Home » Blog » Best Investment Strategies for Beginners 2026
Published February 27, 2026 • 16 min read • by MonkeyInvestments
The average American has less than $500 in savings, and the number one reason people give for not investing is that they do not know where to start. That hesitation is costing real money. A person who invested $200 per month in a basic S&P 500 index fund starting in 2016 would have roughly $48,000 today, even after the bumps along the way. Someone who kept that same $200 in a savings account would have about $26,000.
Investing does not require a finance degree, a stockbroker, or thousands of dollars in startup capital. In 2026, you can open a brokerage account in minutes, buy fractional shares of any stock or fund for as little as $1, and automate the entire process so it runs in the background while you live your life.
This guide breaks down the strategies that actually work for beginners. No jargon. No hype. Just proven approaches that financial advisors recommend to their own family members.
Compound interest is the single most powerful force in personal finance. When your investments earn returns, those returns earn their own returns. Over decades, this snowball effect transforms small, consistent contributions into serious wealth.
Consider two people. Person A starts investing $300 per month at age 25 and stops at 35, investing for only 10 years. Person B starts investing $300 per month at age 35 and continues until 65, investing for 30 years. Assuming a 7% average annual return, Person A ends up with more money at age 65 than Person B, despite investing for only one-third of the time. That is the power of starting early.
Inflation is the other reason. Cash loses purchasing power every year. The $100 bill in your wallet buys less today than it did five years ago. Inflation has averaged around 3% annually over the long term, and recent years have seen it climb much higher. Investing is not just about growing wealth. It is about preventing your existing savings from silently shrinking.
The S&P 500 has returned an average of roughly 10% per year over the past century, including all recessions, crashes, and bear markets. After adjusting for inflation, that is about 7% real growth. No savings account comes close.
An index fund is a type of mutual fund or ETF that tracks a specific market index, like the S&P 500, which includes the 500 largest publicly traded companies in the United States. Instead of trying to pick winning stocks, an index fund owns all of them in proportion to their market size.
Warren Buffett has repeatedly said that a low-cost S&P 500 index fund is the best investment most people can make. He even bet a hedge fund manager $1 million that an S&P 500 index fund would outperform a basket of hedge funds over 10 years. Buffett won decisively.
Vanguard Total Stock Market Index (VTI/VTSAX): Covers the entire US stock market, including small and mid-cap companies. Expense ratio 0.03%. This is the broadest single-fund US equity exposure available.
Fidelity ZERO Total Market Index (FZROX): Covers the total US market with a 0.00% expense ratio. Yes, zero fees. Fidelity uses this as a loss leader to attract customers to their platform.
Schwab S&P 500 Index (SWPPX): Tracks the S&P 500 with a 0.02% expense ratio. Available with no minimum investment through Charles Schwab.
Vanguard Total International Stock Index (VXUS/VTIAX): Covers international developed and emerging markets. Pairs well with a US total market fund for global diversification. Expense ratio 0.07%.
Exchange-traded funds (ETFs) are similar to index funds but trade on the stock exchange like individual stocks. You can buy and sell them throughout the trading day at the current market price. Traditional index mutual funds only trade once per day after the market closes.
For most beginners, this distinction does not matter much. Both ETFs and index mutual funds can track the same index with nearly identical returns. The practical differences come down to how you buy them and minimum investment requirements.
VOO (Vanguard S&P 500 ETF): The ETF version of Vanguard's S&P 500 index fund. Expense ratio 0.03%. This is the single most popular ETF in the world.
VTI (Vanguard Total Stock Market ETF): Covers the entire US stock market. Expense ratio 0.03%. A one-fund solution for US equity exposure.
VT (Vanguard Total World Stock ETF): Covers the entire global stock market, US and international, in one fund. Expense ratio 0.07%. The ultimate one-fund portfolio.
BND (Vanguard Total Bond Market ETF): Provides exposure to the entire US bond market. Expense ratio 0.03%. Useful for adding stability to a portfolio as you approach retirement.
