8 investment strategies for beginners

Investing is for everyone. There are different types of investments for all income levels, and you don't necessarily need to know anything in advance. Kids can learn to invest with the right approach — and their parents' guidance.

Whether you've never invested before or want to learn more about how it works, Greenlight is here to help. This guide will introduce you to different types of investments and explain the basics of investing.

Strategy #1: Start small and think long-term

As a new investor, you might feel safest investing tiny amounts, and that's okay! You can start by buying just one share of an investment product — or even less.

Thanks to a strategy called fractional share investing, you can buy part of a share of stock. The value still goes up and down as the share value changes. For example, if you buy part of an Apple share at $50 and the value doubles, your fractional share would be worth $100.

Consider thinking of your first buy as a long-term investment. Even a small fractional share can grow significantly over years or decades. There's always some risk with investing, but investing small amounts means you have less to lose.

Strategy #2: Diversify your portfolio

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As you learn about investing, you'll see dozens of recommendations to diversify your investment portfolio. 

A diversified portfolio helps you reach your investment goals by spreading your risk. If you only invest in one type of asset — say, tech stocks or commercial real estate — you could lose a lot if that industry experiences a downturn.

Instead, you might diversify your portfolio and spread your money around. You could invest in tech and manufacturing through stock markets, reserving some of your budget for lower-risk assets like bonds. There's no such thing as a risk-free strategy, but diversity helps.

Strategy #3: Invest in what you know

If you know a particular industry and its trends, why not use your knowledge to choose investments? You can even use what your kids know! 

Say your kid loves video games. What do they know about up-and-coming platforms or game technology? They might love investing in a gaming company and seeing what happens. 

Have a sports lover instead? You can invest in fantasy sports, broadcasting companies, and publicly traded teams. No matter what your kid loves, there's a way to invest in it.

Strategy #4: Consider index funds and ETFs

Index funds and exchange-traded funds — ETFs — are straightforward product types for beginning investors.

ETFs are pools of money that invest in a set group of assets. You buy shares in the fund, and the fund uses that money to buy and sell assets. You don't own shares of those assets, but the value of your ETF shares depends on how those assets perform.

Index funds also let you invest in groups of assets. In this case, the fund's value mirrors the value of an index, like the S&P 500 or the Dow Jones. 

An index measures the performance of a specific asset type based on securities representing that type. For example, the S&P 500 measures the performance of the country's biggest companies.

With an index fund, you can invest in the securities that comprise a particular index. It's a great way to diversify and manage your risk at an affordable cost.

Strategy #5: Implement the dollar-cost averaging approach

Dollar-cost averaging (DCA) seriously simplifies your investment decisions. First, you choose assets to invest in. Then, you select a dollar value and a schedule for buying that much. For example, you might buy $10 of Stock XYZ and $5 of Stock ABC every two weeks. 

Whether shares of Stock XYZ are high or low, you still buy $10 worth. Sometimes, you get more shares for your money, and sometimes, you get less. With this strategy, you'll reduce your exposure to volatility and you can worry less about trying to time the market perfectly. 

Strategy #6: Keep an eye on fees

The cost of investing varies depending on where you invest. It's essential to check fee structures before you sign up with any brokerage or financial advisors.

The more advice you get, the more you'll usually pay. But, if you want to save money, some financial institutions and online brokers let you invest with robo advisors.

"Robos" use AI to choose investment options based on your financial goals. You get personalized advice without the higher price tag of a human advisor, and you don't have to select individual stocks by yourself.

Strategy #7: Rebalance your portfolio regularly

As a beginner investor, you don't need to trade individual stocks daily, buying and selling frantically like you're auditioning for "The Wolf of Wall Street." But it's wise to check in on your initial investment plan regularly — say, every six months to a year — to see how it's doing.

Say you invest 60% of your budget in stocks and the rest in bonds, which are comparatively low-risk investments in most markets. When you check back in half a year, your highest-yield investments have doubled in value. 

You don't want to have more of your money in a potentially volatile stock. A balance in that direction wouldn't match your risk tolerance, so you sell those high-ticket shares and use some of the profits to buy bonds. You've made money, and you're still playing the long game.

Alternatively, you might change your balance if your investment goals change. If you want to take on a higher level of risk, you might sell some bonds and buy more shares of your highest-return investments. 

Strategy #8: Stay informed and keep learning

These investment strategies for beginners will help you start, but they're only the beginning. As you get more advice and experience with different asset types, you’ll have more options and be able to make varied choices.

With Greenlight Investing and Level Up, you and your kids can learn together. Even kids and teens can make their own investments on the Greenlight app — with your approval, of course. Experience supports better investment decisions, so keep learning!

Take the first step in your investment journey

As an adult, you have countless options for investing. Start by researching brokerages, looking at what investment options each one offers and how much they cost.

Remember to set your kids up, too! Greenlight helps kids invest safely with parent-supervised accounts and hands-on trading that you have to approve. 

With Greenlight, kids can see their money grow with safe investment options and gamified money lessons. It’s confidence-boosting and sets them up to take control of their financial health. Sign up for Greenlight today, and get ready to be the money-smartest family on the block.