4 of the Best Investments For Beginners

You are ready to invest, where do you begin?

  • You have an emergency fund and have paid off your debt. Now what? What are you going to do with that extra money to invest in “Future You?” Do you save it all? Invest it all? While I can’t and wouldn’t want to tell you what to do, there are some “tried and true” ways to begin investing your money. What you choose, will depend on what you are comfortable with and what your financial goals are.

4 Of the Best Investments for Beginners

Below is a list of the 4 best places to start considering, when it comes to investing and what exactly they entail.

Tip 1: High Interest Savings Account

  • If you haven’t already, a high interest savings account is a must! After your debt is paid off, you’ll want to start saving for 3-6 months of expenses in a savings account. Why not earn more interest when it’s sitting in an account? A high Interest savings account, you generally receive more interest than from a typical savings account at your bank.
  • One of my favorites is the Capital One high yield savings account.

Tip 2: Get that Retirement Plan Going

You will want to be contributing to a retirement plan, if your employer has one. Very common ones are a 401K or a pension.

  • 401k plans have higher contribution limits than individual retirement accounts (IRAs). In 2021, you can set aside up to $19,500 across your 401(k) plan accounts.
  • A Traditional 401K, you contribute to the plan with Pre-tax dollars, but you do have to pay some income tax when you withdraw. You want to withdraw after 59 1/2, but if you take out money sooner there is a 10% penalty in State and Federal taxes.
  • A Roth 401K, you contribute with after tax dollars, and is tax free to withdraw after you are 59 1/2 and had the account 5 years.

If you have a 401K, and your employer matches it, contribute as much as possible. This is basically free money. Every company matches differently. Many do it based on a percentage of your salary.

For those that are self employed or have a small number of employees, you can set up a Solo 401k or SEP IRA.

  • Solo 401k is for you and your spouse, if you are the only two employed. You can save up to $20,500 (in 2022) in your plan as an employee, just as you would in a regular 401k. There is more, since you’re also the employer, you’re able to make an employer contribution to the account, as much as 25 percent of the business’s income, up to a total account value of $61,000 (for 2022).
  • SEP IRA: SEP stands for simplified employee pension, and it allows an employer, including those self-employed, to make contributions to employees’ retirement plans, giving them a way to save for retirement through their employer. You can set aside up to 25 percent of your business’s income, up to $61,000 annually (as of 2022). Even if you have a 401(k) at your main employer, you can contribute to a SEP if you’re self-employed, making a way for freelancers to stash extra money.
  • Pensions: These plans require your employer to contribute money to your plan as you work. Once you retire, you earn the collective pension money divided into monthly checks. There is usually a formula compose of years of service, salary, and the age at which you retire. Not all companies offer pensions.

Tip 3: Roth IRA

  • A Roth IRA is an Individual Retirement Account. You can open one of these even with a 401k, pension or other retirement plan.
  • You can contribute up to $6,000 per year (in 2022), $7,000 if you are over 50 years old
  • You contribute post tax
  • You can withdraw your contributions, but not earnings, tax and penalty free.
  • Any investment gains grow tax free, as long as you have the account for 5 years and withdraw after 59 1/2 year old.
  • It does not require you to take minimum distributions like a traditional IRA
  • To contribute the full $6,000, you have to earn income below $129,000 if you are single and 204,000 if you are filing jointly (in 2022).

Tip 4: Index Funds

  • An Index funds are investment funds that follow a benchmark index, such as the S&P 500. When you put money in an index fund, that cash is then used to invest in all the companies that make up the particular index.
  • It gives you a more diverse portfolio than if you were buying individual stocks. You get a little piece of all the companies that are listed in the index you choose.
  • The S&P 500’s average annual returns over the past decade is around 14.7%. The long-term historic average of 10.7% since the index was introduced in 1957. You cannot get that just leaving your money in the bank.


  • These are some ideas of where to begin, once you have paid off your debt and are ready to start investing. These are not the only way to invest, but if you’re looking for a solid way to start, I would begin with these four.
  • If you are still working on getting yourself out of debt, please click HERE to get my “7 Secrets to Paying off Debt” for FREE.

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