Best Investments for Beginners

We’ve put together some of the best investments for beginners.

Updated: May 18, 2024
Matt Crabtree

Written By

Matt Crabtree

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When you’re just getting started, investments can be incredibly overwhelming. There are a lot of different asset classes, and some of them are more risky than others.

 It’s a good idea to start small and simple, and then you can work your way up to more advanced techniques if that is something you are interested in doing.

For example, a lot of people trade in options and forex, but these are not necessarily where you should start as a beginner. 

Instead, focus on the more common types of investments, learn how the market works, and then build on that knowledge and skills as you go. There is a lot to know, and while many tools provide you data and research, you still need to understand the basic concepts before you dive in. 

We’ve put together some of the best investments for beginners. If you’re just getting started, consider working with these first.

Best Investments for Beginners

  1. Mutual Funds
  2. ETFs
  3. Retirement Plans
  4. Individual Stocks
  5. Robo Adviser Accounts
  6. Bonds or CDs

1. Mutual Funds

Mutual funds are a really great place to start. Instead of choosing one stock, or not being able to afford many shares of a single stock, you can let the fund make those decisions. When you invest in mutual funds, you do so based on your goals. 

With funds, you can choose something that is high yielding, something that is designed for growth, or another category.

Here are some examples of different classes of mutual funds

  • Index mutual funds
  • Equity mutual funds
  • Target date mutual funds
  • Commodity mutual funds
  • Asset allocation mutual funds
  • Environmental, social, and governance mutual funds

Each of these different classes operates in a different way, or will have different types of holdings within them. A mutual fund is made up of multiple holdings. This could include stocks, indexes, commodities, and other mutual funds. There are other investments that could also be found in a mutual fund. 

This may seem overwhelming, but a single mutual fund can diversify your holdings in a way that no single stock could possibly do. That being said, you still may want to be mindful of creating a strategy, and choosing mutual funds that will help work towards your goals. 

As a beginner, you may want to consider something like index mutual funds, or even target date mutual funds, especially if you are setting up a long-term investment. For example, a target date mutual fund is designed to grow for several years when you may need it, and then shift towards income closer to maturity. It’s a popular choice for retirement accounts. 

You can do a lot of research and find more about the most common popular funds, and even the types of assets that they hold within them. 

2. ETFs

ETFs are slightly similar to mutual funds, but they only hold exchange traded funds. Just like mutual funds are a large group of funds, ETFs are a large group of holdings as well. Ultimately, ETF managers watch the market, sift through the data, and then place stocks and put them into the fund. 

If you want to be invested in a variety of funds, or don’t want to have to come up with the thousands of dollars to invest in the top stocks, this is a great way to get a little bit of the share. For example, AutoZone shares were trading for £2,013.75 at the close of market 12/9/22, and many people can’t afford one, much less multiple shares. 

We certainly can’t promise that an ETF will have this specific stock, but you get the idea, right? These funds invest in a wide array of stocks and them pop them together into a fund. You purchase the ETF, and you instantly have a variety of stocks in your holdings within that ETF. 

You can find ETFs through several different companies, and they all have different holdings. They also are designed for different goals or strategies. You can find high-yield options, interest income options, growth options, and more in the ETF industry. 

A single ETF investment gives you relatively broad exposure, without having to purchase all of those individual stocks on your own. Before you purchase just any ETF, take the time to look at it, check out the reputation, the history, and even get familiar with the holdings it has. 

While the assets within vary and give you more exposure, it does not necessarily mean that it is a diverse holding.

An ETF with a specific focus will be heavily invested in that area, so you may want to hold multiple ETFs in different areas to be more diverse. 

3. Retirement Plans

If you’re just getting started in investing, you should be working to plan for your future. Setting up a retirement plan is a great way to get into the market, play around some with investing, and work towards that day when you might retire. The earlier that you are able to start investing for retirement, the more likely you are to be ready when the time comes. 

You can tap into retirement calculators to try to figure out how much you need, but the industry recommendation is to invest approximately 10-15% of your annual income. That means if you make £100,000 in a year, you should be investing anywhere from £10,000 to £15,000 for your retirement. 

This can be hard to do, especially when you’re just scraping by between your paydays right now.

But if you are able to defer to a retirement plan through your employer, this is ideal. Otherwise, you may want to set up a small IRA and just make small contributions to it out of each payday that you have. 