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Explore monkey.investmentsDollar cost averaging (DCA) means investing a fixed dollar amount on a regular schedule regardless of what the market is doing. If you invest $500 on the 1st of every month, you buy more shares when prices are low and fewer shares when prices are high. Over time, this averages out your cost per share and eliminates the risk of investing a large lump sum at the worst possible time.
The biggest enemy of beginner investors is emotion. Markets drop, headlines scream, and the natural instinct is to sell everything or wait for the "right time" to invest. The right time never feels right. DCA removes the decision entirely. You invest on schedule, every time, no matter what.
Research from Vanguard shows that lump-sum investing beats DCA about two-thirds of the time, because markets trend upward and you want your money invested as early as possible. However, DCA dramatically reduces the psychological pain of investing. If DCA is the difference between you actually investing and sitting on the sidelines paralyzed by fear, DCA wins every time.
A robo-advisor is an automated investment platform that builds and manages a diversified portfolio for you based on your goals, timeline, and risk tolerance. You answer a questionnaire, deposit money, and the algorithm handles everything: asset allocation, rebalancing, tax-loss harvesting, and dividend reinvestment.
Betterment: The original robo-advisor and still one of the best. No minimum balance requirement. Annual fee of 0.25% on assets under management. Offers tax-loss harvesting, automatic rebalancing, and goal-based planning. Premium tier at 0.40% adds access to human financial advisors.
Wealthfront: Manages your first $5,000 free, then charges 0.25% annually. Offers direct indexing for accounts over $100,000, which provides enhanced tax-loss harvesting by owning individual stocks instead of index funds. Also offers a high-yield cash account and financial planning tools.
Schwab Intelligent Portfolios: No advisory fee at all. Requires a $5,000 minimum. Uses Schwab's own ETFs to build your portfolio. The trade-off is a higher cash allocation (around 6-10%) which earns less than being fully invested. Still, free is free.
Vanguard Digital Advisor: 0.20% annual fee with a $3,000 minimum. Uses Vanguard's ultra-low-cost index funds. Simple, no-frills, and backed by Vanguard's reputation as the most investor-friendly company in finance.
If you enjoy managing your own portfolio and are willing to learn about asset allocation and rebalancing, DIY investing with index funds will save you the advisory fee. But if you want a completely hands-off experience and the fee does not bother you, a robo-advisor is a perfectly legitimate choice. Paying 0.25% for automated management is far better than not investing at all because the process feels overwhelming.
A target date fund is a single mutual fund that automatically adjusts its asset allocation as you approach a target retirement year. A 2060 Target Date Fund holds mostly stocks today for maximum growth, then gradually shifts toward bonds and conservative assets as 2060 approaches.
This is the ultimate hands-off investment. You pick the fund closest to your expected retirement year, contribute regularly, and the fund handles everything else. Vanguard, Fidelity, and Schwab all offer target date funds with expense ratios between 0.08% and 0.12%.
Target date funds are the default option in most 401(k) plans for a reason. They are simple, effective, and require zero maintenance. If you want one fund that does everything, this is it.
If your employer offers a 401(k) match, this is the highest-return investment available to any beginner. A typical match is 50% of your contributions up to 6% of your salary. That is a guaranteed 50% return on your money before it even hits the market. Not investing enough to get the full match is leaving free money on the table.
In 2026, the 401(k) contribution limit is $23,500 per year ($31,000 if you are 50 or older). Traditional 401(k) contributions reduce your taxable income now, and you pay taxes when you withdraw in retirement. Roth 401(k) contributions are made with after-tax dollars, but withdrawals in retirement are completely tax-free.
An Individual Retirement Account (IRA) is an account you open yourself, independent of your employer. The 2026 contribution limit is $7,000 per year ($8,000 if 50 or older).
Traditional IRA: Contributions may be tax-deductible depending on your income and whether you have a workplace retirement plan. Investments grow tax-deferred. You pay income tax on withdrawals in retirement. Best if you expect to be in a lower tax bracket when you retire.
