Beginner’s Guide: When To Start Investing

Hello Readers,

In this article, I answer some questions that have been sent in by fellow readers. Focusing in on the idea of when to invest, offering insight on what to invest in, and what resources are available.

Key Points

  • Comparison of passive and aggressive investing.
  • A thorough checklist before investing.

When Should You Start Investing?

There is no right or wrong answer to this, but the general consensus is the earlier you start, the better. Your priorities when handling investments is that you should be focusing on long term growth and minimizing your losses.

To keep it simple, it is whenever you feel comfortable depositing money to be left alone for an extended period of time. Many people recommend starting with 10% of your annual income if feasible, but any amount is a great start as it will develop a snowball effect.

Generally long term investments aim for 10 years, but long term can vary depending on the investor.

Types of Investing Strategies

In Benjamin Graham’s book The Intelligent Investor, he categorizes two types of investors. An enterprising and a passive investor, both with their own unique set of characteristics.

Familiarizing yourself with both will be essential prior to starting out your investment journey. Prioritizing one strategy would be efficient in providing results, there is no in-between due to conflicting strategy guidelines.

Passive Investing

Anyone that is looking to do minimal work with average results, look no further! Passive investing is simple, it has basic requirements for you to check, when deciding what companies to buy.

  • Is the purchase of high quality?
  • Does it provide a long track record of dividends?

I have been implementing dollar cost averaging as my main method of investing. Dollar cost averaging is depositing the same amount of money each month into your portfolio.

Following dollar cost averaging, allows you to refrain from joining in on the overly optimistic outlook of speculators. Consistently depositing money into your portfolio has been proven to be the most efficient way of investing.

As an advocate for long term growth, I believe placing your hard earned money into high quality companies or index funds will do you well. Since you are not racing anyone but yourself, losing money because you are young is counterproductive.

Enterprising Investing

Many new investors tend to go towards enterprising investing, as it is the more attractive approach. Although it is attractive it has varying results, depending on how much work you are willing to put into your craft.

Contrasting to passive investing, this strategy requires a lot of research and time. You are constantly looking at companies that are projected to have high growth and provide above average returns. After which you must ascertain companies to pick from, which is a daunting task already.

Following Graham’s suggestions, I believe that this will help clarify what companies to purchase.

Checklist for the enterprising investor.

  • Does this company have a soundproof business model?
  • Does the company fulfill it’s objectives when stated?
  • Is this a large company that is currently unattractive?

The idea of making a quick buck off the market is compelling to many. Yet, with this in mind, many fall short due to inexperience and emotional ties when they invest.

To reiterate, either strategy works well if done correctly. Passive investing is much easier to pick up for new investors compared to the latter. Enterprising investing is daunting, but a rewarding experience once you have done everything correctly.

Checklist Before Investing

  • Make sure your fixed expenses are paid for in advance.
  • Ensure that your emergency fund can cover 3-5 months of fixed expenses at minimum.
  • Review a brokerage before committing to one.
  • Assess your risk tolerance.
  • Research your companies before purchasing.
  • Test out investing by using paper money.
Photo by Pixabay on

Cover Your Fixed Expenses

It goes without saying, that you should prioritize your basic means of living and bills first. As it would be difficult to maintain a portfolio efficiently, without worrying for your own basic needs.

If you find yourself in a situation, where your expenses are not allowing you to save any money. You must deep dive into your expenses and figure out what you need to cut back on.

It might be daunting at first but it is a worthwhile task to do. Since you must be honest and demanding of yourself in order to be financially stable.

Emergency Fund

After you have covered your fixed expenses and other extenuating bills, make an emergency fund your following priority.

This will help you develop a safety net in case anything happens. Especially now, amidst the pandemic, when uncertainty is at all time highs, market volatility is insane, and the lack of common sense is running rampant.

Photo by Pixabay on

Anything can happen, which is why you have to create that safety net to help yourself in the case of emergencies.

I recommend setting your emergency fund up with an online high yield savings account, as the brick and mortar banks offer mediocre rates. Rates may vary due to the Fed cutting rates.

I prefer to use Ally bank, due to the 1.25% interest rate, $1 minimum to have an existing account, available on app store, and minimal fees.

