Investing in stocks yourself takes four steps: open a brokerage account at a large, low-cost broker, fund it from checking, buy one broad index fund before any single stock, and schedule an automatic purchase of that fund every month. Do the first three once, and the fourth keeps you investing without another decision.
A 401(k) invests out of every paycheck on its own. A brokerage account buys nothing until you tell it to, so you have to set that up yourself.
Build the account around one fund. A total-market index fund holds thousands of U.S. companies of every size, so your money doesn’t depend on any one of them and you never have to pick stocks. Buying it on the same date every month means you never have to decide when to buy, either.
If you’d rather not choose even one fund, a robo-advisor builds and manages a portfolio for you.
Open the account at a low-cost broker with no account minimum and $0 commissions on online trades of stocks and exchange-traded funds (ETFs), which trade like stocks. It should also offer fractional shares, which let a $200 order buy part of a share that costs more than $200, and low-cost index funds with no minimum investment. If the money is for retirement, open an individual retirement account (IRA) there instead.
Link your checking account and move $500 in. Buy a total-market ETF with a limit order, which sets the most you’ll pay per share. Set that limit a few cents above the asking price, the lowest price a seller is offering, so the order fills at about the current price and never above your limit. With an index mutual fund instead, enter $500 as a dollar amount, and the order fills at the fund’s end-of-day price.
Then schedule a recurring purchase of $200 of the same fund on the 1st of every month, paid straight from your linked checking account or from cash you move in a few days earlier. Turn on dividend reinvestment, too, so the fund’s dividends buy more shares instead of sitting as cash.
Leave the purchase running through market drops, since the same $200 buys more shares at a low price than at a high one.
Compare the best online stock brokers for beginners to choose where to open the account.
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