Your Rich BFF's Vivian Tu Breaks Down 2 Easy Steps to Invest

Investing is easier than a lot of people realize, and it doesn't take much time to get started.

Financial experts always talk about the importance of investing and how you need to invest to build wealth. The frustrating part is what often gets left out -- how to get started and what to invest in. If you've never invested before, those are crucial details, since you don't want to end up making a bad decision and losing money.

Financial influencer Vivian Tu, who goes by Your Rich BFF, recently got that question from a viewer. In response, she provided an informative and concise breakdown of exactly how you can start investing.

1. Pick an account type

To be able to buy and sell stocks, you need an investment account. Tu refers to these accounts as "online tote bags" because they hold stuff (in this case, your investments). There are two types of investment accounts for you to choose from.

The first is a retirement account or, to use Tu's example, a "special tote bag." Retirement accounts have tax benefits, but you need to be 59 1/2 or older to withdraw funds. If you're younger than that and you need your money sooner, there's an early withdrawal penalty. Here are the most popular retirement account options:

• Individual retirement accounts (IRAs) let you make tax-deductible contributions. You pay income taxes when you make withdrawals.
• Roth IRAs don't have tax-deductible contributions, and instead, your withdrawals are tax-free.
• 401(k)s are retirement plans offered by employers. Tax benefits depend on whether it's a traditional 401(k), which works like an IRA, or a Roth 401(k).

The other type of account is an individual brokerage account. This doesn't have any tax savings. Contributions aren't tax-deductible, and withdrawals are taxed as income. The advantage is that you can access your money at any time, with no early withdrawal penalties. If you want to withdraw money from a brokerage account at 50, 40, or even younger, you're free to do so.

You can open a retirement account or an individual brokerage account with a stock broker. To see the top options, check out The Ascent's list of the best online stock brokers. Your employer may also offer retirement account options, like a 401(k).

2. Invest in index funds

Once you have an account, you can start making investments. And the good news is that one of the easiest ways to invest also tends to offer the best returns. This is investing in index funds.

An index fund allows you to invest in hundreds of different companies at once. These funds pool money from investors and use that money to buy a large assortment of stocks. That means you get a balanced, diversified portfolio without needing to pick the stocks yourself. There are all kinds of index funds out there, but here are some that Tu recommends:

• Vanguard S&P 500 ETF (VOO): This tracks the S&P 500, an index of the 500 largest companies on U.S. stock exchanges.
• Invesco QQQ ETF (QQQ): This tracks the Nasdaq-100, a tech-heavy index.
• Vanguard Total World Stock ETF (VT): This tracks the FTSE Global All Cap Index, an index of stocks around the world.

These are just a few options, and you should have access to many more in your investment account. Compare funds there and pick one that you like. If you're looking for something safe with competitive returns, you can't go wrong with an S&P 500 index fund. Or, there's one other type of fund you could try.

2 (continued). Invest in a target-date retirement fund

Index funds aren't your only good investment option. You could also go with a target-date retirement fund, which is designed to be a single investment that you can use for your retirement nest egg. Tu recommends this type of fund if you want something "more tailored to your age and how close you are to retirement."

Target-date funds are available for specific years, and you choose one for the year when you want to retire. The method Tu suggests is to find the year you'll turn 60, and then round to the closest year ending in five or zero. Pick a target-date retirement fund with that year in it. Note that you'll need to change your calculation if you want to retire at a different age, like 50 or 55.

The manager for a target-date retirement fund adjusts the investments based on how close it is to the target date. Early on, this type of fund will be more heavily weighted towards higher risk and reward investments to provide a greater return. As the target date approaches, the fund will shift towards safer investments to preserve wealth.

You don't need to spend much time or energy learning how to invest. Those two steps from Your Rich BFF are all you need for a quality portfolio that makes your money grow.