Choosing A Brokerage

One of the fun parts of investing, choosing a company that you can depend on when making transactions. Ensure that the brokerage is FDIC insured in the case that the brokerage fails.

Although many of them offer the same type of services, the quality and fees vary from each brokerage.

A list of well known brokerages,

Online brokerages that I use,

Other well known online brokerages,

Remember to do your due diligence and look into what each company offers before signing up with them. Your ability to maximize the utility of your money is essential, equally having peace of mind that your money is safe is of utmost importance.

Determining Your Risk

Losing money is an inevitable event when investing, managing how much you will lose is what you have control of. Maintaining a cool head during times of downturns is essential when you are considering investing.

It would not make any sense for you to buy high and sell low. If you are the type of person to sell the second your investments enter the red, then I advise you to not consider investing. Seeing that that is an unsustainable method of investing, you are consistently losing your money due to lack of control.

Here are some questions you need to ask yourself:

  • How much am I willing to lose?
  • How worried will I be when the market has a severe decline?
  • How diversified do I want my portfolio to be?
  • How often do I plan on tracking my portfolio? Daily, weekly, monthly?

These are some starting questions you should consider answering, as they will be able to determine how comfortable you are with managing your portfolio. After answering these questions, I encourage you to check out this website for a thorough analysis of your investment outlook.

Check your risk tolerance.

Research Your Companies

Doing your homework prior to purchasing a company is essential in minimizing your losses. It is important to know what you own, as it will help you determine when the company should be sold or bought.

Photo by Peter Olexa on

If you were to base your purchases off of price fluctuation, with no understanding of the business model, balance sheet, and P/E ratio. The chances of you having consistent returns is unlikely, since you are basing your investment picks off of speculation.

It would not make any sense for you to purchase a company that is priced “cheaply” just to discover it has not generated any revenue in the past three years.

To demonstrate how easy it is to find a company’s balance sheet, you can go to Yahoo! Finance and search up any ticker symbol. Go to the financials tab and click on balance sheet.

Check out TROW’s financials here: TROW’s balance sheet

Where I Get My Information

Fortunately, we are in a time that financial resources are vast and free. My recommendations would be to avoid paying for any of those “gurus” or “financial experts” programs, as there is so much information out there that is free.

Start off by looking into common business websites for your daily news. Here’s a list of business websites to keep up to date.

My favorite YouTube channels for business news or personal finance suggestions.

Use Paper Money

Before you dive into investing, I recommend using paper money as a trial run. Paper money allows you to simulate an investment account with what you plan on purchasing. Simulate the account with how much money you intend on depositing into your portfolio, this way you will have a more realistic outcome.

Although it is a simulation, you should treat it as if you were investing with real money. In doing so, you will do your best to minimize losses and develop an understanding of the basics to investing.

I have used MarketWatch in the past for a class that was trying to see who could choose the best stocks for the quarter. At the time, I did not own an investment account, but it helped me understand the importance of diversifying and owning high quality stocks. I highly recommend using this as your simulator, as it is easy to use and there are people hosting games everyday.

Also, if you plan on day trading, which I have always advised against for new investors. Consider using paper money prior to investing with real money, this way you will safeguard yourself from large losses at the start of your career.

Check it out here: MarketWatch


The general consensus towards investing is to start earlier, rather than later. Time is your best asset, allowing your accounts to take advantage of compound interest the younger you start is the best thing you can do.

Prioritize building up your emergency fund in a high yield savings account. Minimize your financial expenses to increase your savings and investing amount. Avoid day trading if you are not willing to put in the time and effort into researching your companies.

Investing is a rewarding experience if done correctly, as long as you finish the race with enough wealth, then all is well.

In writing this, I hope that this will be a timeless article that you can always refer back to for information. As always, I hope you found my article informative. Until next Thursday, take care!

Published by Steven Mai

Hello! My name is Steven Mai and I am currently enrolled at University of Washington. My interests are business, investments, financing, and personal development. I hope through this journey I will be able to enhance my skills as a writer and share my ideas on a public platform and gain the necessary skills in life through interactions with the community.

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