How should I invest as a beginner?

Investing can be so overwhelming and confusing... for anyone but especially for beginners. There seems to be so many different things to invest in and so many different ways to invest.

I only began investing myself in 2019 so I'm still a beginner myself but I wish I had began investing as soon as I had access to my own money. Looking back on what I invested in 2 years ago, I think I made the right decision and it was a sensible pick however I would say never invest in something you don't fully understand or just because someone else says so.

ETFs and Index Funds:

I think when you begin investing its better to start with something more safe and stable and less risky and then build your knowledge and decide whether you wish to expand your portfolio. I always think its quite a big risk to start with an active investment or trying to predict the market when you don't actually have much knowledge, experience or perhaps disposable income. When you begin investing, I would also suggest putting 5-10% of your entire worth in... play it safe to begin with and work to build knowledge instead of putting everything you have into a random investment that someone has mentioned.

This is why I think first time investor should put their first lets say $1000 into a low risk index fund or ETF. I think beginners should invest in a fund that tracks many companies. The reason for this is for diversification purposes.. by investing in a fund that tracks many companies you are not having to guess which companies will do well and you don't have to do much research as you would to pick individual stocks.

Index funds and ETFs (exchange traded funds) are perhaps the simplest ways to begin investing in the stock market. These two are often spoken about interchangeably but they basically differ on how they are traded so there’s differences between how you buy and sell these investments is different. You don't need to worry about this too much as a beginner but index funds can only be purchased or sold when the market closes each day for a set price that its worth on that given day whereas ETFs can be traded during the day when the market is open which means the price can change during the day.

Why invest in these things?

So why pick to put your money into index funds and ETFs over perhaps putting putting your first $1000 into I dunno Apple stock. Well, theres a few reasons. Although no investment is without risk, these tend to be quite a safe option, they tend to out-perform other types of investments over time. They allow you to invest in a diverse range of companies without the hassle and knowledge of picking individual stocks. They are low cost and passively managed meaning your investments are tracking a range of companies included in the index rather than your investment being actively managed whereby a person would pick where your money should go. Passive investment is low cost meaning it's cheaper because you're not having to pay for that human element.

If you haven't heard of a man called Warren Buffet he's basically the god of investment and has been very successful in investing. He believes very strongly in investing in low cost index funds. So much so that he placed a million dollar bet that the s&p 500 index fund will outperform a hand picked portfolio (handpicked by experts) over 10 years.

It seems that if you're a beginner and want to take little risk with your money, put your money into an index fund or ETF and leave it for a long period of time even decades and decades to grow.

Examples of ETFs/Index Funds:

So maybe now you're thinking 'okay cool, yes I would quite like to do some more of my own research into these so called index and ETFs but what are they even called'.

Theres quite a few out there and you'll get different options depending on which platform you use to invest in but for example:

S&P 500 Index Fund: Tracks 500 of US biggest companies

S&P 500 ETF: Same as above

FTSE 100 Index Fund: Tracks 100 of UK's biggest companies

Invesco QQQ ETF : Tracks the Nasdaq-100 Index which includes many big companies like the s&p but has different weightings per company and so on.

Fidelity ZERO Large Cap Index (FNILX) .

You can literally just google search 'list of index funds' and you can do some more research!

Thank you for reading this and I hope it was helpful!

Hayley