How to Start Investing: A Guide for Beginners - NerdWallet

How much you should invest depends on your investment goal and when you need to reach it.

One common investment goal is retirement. If you have a retirement account at work, like a 401(k), and it offers matching dollars, your first investing milestone is easy: Contribute at least enough to that account to earn the full match.

As a general rule of thumb, you want to aim to invest a total of 10% to 15% of your income each year for retirement — your employer match counts toward that goal.

If you don't have a 401(k), you can invest for retirement in an individual retirement account, like a Roth IRA

If you're investing for another goal, you likely want to avoid retirement accounts — which are designed to be used for retirement, and thus have restrictions about when and how you can take your money back out — and choose a taxable brokerage account. You can remove money from a taxable brokerage account at any time.

A common misconception is that you need a lot of money to open an investment account or get started investing. That's simply not true.

Many online brokers, which offer both IRAs and regular brokerage investment accounts, require little to no minimum investment to open an account

It’s important to understand each instrument and how much risk it carries. The most popular investments for those just starting out include:

Stocks:

• A stock is a share of ownership in a single company. Stocks are also known as equities.

Bonds:

• A bond is essentially a loan to a company or government entity, which agrees to pay you back in a certain number of years.

Mutual Funds:

• A mutual fund is a mix of investments packaged together. They allow investors to skip the work of picking individual stocks and bonds, and instead purchase a diverse collection in one transaction.

Your investment strategy depends on your saving goals, how much money you need to reach them and your time horizon.

If your savings goal is more than 20 years away (like retirement), almost all of your money can be in stocks.

If you’re saving for a short-term goal and you need the money within five years, the risk associated with stocks means you're better off keeping your money safe, in an online savings account, cash management account or low-risk investment portfolio.