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Investing Strategies for Beginners

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Assuming you’ve started with a solid financial foundation of low-risk savings and life insurance, investing your money is a smart way to grow your wealth over time. Because all investments are inherently speculative, it takes far more skill to be a good investor than a good buyer of guaranteed banking and insurance products.

If you’re new to the world of investing, the whole thing can seem daunting. Good news is that with the right strategies and some basic knowledge, anyone can start investing. Here are some simple and effective investing strategies for beginners to help you get started on your journey to financial security and independence.

1. Use A 401(k) or IRA Intelligently

If you have access to an employer-sponsored 401(k) plan or an Individual Retirement Account (IRA), consider starting here. If your employer offers a match on your contributions, this can be an easy win regardless of what investments are available to you inside the plan. Both 401(k) plans and IRAs offer tax advantages and are relatively easy to set up. If you have the option of a Roth account, consider this as it allows for tax-free withdrawals at retirement.

Tip: If you’re going to participate in a 401(k) plan, contribute enough to your 401(k) to take full advantage of any employer match—it’s essentially free money.

2. Build a Diverse Portfolio

Diversification is a fundamental principle of investing. It means spreading your money across different types of investments to reduce financial risk. You can get diversification in your investments by investing in several different, uncorrelated, assets. Some people use a combination of equity and bond index funds for this. However, these investments are not always uncorrelated. For example, when inflation is high and volatile, stocks and bonds are correlated—they tend to move together (e.g. down), resulting in losses across your entire portfolio.

Tip: Look for uncorrelated investments and assets, like cash value life insurance and broad-based index funds, to diversify investment and financial risks.

3. Use Dollar-Cost Averaging And The Saving Habit To Your Advantage

Instead of trying to time the market, which can be challenging even for seasoned investors, consider a strategy called dollar-cost averaging. With this approach, you invest a fixed amount of money at regular intervals, regardless of market conditions. When prices are high, you buy fewer shares, and when prices are low, you buy more. Over time, this strategy can help reduce the impact of market volatility on your investments.

Even if dollar-cost averaging didn’t result in cost savings and risk reduction, it has the effect of establishing a savings habit. In other words, you’re saving money consistently each and every month, which allows you to make steady progress, all other things being equal.

Tip: Set up automatic contributions to whatever assets you’re buying. You’ll establish the savings habit and it’ll make dollar-cost averaging easier.

4. Understand Risk Tolerance And Risk Capacity

Risk tolerance is how you feel about risk. Risk capacity is how much risk you need to take to achieve your desired goal, or how much risk you can afford to take to achieve your financial goals. Before you start investing, assess your risk tolerance and capacity. Are you comfortable with the idea of your investments fluctuating in value? Can you afford to lose the money you’re investing?

Generally, younger investors can afford to take more risks because they have more time to ride out market ups and downs. Older investors may prefer a more conservative approach to protect their savings. But even young investors may not have a high risk capacity if they have no other savings (i.e. insured savings with a bank or life insurance company).

Tip: Use online risk tolerance and risk capacity questionnaires to assess your feelings about risk and how much of your savings you can afford to lose.

5. Educate Yourself Before You Invest

Investing doesn’t require a degree in finance, but it does benefit from some basic knowledge. Take the time to learn about different investment options, such as bank CDs, savings accounts, money market accounts, dividend paying whole life insurance, stocks, bonds, and mutual funds. Understand how fees and taxes can impact your returns. There’s a wealth of information on the Internet today you can use to get a very basic idea about any of these assets.

When you’re first starting out, do not rely on biased articles and books for your basic education. If you find yourself favoring one asset over another, it might be appropriate to learn more about those assets through more biased educational channels. However, when you’re first learning about an investment or asset, you want a balanced understanding of the asset, all of its pros and cons, and also use cases. Study both historical norms for that asset as well as current norms. Assets that performed well in the past may not perform as well in the future. Likewise, assets that haven’t performed well in the past might perform well in the future.

Pay attention to the use case for an asset. For example, dividend paying whole life insurance is not a traditional investment. It’s a life insurance policy and it’s primary function is to protect the policyholder’s income and savings against loss, while also providing a death benefit to heirs when the policyholder dies. Contrast this with an equity based mutual fund, where the purpose of the investment is to invest in speculative businesses for a share of expected future profits.

The expected returns on whole life insurance are low, but stable. The expected returns on an equity mutual fund are higher, but also more volatile. Each asset can be complementary in a portfolio, but neither can replace the other.

Both assets can be valuable in a portfolio, but each serves a very different purpose.

Tip: Start with reputable financial websites and consider reading beginner-friendly investment books.

6. Set Clear Goals

Establish clear financial goals for your investments. Are you saving for a down payment on a house, funding your child’s education, or planning for retirement? Knowing your objectives will help you determine the right investment strategy and time horizon.

Tip: Write down your goals and create a timeline for achieving them.

7. Establish An Emergency Fund First

Before you start investing, make sure you have an emergency fund in place. This fund should cover three to six months’ worth of living expenses. Having a financial cushion ensures that unexpected expenses won’t force you to dip into your investments prematurely.

Tip: Keep your emergency fund in a high-yield savings account for easy access.

8. Stay Informed and Patient

Investing is a long-term endeavor. Markets will have their ups and downs, but historically, they’ve trended upward over time. Avoid making impulsive decisions based on short-term market fluctuations. Stay informed about your investments but resist the urge to check their performance daily.

Tip: Review your investment portfolio periodically, perhaps once a year, and make adjustments if your goals, risk tolerance, or risk capacity changes.

9. Minimize Fees, Maximize Returns

Investing fees can eat into your returns over time. Look for investment options with low fees, especially when it comes to actively managed mutual funds. Many online brokerage platforms offer commission-free trading and a variety of low-cost investment options.

Tip: Compare the expense ratios of mutual funds and ETFs to find cost-effective choices.

10. Stay Disciplined

The key to successful investing is discipline. Stick to your investment plan, even when emotions tempt you to make hasty decisions. Avoid trying to “get rich quick” through gambling-like behavior or overly speculative investments and focus on your long-term financial goals with a consistent approach.

Tip: Consider setting up automatic contributions to your investment accounts to ensure consistency.


Investing doesn’t have to be intimidating, especially for beginners. By following these simple strategies, you can start your investment journey with confidence. Remember that time, patience, and discipline are your allies in building wealth over the long term. As you gain experience and grow your financial knowledge, you can explore more advanced investment strategies, but for now, these basics will serve as a solid foundation for your financial future.


David has been a licensed life insurance agent since 2004. In addition to life insurance design and sales, he has also helped develop educational and marketing content for large financial firms like Allstate, New York Life, State Farm, AmTrust, and J.G. Wentworth. His articles and essays on life insurance and Human Life Value are currently taught at California State University (CSU) as part of its Expository Writing and Reading Course, and his articles on budgeting, life insurance, investing, and financial planning have been featured in online publications like ThinkAdvisorThe Huffington PostNuWire Investor, and RealClearMarkets. David is also the author of several short eBooks on budgeting and saving money, and the designer of the xFlow™ budgeting app and the xCalc™ suite of financial calculators.

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