Here’s the No. 1 Way To Start Investing Young Without Taking on Too Much Risk in 2026
There’s never been an easier time to be a young investor than in 2026. Many teenagers are actually learning about stocks before they can even open their own brokerage accounts, according to NBC San Diego.
But if you’re going down that road, the No. 1 way to start investing without taking on too much risk is to diversify. Here’s how to do it, along with some other helpful tips for beginners.
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Start With the Broad Market, Not Individual Stocks
The stock market as a whole can be volatile, but individual stocks can provide even more of a roller-coaster ride. When you’re just starting out, it’s usually a good idea to diversify your investments, rather than risking everything on a single stock.
With individual stocks, all it takes is one bad earnings call, management misstep or shift in market sentiment to torpedo your investment, one that might never recover. But broad market indexes, like the S&P 500, have historically made new highs again and again, even though they might have some bad years along the way.
Gen Z investors generally have higher risk tolerances than older investors, and that can lead to speculative all-or-nothing bets that don’t really qualify as “investing.” While it can be tempting to take your chances on a high-flying stock that could double or triple, that’s a gamble. And at a young age, it’s not even necessary to take on those big risks, thanks to the effects of compounding.
Learn About the 'Miracle' of Compounding
The biggest advantage that young investors have over older ones, even professionals with years of market experience, is their age. Over time, the compounding effects of market returns can really be quite remarkable.
According to Fidelity, the S&P 500 has averaged a return of roughly 10% per year since 1957.
If you invest just $100 per month at a 10% average annual return starting at age 20, your money would grow to over $1 million by age 65. And that’s without ever increasing your small contribution, even when you’re earning a much bigger salary. But the bottom line is that time, not a bigger paycheck, is your biggest advantage when you’re young.
Choose the Right Accounts
For young investors, a Roth IRA is one of the best accounts you can choose to get started. For 2026, the IRS raised the contribution limit to $7,500 for people under 50, but you will need to have earned income to qualify.
The tax features of the Roth IRA make it particularly attractive. You won’t pay income taxes on any earnings you generate in the account, and when you withdraw money after age 59 ½, you won’t have to pay any tax on it either. However, there is a 10% penalty, in addition to a tax on your earnings, if you withdraw money before that age.
If that seems like too long to tie up your money, consider using a regular taxable brokerage account. You’ll have access to your money at any time, but you won’t get the tax benefits of a Roth IRA. You’ll also have to be disciplined about keeping your money in the account for long periods of time rather than using it as a slush fund.
Avoid Overtrading
One of the hardest parts of investing is to let your money do the work. Younger investors are generally more risk-averse than older ones, according to FINRA. They tend to trade in and out of stocks more frequently and often buy riskier investments, like options. Overtrading tends to hurt long-term returns, according to TradingView, so this is something you’ll want to try to avoid.
To help prevent this scenario, set up automatic transfers from your bank account to your investment account and do your best to forget about your portfolio. You should still monitor your account, perhaps quarterly or monthly, but avoid the urge to look at it all day every day, as you’ll be more likely to trade in and out of it.
The Bottom Line
Long-term investing success doesn’t require picking the next Nvidia before it blows up on TikTok. All you need is a consistent, diversified investment strategy that you can leave alone to compound over decades. It may sound boring, but “future you” is likely to be very happy that you picked a simple, lower-risk investment strategy.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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