How to start investing: a step-by-step guide for beginners
Starting to invest comes down to a few repeatable steps: set a goal and time horizon, choose an account, research and choose your investments, and automate regular contributions.
- Set a goal and time horizon
Before choosing any investment, it helps to define what the money is for and when you’ll need it. A goal that’s five or more years away — like retirement — is generally treated differently from money you may need within a year or two.
Why time horizon matters: markets can fall in the short term, so money you’ll need soon is often kept somewhere lower-risk, such as a high-yield savings or cash account. Longer time horizons give a portfolio more time to recover from downturns, however, a longer horizon does not guarantee a positive return. - Choose an account.
Your investments have to live inside an account. Two common starting points:
A taxable brokerage account — flexible, with no contribution limits and no penalties for withdrawing, but you may owe taxes on dividends and realized capital gains. Learn more in what is a brokerage account.
A retirement account (IRA) — a Roth IRA or traditional IRA can offer tax advantages, but comes with annual contribution limits set by the IRS — $7,500 for 2026 for those under age 50 — and generally restricts withdrawals before retirement age.
One common approach is to use a retirement account for long-term goals and a taxable brokerage account for goals you may reach sooner. The right choice depends on your goals, tax situation, and when you’ll need the money — there is no single account that is best for everyone. - Choose your investments.
With an account open, the next step is deciding what to hold. Diversified funds and individual stocks work differently: a single fund can spread your money across hundreds of companies at once, while individual stocks concentrate both the potential gains and the potential losses in one company.
Common building blocks:
Index funds — funds designed to track a market index such as the S&P 500. They offer broad diversification, often at low cost, though they still fall when the overall market falls.
ETFs (exchange-traded funds) — similar diversification to index funds, traded like a stock during market hours.
Fractional shares — let you invest a specific dollar amount across your chosen holdings, rather than being limited to whole shares.
Diversification can help reduce the impact of any one investment performing poorly, but it does not eliminate the risk of loss. How you divide your money across investments — your asset allocation — is generally guided by your goal, time horizon, and comfort with risk. - Automate and stay consistent.
Once your investments are chosen, setting up automatic recurring contributions can help you invest steadily regardless of what the market is doing on a given day. Investing a fixed amount on a schedule — an approach known as dollar-cost averaging — means you buy more shares when prices are low and fewer when prices are high.
For example, a $100 monthly transfer scheduled in advance happens on schedule rather than by memory. Dollar-cost averaging can smooth out the effect of short-term price swings, but it does not guarantee a profit or protect against loss in a declining market.
For a sense of scale, M1’s automated investing ratio — the share of its investors using automated contributions — was 82.8% as of June 30, 2026. It’s one of several figures M1 publishes from its own platform data, alongside how investors allocate their money across cash and holdings.
This is not a recommendation to use automated investing. Automating contributions is a form of dollar-cost averaging, which does not ensure a profit or protect against loss in a declining market. Individual investing approaches vary based on financial goals, risk tolerance, and life circumstances.
How much money do you need to start investing?
There is no universal minimum to start investing. Most major brokerages now open a standard self-directed account with no minimum balance, so in practice the account itself doesn’t set the floor — the investments you choose do.
Minimums haven’t disappeared everywhere. Some mutual funds set an initial investment minimum, often in the hundreds or low thousands of dollars, and managed accounts usually require a starting balance. These apply to specific investments, not to the account itself, so they limit what you can buy rather than whether you can get started.
The more useful number is what you can add consistently — regular contributions matter more than the size of the first deposit.
How to start investing with little money
You can start investing with a little or small amount of money because fractional shares let you buy by dollar amount. A $25 contribution can go into a fund whose share price is $400 — you own a fraction of a share rather than waiting until you can afford a whole one.
That also means one small contribution can spread across several holdings at once. A $25 deposit divided across a handful of funds puts a few dollars into each, so a starter portfolio can be diversified from the first contribution rather than built one share at a time.
Two things are worth weighing at a small balance. Flat account fees take a larger percentage out of a small balance than a large one, so compare what a provider charges before you commit. And a small balance moves in small dollar amounts even when percentage changes are large.
The M1 bottom line
M1 is one platform where beginners can put these steps into practice. You can build a diversified portfolio with fractional shares, set your target mix once, and let scheduled deposits follow it. Trading in stocks and ETFs is commission-free. M1 charges a $3 monthly platform fee, which it does not charge if your total M1 assets are $10,000 or more. Other fees can apply — see the Platform Fee Disclosure.
As with any platform, investing through M1 carries market risk, including the possible loss of principal, and M1 does not provide personalized investment advice about which securities to choose. You can explore how it works at M1 Invest.
Frequently asked questions on how to start investing
Starting to invest generally means four things: setting a goal and time horizon, opening an account (a brokerage account or an IRA), researching and choosing your investments, and automating regular contributions. Start with an amount you can sustain and increase it over time.
Most brokerages set no account minimum, so the practical floor is the cost of the smallest investment you can buy — and fractional shares put that at a few dollars. Because fees and fund minimums weigh more heavily on small balances, comparing costs first can help.
Diversified funds such as index funds or ETFs spread money across many companies, which can soften the impact of any single holding performing poorly — though it also means no single winner drives outsized gains. Individual stocks concentrate your money in one company, which raises both the potential gain and the potential loss. The right mix depends on your goals and risk tolerance.
Use an account with no minimum, buy fractional shares so small dollar amounts can go into diversified funds, and set up small automatic contributions you increase as your income allows. Compare account fees before you begin, since a flat fee weighs more heavily on a small balance.
Educational information only, not investment advice. Investing involves risk, including the possible loss of principal. Diversification and dollar-cost averaging do not ensure a profit or protect against loss in a declining market. M1 does not provide personalized investment advice. A platform fee and other fees apply — see the M1 Fee Schedule. IRA contribution limits and eligibility are set by the IRS and subject to change.
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