If you grew up in an American school system like I did, then you did not get any formal education around personal finance and investing.
While some schools are starting to introduce a curriculum around various money skills, it’s still very rare to find it.
And as you grow older, you’ll find that knowing the basics of investing is going to be pivotal in your future financial health. But without having someone in your life (say a parent or other family member) who knows investing, you are basically on your own.
The problem most people have is that learning how to invest can be intimidating. There are lots of fancy terms, strategies, and numbers that might concern you that you’ll lose money.
However, you can teach yourself investing and it won’t be as challenging as you may think. Below I’ll cover the steps you can take that will have you master investing 101.
Are you ready to teach yourself investing? Do you want to control what your money does? I put together some investing 101 steps that helped me learn what I need to know to manage my own investment portfolio.
While you can easily get comfortable in a year, learning about investing is an ongoing endeavor. Even after 7+ years, I’m still learning and refining my knowledge. Let’s get into the steps to learn about investing.
1. Buy and read investing books
One of the best first steps you can take to teach yourself how to invest is to buy and read investing books. Each book and author will give you insights and different views into the stock market and how to best put your money to work.
The challenge for you might be what books are worth your time and will teach you the right ways to invest?
After all, there are thousands of books on personal finance, investing, and the stock market. But do not worry, as you do not need to read every single investing book in the world!
During my initial learning phase, I discovered many books to choose from about investing. Yet after all these years, these are the few I’d recommend reading that cover everything you’ll need for long-term success:
- The Bogleheads’ Guide to Investing
- I Will Teach You To Be Rich
- The Simple Path to Wealth
- Money Master the Game
- The Only Investment Guide You’ll Ever Need
Extra: If you want to learn more about those books and others, check out my guide to the best investing books. And if real estate is more of your interest, I also have a list of the best real estate investing books too.
2. Learn the investing terminology
One of the most confusing aspects of learning how to invest can be all the terminology. Media sites, books, financial advisors, and T.V. money personalities will throw a lot of fancy words your way.
Bull market? Bear Market? Index Funds? Roth IRA? Dollar-Cost Averaging? What do these all mean?
Before you have an anxiety attack and quit learning in frustration, take a step back. There are lots of investing terms, but all of the concepts are fairly easy to understand.
Highlight words and definitions in the books you bought and come back to them again. Re-read the terms you might not understand and do further research online if you need to. While you could go a step further and make flashcards, you don’t need to go that far.
Instead, the more you read these terms in books the more natural it becomes to understand and remember what they mean. You’d be surprised how much investing vocabulary you’ll retain just from reading books.
3. Attend any company meetings for employees
Does your company have a 401k? Or other financial benefits? If so, definitely make sure you are taking advantage of that offer. This is especially true if your company offers a match on retirement investing.
But pending your company, you might not realize they offer learning sessions about your retirement plan and other benefits.
Sometimes this is led by the HR person responsible for the employee benefits and other times whatever retirement plan they utilize, they’ll have a representative come in to explain it and answer questions. If your company does this, attend the sessions and ask questions.
Now not every company has the best retirement plan, but it’s a good way to start learning more. And if there are no sessions like this, connect with your HR rep and see if they can share more information for you to learn from.
Tip: Want to see how your 401k or IRA is performing? Want to see if there any hidden fees you don’t realize are being taken out? Connect your account to Blooom, which will analyze your portfolio for free.
4. Start reading fund prospectuses
When you start investing in mutual funds, index funds, stocks, or bonds, your broker will typically have something called a prospectus that goes along with the investment.
According to Investopedia:
A prospectus is a formal document that is required by and filed with the Securities and Exchange Commission (SEC) that provides details about an investment offering to the public. A prospectus is filed for offerings of stocks, bonds, and mutual funds. The document can help investors make more informed investment decisions because it contains a host of relevant information about the investment security.”
Start reading these on funds you want to invest in or currently do. It starts to shape your mind and think like an investor by giving you insights into things like the brief summary of the company’s background and financial information, name of the company issuing the stock, number of shares available, costs, growth, and more.
This might not be super exciting, but you start to learn about the financials of companies or funds, and reading these documents train your brain to have an investor mentality.
5. Follow & read personal finance websites
As you begin your educational journal with investing, you’ll inevitably land on numerous financial websites and blogs. There are hundreds of them online, even more than you ever realized.
While there are many great blogs (ahem, like this one) there are also plenty of major media publications about investing that are worth bookmarking.
Besides reading books, this was a popular tactic I took to stay on top of the industry, but also to learn as much as possible from various financial experts.
But even with money experts and writers, I still never blindly follow any specific advice. Remember, you should always do further investigating. But reading this will also shape your investor mindset.
