ignore complex patterns and focus only on the overall trend direction.
- Where to find them: TradingView, brokerage platforms (like Fidelity, Schwab).
Beginner Tip: When just starting out, stick to simple line charts. Avoid graphics such as volume charts, range bar charts, Heikin Ashi charts and so on, which are more suitable for experienced investors–don't be seduced by the fancy names!
3 key patterns to watch for when tracking stock prices
When tracking stock prices, recognizing key patterns can help you decide whether a stock is gaining momentum, losing value, or staying stable—without needing complex trading strategies.
These are the 3 overall patterns to try and identify in the movement of stock prices over the weeks and months prior to your analysis:
- Uptrend – If the price has been rising steadily, there’s a good chance that it may rise further.
- Downtrend – If the price is falling, the likelihood is strong that it may continue to decrease; Waiting before buying such a stock might be advisable.
- Sideways movement – If the price doesn’t move in any one direction, but keeps fluctuating within a range, this indicates that the stock is stable; However, there may be a big move at any time, so caution is the watchword.
Beginner Tip: Learning the basics of fundamental analysis is a good strategy for a new investor who's just getting started, as it lets you pick strong companies. You can gradually learn technical analysis to improve investment timing. The best approach is to analyze both fundamentals and technicals.
Must Dos Before You Invest
Before jumping into the market, it’s important to build a strong financial foundation. This section lays down a few essential precautions for prudent investors.
Set up an emergency fund first
Keep 3 to 6 months of essential expenses in a savings account. This protects you from unexpected costs while your investments grow.
Determine how much you can afford to invest
Start by reviewing your monthly income and expenses. A good rule of thumb for determining the capital available for investment:
- Ensure that essentials are covered—rent, bills, debt payments.
- Put in place savings for short-term goals—vacations, upcoming big purchases.
- What surplus is left over?—It is typically recommended to invest from 10–20% of your income. Don’t worry, you could start with as little as $50–$100 per month.
- Check ‘Account Minimums’—Some mutual funds require maintaining a minimum balance (for example, $500); however, some brokerage accounts have a $0 (zero balance) requirement, for example Fidelity, Robinhood.
Remember, investing should never jeopardize your financial stability—start small, stay consistent, and increase contributions as you gain confidence.
Next Steps
By now, you’ve built a solid foundation in investing—you understand how stocks work, how to evaluate them, and how to start investing smartly. The next step? Putting your knowledge into action.
If you’d like more personalized guidance on the optimal investment strategy to suit your preferences and goals, sign up today for a one-on-one coaching call with me.