Roth IRA: Contributions are made with after-tax dollars (no deduction now). Investments grow tax-free. Withdrawals in retirement are completely tax-free. You can also withdraw your contributions (not earnings) at any time without penalty. Best for younger investors who expect their income and tax bracket to increase over time.
For most beginners in their 20s and 30s, a Roth IRA is the better choice. You are likely in a lower tax bracket now than you will be in retirement, so paying taxes now and getting tax-free growth for decades is a powerful advantage.
Nobody consistently predicts market tops and bottoms. Missing just the 10 best trading days over a 20-year period can cut your returns in half. Time in the market beats timing the market every single time. Invest regularly and stay invested.
Looking at your investments daily leads to panic selling during normal dips. The stock market drops 10% or more at least once every 18 months on average. This is normal. If you check daily, every dip feels like a crisis. If you check quarterly, those dips barely register.
Individual stock picking is gambling unless you genuinely understand financial statements, valuation metrics, and competitive dynamics. Even professional fund managers fail to beat the S&P 500 index more than 90% of the time over 15-year periods. Start with index funds and learn stock analysis as a separate educational project if you are interested.
A 1% annual fee might sound small, but over 30 years, it can consume 25% or more of your total returns. Always check expense ratios. If a fund charges more than 0.20%, there is almost certainly a cheaper alternative that tracks the same index.
Investing $50 a month feels insignificant. At a 7% average annual return, $50 per month for 30 years becomes roughly $56,000. The amount matters less than the habit. Start with whatever you can afford and increase it as your income grows.
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Visit monkey.investmentsYou can start with as little as $1. Fidelity, Schwab, and most major brokerages now offer fractional shares and have no minimum balance requirements for individual brokerage and Roth IRA accounts. The Fidelity ZERO index funds have no minimums at all.
A broadly diversified index fund like the Vanguard Total Stock Market ETF (VTI) is the safest long-term investment for beginners. It spreads your money across thousands of companies, which minimizes the risk of any single company hurting your portfolio. Over any 20-year period, the US stock market has never lost money.
Index funds. Over 90% of professional fund managers fail to beat the S&P 500 index over 15-year periods. As a beginner, your odds of picking winning stocks are even lower. Index funds give you market returns with minimal effort and maximum diversification.
ETFs trade on the stock exchange throughout the day like stocks. Mutual funds trade once per day after the market closes. Both can track the same indexes with similar returns. ETFs have no minimum investment (you buy by the share), while some mutual funds require $1,000 or $3,000 to start. For most beginners, the difference is negligible.
If the alternative is not investing at all, absolutely yes. A robo-advisor charging 0.25% per year handles asset allocation, rebalancing, and tax optimization automatically. If you are comfortable managing your own portfolio with index funds, you can save that fee. But 0.25% is a reasonable price for full automation and peace of mind.
It depends on the interest rate. Pay off high-interest debt (credit cards at 15-25%) before investing. For low-interest debt like a mortgage (3-7%), you can invest simultaneously because your investment returns are likely to exceed the interest cost. Always get your employer 401(k) match regardless of debt, because that is an instant 50-100% return.
Once per quarter at most. Checking daily leads to emotional decisions and panic selling during normal market fluctuations. Set up automatic contributions, pick a diversified index fund, and let the automation do its work. Review your overall strategy once or twice a year.
Dollar cost averaging means investing a fixed amount on a regular schedule regardless of market conditions. It removes emotion from investing and prevents you from trying to time the market. While lump-sum investing technically outperforms DCA about two-thirds of the time, DCA is the best strategy for beginners because it builds the habit of consistent investing.
The best investment strategy for a beginner is the one you will actually follow. A perfect portfolio that you abandon during the first market downturn is worth less than a simple index fund that you contribute to every month for 30 years.
Open a Roth IRA, pick one total market index fund, automate your contributions, and do not touch it. That strategy alone will put you ahead of 90% of people your age. You can optimize later. Right now, just start.
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