Here are a few investing and money websites I like to read:
- The Balance
- Financial Times
6. Take an investing online course
If you are feeling unsure and really want to hone in on your skills, you can take an investing course that covers all the basics. Luckily, there are plenty of free and affordable courses that create an educational plan for you and can take your financial health to the next level.
There are a lot of benefits by choosing an investing course, which includes learning at your own pace, no need to organize and figure out what you need to learn, and get detailed information from experts in the field.
So what investing courses should you consider?
- The College Investor – Learn How To Start Investing Today (Free)
- Udemy – Stock Market from Scratch for Complete Beginners (Paid)
- TD Ameritrade – The Investing and Trading Library from TD Ameritrade (Account Required)
- Morningstar – Morningstar Investing Classroom (Free)
Do some research if you are looking for more than the courses listed above. You’ll come across many different options. Just make sure to do your research, check out reviews, and don’t feel obligated to spend hundreds of dollars to learn.
7. Learn from stock simulators
Another great way to learn about investing is with stock simulators. If you plan on investing in individual stocks or may want to be active in day trading, then you can learn quite a bit from stock simulators.
A stock simulator is an investing tool that simulates the stock market movements, but without you risking any real money. Think of it like you are using play money or “paper trading” and you can test out your knowledge and investing strategies.
You’ll find you can hone in on your skills, get a better understanding of how stocks move and are not putting any of your capital at risk quite yet. Many brokers offer a paper trading platform that you can access on desktop or mobile. Thinkorswim is a popular desktop option from TD Ameritrade.
8. Start investing with little money
Personally, I also learn well by doing instead of just reading or being told about something. And while that might not be exactly true for you, learn by doing will be key in growing your investing knowledge.
Now you don’t want to risk a lot of your money at first, especially if you can’t afford to lose that invested money. And while funds and stocks can be expensive sometimes, we live in a time when you get to invest with little money. I’m talking as low as $5 in many cases.
If your company has a 401k with a match, start there. But if you want to learn, aren’t interested in paper trading, and want to take less risk to start, getting on a trust investing app with low minimums is an option.
9. Follow investing forums
Another useful learning tool is online forums. These will be places for open discussions, asking questions, and insights from people of all sorts of backgrounds.
When you get involved or engaged in any forums around finances, also never blindly follow the advice and do your additional research on topics. Everyone has different experiences and views on money, so your needs and situation will be different from those strangers on the internet.
Now don’t let that scare you away, a lot can be learned when engaging in forums around money. The most common one you might come across is Reddit, which has various communities about finances. Additionally, you might come across Bogleheads.org, which is heavily focused on index funds, investing, and Vanguard.
You can find many answers to questions you may have and discussions with others can help your mind think like an investor.
Things to Consider Before Investing
Before you actually invest any larger sums of money, you want to follow the steps above to help you get an education about everything. At the same time, you should be working at your overall money management and current financial situation.
Ask yourself a few questions before you dive in, as even when you feel comfortable with investing, your overall financial health might not be ready.
Are you in a lot of credit card debt?
Pending how much credit card debt you have, you may want to focus on eliminating this first. Credit card debt can have seriously high interest.
The average credit card interest rate is 17.87% for new offers and 14.58% for existing accounts according to WalletHub. And many will be in the 20%+ range too.
Do you have an emergency fund?
No matter what financial publication you read, you’ll always find having an emergency fund as a recommendation. It might not be exciting, but you need to ensure you have money saved for unexpected life events. The common recommendation is three to six months of expenses, but I like the six months to a year range.
The COVID-19 pandemic has shown us why longer emergency funds are critical. Before investing more consistently, ensure you have a health emergency fund ready.
Is your money mindset in the right place?
With investing, your money mindset has to be in the right place. It’s easy to get too emotional with investing and being making rash decisions that negatively impact your portfolio.
Are you comfortable with losing the amount you want to invest? Are you going to let the emotions of market volatility make decisions for you?
Really check in on your mentality and how you view money, because if it’s in a negative space then you might not be ready to invest money just yet. Certainly, you won’t be perfect with investing nor can you accurately make every right decision. But, you need to be mentally and emotionally prepared when it comes to investing your money.
The above steps are not complicated, but can take time for you to process efficiently with your investing. Becoming an investing expert will not happen overnight, so don’t look for get-rich-quick schemes and do not give up early on your learning.
You might have been surprised there are no big secrets or hidden insights when it comes to investing. It’s simply taking the time each week to spend time on your finances, read, and then just getting started that has the biggest impact on your learning.
Of course, you can also expand your investments beyond the stock market with other appreciating assets like real estate, art, collectibles, etc. too. But these steps will set you far ahead of most of your peers.
So what are you waiting for!?