An employer retirement plan is advantageous because the money that goes into the plan is typically pulled out before your earnings are taxed. This might help reduce your tax liability, but it also makes that amount you defer less noticeable on your paycheck. 

In a retirement plan, a traditional IRA, or a Roth IRA, you can choose investments suitable to your age and how close you are to retirement. At a bank, you can place your IRAs into a CD-type product. 

Or, you can work with an online broker platform (or an adviser) and set up your own in the investment world. Here, you can choose what to place in your retirement account. If you are 30 years from retirement, consider focusing on growth for now. You can transition to income and reduced risk as you get closer to retirement. 

4. Individual Stocks

As a beginner, you may want to start with some individual stocks to invest in. You can do this several different ways, but we recommend finding a low-cost online broker to use as a beginner.

Many online brokers have very low minimum deposits, as well as helpful tools for beginners to use as they start playing the market. You will want to be mindful and pay attention to what you are investing in. Don’t just haphazardly choose things because you see good prices, or you heard something that one time about them. 

Do your due diligence, pay attention to forums, look at some research, and make informed investments into stocks. Do you plan to stay invested into the stock for a long time, or do you hope to play the market as you go? 

Your approach will be solely up to you, but have a good handle on your intentions before you jump in. Investing in individual stocks can sometimes feel like a roller coaster. These can often be volatile, and they will move up and down based on what the market or that business is doing. 

Before you invest in stocks, make sure you can handle the ups and downs without anxiety and stress.

If you feel like watching those highs and lows is going to be bad for your mental health, you may want to consider a different choice for investing to start with. 

You can easily diversify your portfolio, and be invested into the market, without purchasing individual stocks. 

5. Robo Adviser Accounts

If you want to invest, but simply don’t really know where to start, you can always go with a robo adviser account instead. Robo adviser accounts allow you to get automated assistance and management within your investment portfolio. 

These types of accounts work differently from various providers. Some of them will be fully managed, while others will just offer advice and then allow you to make changes at will.

You may never have invested before, and this could be a good way for you to watch and learn. 

Investing doesn’t mean that you have to figure it out on your own. It also doesn’t require you to manage investments on your own. A robo adviser account is geared towards your risk profile and the goals that you enter when you open an account. 

This is a great option for someone who really wants to invest, has a little bit of money (or even a lot) to put into the market, but has no idea what they want to do. That’s why it’s great for beginners. You don’t have to know what you’re doing; you just have to be willing to let the managers help you out. 

You don’t have to figure out how the market works, read all the research, and then try to decide what to invest in. The robo adviser does all of that for you. Instead, you put the money in, sit back, and let this app do it all for you. 

One of the nice things about robo advisers is they typically have fairly low fees, and you can get into them without having to build up a huge savings first. There are plenty of these apps out there to consider if this feels like the right fit for you. 

6. Bonds or CDs

Let’s be honest. Not everyone has a high tolerance for risk and the stock market can often pose challenging risks. It’s notorious for those ups and downs. Even things like mutual funds and ETFs can experience those ups and downs, although it’s not typically as extreme as some stocks. 

It’s a volatile place, and it can be incredibly nerve-wracking. Instead of investing in these things that make you nervous, or just aren’t the right fit for you, you can go with a more conversative approach. It’s totally up to your preferences! 

A conservative option for some beginner investors could be to invest in bonds or CDs. These are similarly designed instruments, although there are some slight differences. In most cases, both of these investments are designed for income. However, you can reinvest and take advantage of the compounding interest as well. 

If you’re specifically wanting to invest, you can look for bonds in the market, as well as brokered CDs.

These do have some risk, but there are more secure than most stocks and other funds. These assets bear interest rates, and will have a specific maturity date as well. 

If you choose to invest in a bond or CD, you need to be sure that you can stay in until that maturity date. Otherwise, you may have to pay a penalty for cashing out early. The rates are more steady and secure in these investments, because the majority of them have a specified interest rate. 

The risk of a bond or CD is the underlying asset and whether it goes bad, so choose wisely based on quality. You could also invest in a bank CD if you prefer. One more thing to note here. Many times, the minimum investment is £500 or more, so this is something to be aware of. 

Tips to Prepare for Investing as a Beginner

Now that you know some investment places to start, let’s consider other details that might be valuable for a beginner to know. 

