How to Invest Money: A Beginner’s Guide

What does investing mean to you? Does it mean poring over complicated charts and doing hours of research so you can unearth the next Amazon or Google?

Do you think it means you’ll need thousands of dollars to get started? The truth is, investing doesn’t require a lot of upfront costs and isn’t a time-consuming process at all. 

Thanks to the rise of robo-advising services and online portfolios, it’s easier and more affordable than ever to invest for the future. With a small initial investment and some research, anyone can begin investing.

We’ve created a quick and easy guide to help you choose the best way to invest for your personal situation, such as MoneyLion managed investing.  

What’s the Best Way to Invest Money?

Investing is an individual experience. The investment strategy that’s right for your friends, co-workers or parents might be totally different than the one that’s perfect for you. The right way to invest will depend upon a number of factors, including your investment goals, your age and how much risk you can handle. 

Not sure how to begin? Use these three quick and easy steps to determine how you should invest.  

Step 1: Decide Who Will Invest Your Money

When you open an investment portfolio, the first thing you need to decide is who should invest your money. You usually have two options.

DIY investing

As the name suggests, self-directed investors choose their own stocks, bonds and funds themselves. They research what they want to buy and project growth potential independently.

DIY investors spend a lot of time doing research to choose which companies, industries and sectors they think will grow in the coming years. Though self-directed investing one way to get a completely customized profile, it’s not recommended for beginners or those who don’t have a lot of time to think about their investments.

Managed portfolio investing

Managed investing is a more hands-off way to invest your money. Finance professionals curate managed accounts on your behalf. You usually choose a portfolio based on your risk tolerance.

For example, if you have plenty of years until retirement, you may want to choose a portfolio that allows you a greater potential for both gains and losses. On the other hand, if you’re nearing retirement, you may choose a more conservative approach to ensure that you’ll be able to retire on time without losing money. 

When you choose a managed account, all you need to worry about is scheduling deposits. Your robo-advisor will allocate the money depending on the portfolio type you’ve chosen. Managed portfolios are good for people who don’t have the time or interest that it takes to make profitable stock, bond and fund choices.

The benefits of DIY investing include a more personalized portfolio, which can mean higher returns if you know what you’re doing. However, if you don’t take the time to effectively manage your money, you might end up losing more than you gain.

DIY investing might be right for you if you have a background in finance or you’re very interested in learning more about the intricate side of investing.

Managed portfolios give you access to professional-approved investment choices without research. You can also customize a managed portfolio based on your risk tolerance. Most novice investors should choose a managed portfolio to be safe.

Step 2: Determine Your Comfort Zone and Timeline

Once you’ve decided how you want to invest your money, it’s time to decide on your investing strategy. You can choose an investment strategy focused on growth or you can choose one focused on stability and small gains over time.

Here are the factors you need to consider when you decide how you want to invest.

Your timeline

The biggest factor in your investing decision? When you need your money back.

For example, if you’re investing so you can buy a new car and you need your money back next year, you should invest more conservatively to avoid a horribly-timed downturn in the stock market.

On the other hand, if you’re investing for the future, you can take more risks and invest more aggressively.

Your age

Your age is especially important if you’re investing for retirement. If you only have a few years until you retire, you want to invest only in the most conservative stocks and funds. This will ensure that you can retire on time and that you won’t lose too much money.

If you’re younger, you have plenty of time until you need to withdraw your money to live on during retirement. Younger investors can “ride out” dips in the stock market and take more risks with their money.

Your income situation

You don’t need a ton of money to start investing. However, you do need to invest your money for longer periods of time to maximize growth. You can afford to be riskier with your investments if you have a steady source of income and an emergency fund.

You may want to invest more conservatively if you’re in between jobs or you don’t have an emergency fund, in the event that life throws you an unexpected bill or fine and you need to pull your money.

Always remember — there’s a possibility that you may lose money. Though using a managed account can limit your risks, it’s better to lean toward conservative investments if you’re older or you need to withdraw your money sooner.  

Step 3: Invest for the Risk You’ve Set

Now that you understand your goals, risk tolerance and timeline, it’s time to choose your portfolio allocation. You can fill your portfolio with two basic types of securities, and you can also combine those securities into funds.

Individual stocks

Individual stocks are shares of a corporation. For example, buying one share of Apple stock means that you own a small piece of the Apple corporation. Buying individual stocks is riskier because there is no contractual obligation to pay you back or earn you any money.

