A lot of people think opening a brokerage account to buy stocks requires a suit, a broker named Bartholomew, and $100,000. This used to be true. But today, you can literally buy slices of the world's largest companies from a free app on your phone while sitting on the couch.
If you have managed to scrape together your first $1,000 to invest, congratulations. You are ahead of 90% of the population. Here is the safest, most reliable way to invest it without losing it all on obscure meme stocks.
Step 1: Open a Brokerage Account
To buy stocks, you need a brokerage account. You do not want one that charges trading fees. The top three brokerages we recommend (which allow you to buy "fractional shares") are:
- Fidelity: An industry giant with incredible customer support and a great app.
- Vanguard: The pioneer of index fund investing. Their app is a bit clunky, but they are incredibly trustworthy.
- Charles Schwab: Excellent research tools and zero fees.
Step 2: Do Not Pick Individual Stocks
The single biggest mistake new investors make is using their $1,000 to buy shares of Apple or Tesla, hoping they double in a month. This is gambling, not investing. Even professional hedge fund managers fail to beat the market average by picking individual stocks over a 10-year period.
Instead, you are going to buy an Index Fund. An index fund is a basket that holds a tiny piece of hundreds of companies.
Step 3: Buy the S&P 500 (VOO or FXAIX)
The S&P 500 is a list of the 500 largest, most profitable companies in the United States (Apple, Google, Microsoft, Johnson & Johnson, etc.). If you buy an S&P 500 index fund, your $1,000 is automatically split amongst those 500 companies.
If one company goes bankrupt, you don't care, because you own 499 others. Historically, the S&P 500 has returned an average of about 10% per year over the last century.
In your new brokerage account, execute a "Buy" order for the ticker symbol VOO (Vanguard's S&P 500 ETF) or FXAIX (Fidelity's version). Put the entire $1,000 in there.
Step 4: Automate and Ignore
The secret to wealth is boredom. Once you buy that index fund, close the app. Do not check whether it went up or down tomorrow. The market will crash, there will be recessions, and there will be booms. Set up an automatic transfer to invest $100 from every paycheck into that exact same index fund, no matter what the news says. Do that for 30 years, and you will retire a multi-millionaire.