11 Ways to Get Started DIY Investing

You can start DIY investing in just a few steps. Open and fund an account, select securities you like, and transact. But within those seemingly simple action items, it's easy to get hung up by many questions and concerns.

You might get stuck on the practical decisions, like what type of account you need or what assets to buy. Or you could be held back by less concrete issues, like fear of loss or lack of confidence.

Whatever the sticking point is, it's time to move past it -- and this guide can help. Read on for a look at 10 ways to get started as a DIY investor.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, "I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of "5 Growth Stocks Under $49" for FREE for a limited time only.

If you're not quite sure where to invest, a retirement account is an easy starting point. Workplace 401(k)s and traditional IRAs offer some compelling tax benefits that help you grow your wealth faster. Specifically, you make pre-tax contributions to these accounts, and the taxes on your earnings are usually deferred until retirement.

A 401(k) has a smaller menu of investments available versus most IRAs. For novice investors, fewer choices can be better.

If your employer doesn't offer a 401(k), an IRA is still a great option. Look for one that allows you to automate contributions and investments.

ALSO READ: 5 Investment Strategies to Maximize Your 401(k)

If you have kids, you can start your investing journey with a college fund. Open a 529 plan for the kiddos and you'll get tax-deferred earnings plus tax-free withdrawals on qualified education expenses.

The process of investing in a 529 plan gives you a nice preview of what it's like to invest generally. You'll review fund options offered by your plan, comparing investment approaches and fee structures. You'll lean toward funds with lower fees and land on one that matches your risk tolerance and timeline.

You may see an age-based fund as an option. This type of fund gradually gets more conservative over time. The shift provides greater protection against market volatility as the college years approach. It's a smart strategy, one you might implement manually if you invest in a static fund instead.

If you don't feel comfortable investing a large sum of money straight away, start with fractional shares. Fractional shares are what they sound like -- stock shares in units of less than one. With some brokers, you can buy, say, one-tenth of a share for one-tenth the price.

The beauty of fractional investing is that you can build a diversified portfolio for $25 or $50. Simply pick out 25 or more high-quality stocks and invest $1 in each one. Alternatively, you could invest in fractional shares of funds such as an S&P 500 exchange-traded fund (ETF). A position in an S&P 500 fund gives you exposure to the 500 largest, most successful public companies in the country.

Mainstream brokers that allow fractional investing include Charles Schwab and Fidelity. Investing apps like Betterment also support fractional shares.

ALSO READ: Best Brokers for Fractional Share Investing

If you're worried about the work involved in investing, you can overcome that obstacle with automation. Kick off your DIY investing activities in an account that allows you to set up recurring contributions that are invested in your picks automatically.

Automation is convenient, but it has other benefits, too. When you automate, you are practicing dollar-cost averaging (DCA). DCA is investing a set amount each week or month versus a larger amount each year. Those smaller, periodic purchases can ease the impact of timing mistakes -- such as buying a stock the day before the market crashes.

401(k)s are automated. You can also find IRAs and taxable brokerage accounts that have automation features.

If choosing your investments from the full range of exchange-traded securities is overwhelming, you could focus on one fund family to start. You'll find plenty of choices covering a broad range of exposures within Vanguard or Fidelity, for example.

As a bonus, those two fund families also have a good selection of low-fee funds. Fees are an important consideration because they reduce shareholder returns.

You'll see fees expressed as the expense ratio. An expense ratio of 0.03% equates to fees of $3 per year for every $10,000 you have invested.

If you have the choice between two similar funds, lean toward the one with a lower expense ratio.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, "I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of "5 Growth Stocks Under $49" for FREE for a limited time only.

If you have no clue what to invest in, broad-based index ETFs are a lower-risk starting point. Because they're exchange-traded funds, they trade throughout the day like stocks. An index ETF tracks an index such as the S&P 500 or the Russell 3000. Broad-based means the index covers a large percentage of the total stock market. That will be less risky than investing in a specialized index.

The S&P 500 represents about 80% of the stock market, while the Russell 3000 encompasses about 98%. Investing in one of these indexes automatically delivers market-level returns, with a small lag for fund-related expenses. To minimize the lag, choose funds with low expense ratios.

If you like the idea of buying individual stocks, start by researching companies, brands, and industries you know. This advice comes from famous investor Warren Buffett. He says investors have a "circle of competence." Sticking to that circle produces better investment decisions.

Say you own an iPhone, MacBook, and other Apple products. As an Apple user, you'd naturally evaluate the company's strategies from the customer's perspective. That could reveal valuable insights, particularly with respect to product strategy. You're also more likely to enjoy researching and following Apple over time. You might not feel the same connection to, say, companies involved in genomics or robotics.

ALSO READ: How to Buy Stock: 6 Steps for Beginners

If fear of losing money is holding you back, get familiar with two simple risk management tactics -- diversification and long-term focus.

Diversification is the investing equivalent of not putting all your eggs in one basket. Specifically, don't invest every dollar in one company, one segment, or one asset class. At a minimum, start with exposure to large-company stocks plus government bonds. As you gain confidence, you might layer in smaller companies, international companies, and corporate bonds.

When you have a long-term focus, you're planning to get rich via compound earnings over time. This is much safer than trading often for quick profits. Under the long-term approach, you don't have to time the market. Even better, you don't have to react to short-term volatility. If you're comfortable that your stocks or funds will recover, doing nothing can be the best long-term strategy when the market goes haywire.

If you've opened an account, planned your approach, researched stocks, but haven't yet made a buy, you might need to define your motivation. Think about why you want to start investing. Go beyond the vague goal of building wealth and decide how much wealth you want and under what timeline.

The purpose here is twofold. One, you want to get excited about moving forward with your investment plans. And two, setting parameters can help you make focused decisions.

If you're investing to become a millionaire retiree by 2050, for example, you don't need to trade often or react to short-term market volatility. You could reach that goal by investing in quality stocks that you'll hold for the next 28 years.

Another strategy to stoke motivation quickly is to read inspiring stories from people who've found financial independence. Read up on Grace Groner and Ronald Read -- both ordinary people who amassed multimillionaire-dollar investment portfolios. You can find many more stories about ordinary millionaires within the Financial Independence, Retire Early (FIRE) movement.

These stories carry a few good lessons for new investors. First, you don't need a financial background to amass wealth in the stock market. Second, many of these millionaires took the buy-and-hold approach -- they invested consistently over time in good companies and allowed their earnings to compound for decades.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, "I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of "5 Growth Stocks Under $49" for FREE for a limited time only.

One final strategy to push you into investing action is to join a community of like-minded investors. This can take many forms. You might create an informal club among people you know, for example. As a group, you can share ideas, strategies, and learnings.

You could also join an online investing community. Across the major social media platforms, there are many. Your challenge will be finding a group with members who share your goals and perspectives.

Stock picking services are also an option. A good one will give you investment ideas and explain the rationale for investing in those companies. It's a bonus if the service allows you to engage with other members, too.

ALSO READ: How to Tap the Power of an Investment Community

Investing is not an exact science, even for experts. Still, you can make money investing on your own, even without experience or specialized knowledge.

One simple path is to buy a low-fee S&P 500 fund and hold it for 10 years or more. You could follow that strategy in your retirement account, college fund, or a taxable brokerage account. You could also springboard from that simple portfolio into more complex exposures as you learn and gain confidence.

What's important is to get started investing sooner rather than later. In investing, time is money. The earlier you put your money to work, the greater the opportunity ahead.

Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Catherine Brock has no position in any of the stocks mentioned. The Motley Fool owns and recommends Apple. The Motley Fool recommends Charles Schwab and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.