A corporation you’ve invested in could go bankrupt and you’d lose all or most of your money. However, that corporation could also skyrocket in value, earning you lots of money on your investment.

Bonds

A bond is basically a loan you give to the government or a corporation. When you buy a bond, the entity selling you the bond has a legal obligation to pay you back with interest. Buying bonds is the safest investment you can make but has the lowest potential for growth.

Funds

You can also invest in mutual funds and exchange-traded funds, or ETFs. Funds are different than individual securities. When you buy a fund, you pool your money together with other investors to increase your return. In exchange, you buy a share of the fund and get a percentage of every stock and bond the fund decides to invest in.

Every fund features its own unique mix of individual stocks and bonds. Buying funds is a great way to protect yourself by diversifying your portfolio.

There are two major types of funds:

  • Mutual funds: Mutual funds are funds managed by a team of finance professionals or advisers. Mutual funds often have high initial minimum investment requirements.
  • Exchange-traded funds (ETFs): ETFs are funds that trade like individual stocks. They don’t have an initial investment — you can buy an ETF for as low as the price of a single share.

Let’s look at three types of investment portfolios by risk and compare allocations. 

Low-risk investments with slow growth

Choose conservative bond and bond-based ETFs if you want to avoid a high-risk portfolio. Because your bond issuer must pay back the value of the bond, you have insurance that you won’t lose everything.

If you want to focus on protecting your money and making slow but steady gains, make a large percentage of your portfolio bond-based. 

Moderate-risk investments with balanced growth

Want to balance growth and safety with your investment? Focus on creating a relatively equal balance between bonds and stocks.

Investing in equities and bonds equally allows you room to grow and also safeguards a large percentage of your money. 

High-risk investments with exponential growth

Want the highest potential for return on your money? Focus on investing in individual stocks and equity-based ETFs. Stocks increase in value much faster than bonds, which means you can see significantly more of a return if you have a higher percentage of equity investments.

Keep in mind that these types of aggressive portfolios also have the potential to lose money just as quickly as they earn it. 

Finding the Right Place to Invest Your Money

Choosing what to buy isn’t the only decision you need to make when you begin investing. You also need to decide on an investment account provider.

Look for these key features.

Investing flexibility

From an unexpected fine to an upcoming vacation, there may be some instances when you simply can’t afford to add money to your investment portfolio. Look for an investment platform that doesn’t require recurring deposits. This gives you more freedom to choose when and how much you want to invest. 

Customize your portfolio

Give yourself the comfort of knowing that you can customize your portfolio according to your risk tolerance. Look for an investment account provider that allows you to customize your investment strategy. 

Put your investments on autopilot 

Unless you’re prepared to make a major commitment to research and education, choose a managed portfolio. Look for an account provider that offers a hands-off approach to investing. 

No minimum investment required 

Most people don’t have thousands of dollars lying around that they can use to begin investing on a whim. Look for an investment account provider that allows you to start investing without a high minimum. 

Managed investing

Why risk your money if your account provider is just going to take all your gains back with fees? The best investment account providers allow you to keep more of your money with very low fees. 

Investing in Your Future with MoneyLion

When you choose to invest with MoneyLion, you get all of these features and much, much more. Here’s how to open your managed investment account and start growing your money.  

Apply for a Membership with MoneyLion

You’ll need a free MoneyLion Core membership, which includes a Zero-Fee Checking account and a Managed Investment Account, to take advantage of investment services.

Don’t worry — opening and maintaining these accounts is easy, and there are no minimum balances. Download the MoneyLion app from the Google Play or Apple App store and follow the in-app instructions to open your account. When you join, MoneyLion will ask you a few questions and design a personalized investment portfolio that fits your needs. 

Establish Your Risk Tolerance

Your risk level will be determined via a set of quick questions in the app. Then, after you’re invested in that recommended portfolio, you can go in and adjust your risk tolerance if you choose.

MoneyLion allows you to choose between seven different levels of risk, varying from a super conservative all-bond portfolio to a very risky all-equity option. Consider your individual situation, choose your risk level and allow MoneyLion to start putting your money to work.  

You can view and adjust your portfolio in the app any time. MoneyLion will also monitor your account and keep you aligned with your goals by rebalancing as needed.

Making the Best Investments For You 

MoneyLion doesn’t require a minimum initial investment, which is a great reason to open your MoneyLion managed investing portfolio. No experience is necessary, either — 90% of ML members are first-time investors. 

Are you ready to get started? A MoneyLion managed investment account could be the right first step for you. Download the MoneyLion app today to achieve a simpler way to invest.