First things first. There is no way to invest in the market and have absolutely no risk. This is something everyone should know. You can certainly do research and try to make informed decisions with less risk, but there is never a guarantee. Investing is meant to be long-term, although some people do play the market in short-term capacities. 

Check out some of these tips to prepare you for your investing efforts. 

Learn Your Risk Tolerance

One thing that you will want to figure out before you invest is just what your risk tolerance is. When you work with an adviser or investment professional, they are required to ask you questions to gauge this before they make any recommendations. 

When you set up a new online broker account, you will also probably have to answer some questions for the same reason. If you have a low risk tolerance, you will want to stick to investments that are known for lower risk. This means you probably won’t be trading in forex, futures, options, and other similar assets. 

If the thought of a stock plummeting in your portfolio makes you want to vomit, you might want to stay away from stocks. Every investor will have their own risk tolerance. Some people love the thrill of the game, while others want to make a little income without having severe anxiety while doing it. 

What Are Your Financial Goals?

As you start investing, what are your goals for doing so? Are you just interested in playing the market a little bit and seeing what happens? Maybe your plans are to set up a retirement account and watch it grow. 

Most investors have their own goals, which define the strategy behind the investment approach that they use. You can have both long-term and short-term goals that help you choose when and how to invest.

These goals should define the things you do or do not do, to some extent. 

What are you looking to achieve with your new investment account? Keep your focus on these goals, and don’t let opinions or other strategies sway you. It’s also ok to have multiple accounts and have a different goal with each of them. However, as a beginner, start with one simple goal and then build from there. 

Do You Want Help? 

You might be a beginner investor, but that doesn’t mean you have to figure it out alone. You can create your own accounts, where you are 100% in charge. But you don’t have to. 

Aside from self-management, you can choose partially managed and fully managed accounts too. You can also choose accounts where you get advisement, but you still make your own decisions in the end. 

Robo adviser accounts are one we mentioned above as a great investment for beginners. You could also be fully managed with an individual rather than AI if you prefer. Or, find yourself somewhere in between where you get the advice, and then say yes or no. 

Of course, you’re welcome to go it alone also. Most online brokers have a multitude of helps, tips, research, and data to help you be successful in the trading industry. 

How Much Do You Need to Invest? 

This number is going to vary from platform to platform. However, there are plenty of online brokers that have minimum deposits of £0. Technically speaking, you need enough money to purchase a share of something. That being said, some investments like ETFs and mutual funds can also be purchased in partial shares. 

There are brokers that allow you to invest small amounts and still be in the market.

This is a good way to build up your portfolio. However, if you want something specific, you need enough money to purchase that specific share. 

For example, Apple shares are currently trading around £120. So, if you want 5 shares, you need approximately £620 to make that happen. Or, you can choose a fund or ETF that holds Apple within it, and probably spend a bit less to get invested. 

Don’t Forget Taxes

Something that many investors aren’t familiar with is taxes. But you should know that when you invest in the market, you could potentially have a tax liability from doing so. If you have capital gains, earned interest, or anything else, you will potentially have to pay taxes on those amounts. 

Of course, if you take a loss, you might also be able to claim that as a deduction to you. While you don’t have to know all the ins and outs of tax law regarding investments, you should at least be aware that you may have to pay taxes from investment income and gains. 

Don’t Invest More than You Can Afford to Lose

Finally, our last tip for beginning investors is to not over invest. Remember that nothing in the investment world is guaranteed. You might make some money, but there is a chance you could lose it all. 

You choose your investments based on goals and risks, but you may come out empty-handed. When you are investing, be sure that you already have an emergency fund and nest egg set aside for those unexpected circumstances. 

Then, you can invest and not have to worry as much about losing money. When you invest, make sure that you can afford the loss if it happens to you. That’s why we recommend investing for the long-term, or making sure your emergency fund is already covered. 

Does this mean you should just skip investing all together? No, that’s not what we’re trying to say. But don’t invest money that you might need for your bills and immediate expenses.

Your living expenses and day-to-day budgets simply don’t belong in the stock market. 

Conclusion

Everyone has to start somewhere. As a beginning investor, you have a lot of decisions to make. But remember that you don’t have to jump all in all at once. Just because you know someone who is day trading, doesn’t mean that’s the right fit for you. 

Be sure to take the time to educate yourself, watch trends, and pay attention to the market. Invest in things that are suitable for your goals, as well as your risk tolerance. As long as you invest for your purpose, you should do ok.

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