5 Best First Steps for New Investors, According to Self-Taught Pros

Everyone knows that the best way to start something is to start something. Still, we are cautious to begin a process when we aren’t sure what we’re doing and what the outcome will be. When it comes to investing, beginners tend to overthink things because of the value people place on money and the stigma attached losing it.

As the host of “The Personal Finance Podcast,” Andrew Giancola invited self-taught pros Dave Ahern and Andrew Sather — the team behind the popular “Investing for Beginners” podcast and website — to his podcast to talk about trading basics and the psychology behind investing.

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Here are five best first steps for a beginner investor, as discussed by Sather, Ahearn and Giancola, and what simple actions you can take along the way to gain experience.

“First of all, you need to have your ducks in a row … You basically have to have your foundation set,” Ahern said.

Only a fool should start investing with too much debt and too little saved in an emergency fund. An emergency fund acts as a buffer against unexpected expenses like job loss, medical emergencies, or unexpected home, car or travel expenses.

Three to six months’ worth of savings is the rule of thumb, but it will depend on your lifestyle, monthly costs, income and dependents, per Wells Fargo. It suggested storing the funds in a bank account that earns interest.

If you’re living paycheck to paycheck, save what you can until you feel comfortable jumping into investing.

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When starting out, you need to decide how much time you want to devote to investing and how interested you are in the learning process.

Do you want to be a hands-on stock picker or passively invest via index funding or exchange-traded fund investing? Or, if you have sufficient funds but don’t care to be actively participating, would you rather let someone invest for you? Deciding your commitment level will help control your emotional investment, according to Ahern.

Sather described investing as a “lifelong journey,” but many beginner investors get frustrated with tracking short-term inconsistencies and their effort not paying off in results. “If you can set the right type of goals in place, that helps shift your mindset and put things in perspective so you don’t get discouraged too much when you don’t feel like you’re making progress,” he said.