“The secret of getting ahead is getting started.” That quote often is attributed to Mark Twain—though like so many other things Twain is said to have said, he almost certainly never said it. But no matter who actually voiced these words, it’s still advice that investors would be wise to follow. The sooner you get started as an investor, the more you will benefit from one of the investing world’s most valuable weapons—time.
Example: If you had invested just $10,000 in the S&P 500 in 1995, it would be worth more than a quarter of a million dollars as of late 2025.
But how should novice investors start investing? Investing money for beginners can be daunting—uncertainty can lead to inertia…missteps can lead to financial losses.
Bottom Line Personal asked investment expert Ric Edelman what novice investors need to know to get started on a smart investment path…
1. Clarify your financial goal
Before you start selecting investments, consider what you plan to use the money for. Are you saving for retirement? To send your child to college? For a downpayment on a house? To go to Disney World next summer? Specifying a goal will tell you two important things—the amount of money you need…and how much time you have to accumulate it.
“A basic back-of-the-envelope retirement savings target is 20 to 25 times the amount that you would currently need to live a lifestyle that you consider sufficient,” says Edelman. Example: If $70,000 per year would be sufficient to cover such costs, that would suggest a reasonable goal of $1.4 to $1.75 million in retirement savings.
Helpful: An online savings calculator, such as the US Security and Exchange Commission’s Savings Goal Calculator, available at Investor.gov/financial-tools-calculators/calculators/savings-goal-calculator, can help you determine how much you have to save each year to reach this target by your intended retirement date. Example: If your target is $1.4 million and you’re 30 years from retirement, the calculator will recommend contributing $940 each month to reach your goal, assuming your investments will deliver an 8% annual return. How much your investments actually earn will vary based on several factors, including which investments you select—see below for more about investment selection.
Need some extra motivation to get started investing? Try reducing the time horizon that you input into this online savings calculator from 30 years down to 20. That 10-year delay would increase the amount you would need to contribute to a retirement account each month by more than 150%. If it seems challenging to set aside $940 each month, imagine having to set aside $2,375 per month to reach the same investment goal.
2. Select investments
There are innumerable investments available, an abundance of choices that can make selecting the right investments a formidable task. But it doesn’t have to be. If you’re a novice investor…and your investment goal is still at least a decade away…and you need your investments to generate a substantial return to reach this goal, then your best bet is to simply choose stock exchange-traded funds (ETFs). These investments are a lot like mutual funds, but they’re traded like stocks. Many have very low costs relative to stock mutual funds…low or no minimum investment requirements…and are easy to buy and sell…and tax-efficient—that is, they don’t generate unnecessary tax bills for investors. “Novice investors often overlook details like fees and taxes,” says Edelman “But these factors can dramatically affect the amount earned over time.”
Which stock ETFs should you consider now? Edelman says two stand out as top choices for novice investors…
SPDR S&P 500 ETF (SPY). This is a simple, low-cost way to invest in all the stocks in the S&P 500. In other words, it’s a way to put your money into a wide selection of the biggest, most well-established US companies. Recent 10-year annualized return: 15.5%.*
Invesco QQQ Trust (QQQ). This ETF offers a way to buy a diversified portfolio of mainly technology shares. Tech companies have driven much of the stock market’s recent growth, and this is a simple way to access tech’s huge upside. Recent 10-year annualized return: 20.4%.
You can purchase shares in these ETFs through any financial advisor or discount broker, such as Robinhood, Schwab and Vanguard.
Novice investors often are advised to consider their personal psychological risk tolerance before selecting investments. That’s a mistake, warns Edelman—when novice investors focus primarily on the risks associated with investing, they often talk themselves out of putting their money into the sorts of growth-oriented investments necessary to reach large investment goals.
Other novices are tempted to invest in individual stocks—perhaps those recommended by friends or on social media. That’s also unwise for novices. In fact, stock picking usually doesn’t work very well even for experienced professional investors. Simply putting money into a diversified investment, such as an index fund or the ETFs cited above usually delivers better results than even professional investors’ best efforts to select individual stocks, according to numerous studies, such as investment research firm Morningstar’s Active/Passive Barometer semiannual report. Investors who do beat the returns of these diversified investments often do so because they’re unknowingly taking on significantly more risk than they realize, with potentially disastrous results down the road.
If you’re wondering about all the other asset classes not mentioned here—bonds, real estate, commodities and crypto, for example—those all have their place, but they’re not the best options for inexperienced investors.
If your time horizon is not long, then some low-volatility investment classes do come into play. Example: If you’re investing for a goal that will arrive within two years, then opt for the security of a money-market fund or bank CDs. Both currently provide extremely safe annual returns of 3.5% to 4%. That 3.5% to 4% return pales next to the average annual returns generated by the stock market ETFs above, but stock market investments sometimes experience sharp setbacks—Invesco QQQ has lost more than 40% of its value during a single calendar year, for example…SPY more than 35%. If you need to spend your money soon you might not have time to wait for a rebound.
3. When the market goes down, stick to the plan
When your investments lose money, follow the strategy above. When your investments make money, follow the strategy above. In fact, no matter what the markets do, don’t pull money out of your investment accounts…don’t stop making contributions to your investment accounts…and don’t start buying some other investment because everyone else seems to be making a fortune by doing so. Why include this step if it really just boils down to “follow the steps already provided”? Because this is precisely where many novice investors go wrong—they panic when the markets decline, pull out their money and miss the rebound…or they become too aggressive with their money when the markets rise and end up facing greater investment risk than they intended.
4. Create an emergency fund
Even if your investment goals are decades away, you might need money unexpectedly in the short term. Life happens. Your emergency fund should be invested in extremely liquid, low-volatility accounts, such as bank accounts or money-market funds. Having an emergency fund reduces the odds that you’ll have to remove money from your longer-term investments at an inopportune time. Ideally, your emergency fund should contain sufficient assets that it could cover your required expenses for at least six months if necessary.
