The who, what, and why of investing for beginners

This is the Holfolio Guide to Investing. It will continue to improve over time.

The specific examples are for US investors, but the general principles apply to everyone. You can find our UK guide here

Why (should you invest)?

This is probably the most important question to answer first. The short answer is to turn your money into more money. You’re probably sick of hearing about growth rates right now with COVID-19, but the power of compounding still surprises me nearly every time I run these sorts of numbers:

If you put $100 a month into your bank account for 40 years, earning 1% interest a year, you will have turned $48,000 of savings into $59,000. If instead you put that $100 a month into the stock market, and it earns an average rate of 8% a year, you will have $349,000 in 40 years time.

The extra risk of the stock market gives you extra returns. The extra returns from just $100 a month is worth $290,000. Don’t work for your money, make your money work for you. That is why you should invest.

Who (should invest)?

If you have a few months of expenses stored as cash (i.e. a rainy day fund), and you’re not planning a big change in the next few years (e.g. buying a house, retiring), then you should be putting any excess savings into the stock market. You need to have the mindset that you will not see the money you put into the stock market for at least five years. This will give you the time to recover from any falls that may occur.

When (should you invest)?

The best time was when you first had more than a few months of emergency savings. The second best time is now!

Don’t try and time the market, it’s almost impossible to do. Instead, just set up regular monthly payments to purchase as much as you can afford every time you get paid. When the market is down you’ll be able to afford more shares, and when the market is higher your monthly amount will buy fewer shares. This is dollar cost averaging, and is your friend in times of market panic. Just keep buying, regardless of the scary headlines, and in the long term you won’t regret it.

How (should you invest)?

Virtually all brokers in the US now offer zero commission. RobinHood were the first, and despite some badly timed service outages, still have the best user experience. If you want a more traditional service, Interactive Brokers, Fidelity, TD Ameritrade, Charles Schwab, and E-Trade are five of the most popular stock brokers - you can find out a more detailed comparison here

Where (should you invest)?

In terms of geography, you should invest everywhere. You want to be as diversified as possible, so a global index fund would seem to be the best ‘base case’ holding to have. As you can see with my own holdings, I buy the FTSE All World ETF every month (ticker: VWRL). I like this because it is about as passive as it gets. You’re not making an opinion on which regions or which sectors you think will do better, this is just a broad index.

What (should you invest in)?

For many people, simply holding a global fund such as VWRL.L will suffice. For those who have more of an interest in the markets, you might want to also hold some individual stocks that you think are going to do very well in the next few years. There are millions of books and articles going into detail on what makes a stock attractive to buy, and this is where you can get lost in the rabbit hole of too much information. You could also invest in different asset classes (cryptocurrencies, P2P, private investments) to broaden your portfolio even more.

Just try not to major in the minors, and keep perspective of the big picture. It helps if you keep a note of why you bought the stock in the first place, so that you can keep checking whether this is still true, regardless of how the price has changed since.


  1. Make sure you have some emergency cash stashed away safely
  2. Make sure you won't need money used for investing for several years
  3. Open up an account with Vanguard for a stocks and shares ISA
  4. Set up a monthly payment to buy VWRL the FTSE All World Index
  5. You're now ahead of 90% of all investors, with a broad globally diversified stock portfolio that will let you sleep well at night - congratulations!


If you want to read more about investing, here are our three favorite books

  • The Bogleheads' Guide to Investing
    This is from Jack Bogle, the founder of Vanguard, and the biggest proponent of index investing. It highlights how just being the market, rather than trying to beat the market, is probably the best way to go for most people.

  • A Random Walk Down Wall Street
    Also a very good book about how passive investing is the way to go. While markets may not always seem efficient, beating them in a predictable manner is a lot harder than most people think.

  • The Intelligent Investor
    I would say more, but this should suffice: "By far the best book on investing ever written." (Warren Buffett)

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