Complete Beginner’s Guide To Investing In 2026

Investing is one of the best ways to build wealth over time. The S&P 500, which is an index fund made up of the top 500 companies in America, has averaged a return of 10.2% per year since 1957. This means if you invested just $5 a day, which is the price of a Starbucks coffee, you’d have over $1.6 million in 45 years’ time, just from that $5 investment. But how do you start investing? And more importantly, what should you invest in? As a millionaire investor who started out with nothing, I’m going to walk you through exactly what you need to do, step by step. I’m not a financial advisor, and this isn’t financial advice. I’m just sharing what’s worked for me over the years. Please also do your own research.

Step 1: How to Start Investing

So, how do you start investing? Well, there are a few things you need to do. First, you’ll need to open an investment account. There are many different investment platforms to choose from, but they all offer different benefits. Here’s a few things you should look out for. Firstly, low fees. You don’t want your investment returns to be eaten up by unnecessary charges. Secondly, a beginner-friendly interface. Although I’m comfortable with complicated investing terms, I know most beginners would be put off if it looked too confusing. Thirdly, security. What’s the point of investing if your money isn’t safe? Make sure the platform you choose is fully protected by the relevant financial authorities. This will compensate you up to a certain amount in case something happens to the platform. However, bear in mind this protection doesn’t cover investment losses. Lastly, fractional shares. This would allow you to invest in high-priced stocks without needing to fork out hundreds of dollars to buy an entire share. For example, Apple is, as of August 2023, trading at around $178 per share, which clearly doesn’t work with a $5 a day budget. But with fractional shares, you can invest any amount you want, no matter how small.

I’ve used a lot of investing platforms in my life, and one of my favorites is Trading 212, as it ticks all of these boxes. If you’d like to sign up, I’ll leave a link in the description. By using the code “TILBURY,” you’ll get a free fractional share worth up to £100 when you fund your account. Plus, you can get more free shares by inviting your friends. Both of you will get a free share, as long as they fund their account. Also, don’t worry if you’ve opened an account in the last 10 days. You can still use the promo code “TILBURY” in the app and receive your free share. This isn’t sponsored, but I thought I’d share it with you guys as I’ve been using them for years now.

Choosing the Right Account Type

When it comes to this step, there’s one key decision that many people overlook, a decision that can make or break your long-term results. This is because the type of account you choose will determine how much of your profits you actually end up keeping. Let me explain. There are two main types of accounts we need to consider. For now, let’s call them Account A and Account B. Now, let’s imagine we’ve got $2,000 to invest. We’ll split it equally between both boxes. So, $1,000 goes into Account A, and $1,000 goes into Account B. At first, everything looks the same. Both accounts have the same amount of money invested, but here’s where things start to change. When you use Account A, your profits aren’t entirely yours to keep, and that’s because of the dreaded taxman. First, he takes a slice of your dividend earnings. Dividends are like a reward companies give their shareholders. Now, not all companies pay them, but many do. How much the taxman takes depends on your income and tax bracket. So, the more you earn, the bigger the slice he takes. Next, he takes even more for capital gains tax. This happens when you sell an investment for more than you paid for it. In the UK, capital gains tax is typically 10 to 20%. In the US, long-term capital gains tax rates range from 0 to 20%, based on your income level.

Now, what about the money in Account B? Well, this account has special protections that stop the taxman from reaching in and taking your profits. Everything you make here is yours to keep. That’s because Account B is known as a tax-advantaged account. Meanwhile, Account A is just a general investing account. In my humble opinion, you shouldn’t even be looking at a general investing account until you’ve fully taken advantage of everything a tax-advantaged account has to offer. So, how do you do that? Well, it depends on where you live. In the UK, our tax-advantaged accounts are called Stocks and Shares ISAs. And in the US, they’re known as Roth IRAs. Both of these special accounts come with incredible tax benefits, but there are a few things to keep in mind. In the UK, you can contribute up to £20,000 per year into an ISA. In the US, Roth IRA contributions are capped at $6,500 each year, or $7,500 if you’re over 50. For most people, these limits are plenty, allowing you to build your future while still covering living expenses. The ISA allows you to withdraw money at any time, tax-free, which makes it very flexible. So, while a general investing account isn’t necessarily a bad option, it often falls short when it comes to maximizing your money. Of course, if a tax-advantaged account isn’t available where you live, you’ll have no other choice but to use option A, a general investing account.

Step 2: Pick Some Investments

The second thing you need to do is to pick some investments. Now that you’ve opened your investment account, it’s time to decide what you’re actually going to invest in. This is all about deciding what actually goes into the box. So, we could fill it with individual stocks, like Amazon, Meta, Apple, Tesla, and Nvidia. But to be honest, while these are great companies, putting all your money into a handful of individual stocks can be really risky. If one of these companies doesn’t perform well, it could drag down your entire portfolio. That’s because your money is tied up in just a few companies, and that increases your risk. That’s why for this challenge, I’m using a different strategy, and you might have guessed it already. It’s called index fund investing. This will give us exposure to loads of different companies without all the stress of picking individual stocks and praying for a winner. Index funds can hold shares from hundreds, sometimes thousands of different companies at once. This makes it easy to invest in a whole bunch of companies all at the same time, making your portfolio more diversified. Now, here’s the best part. What makes this even more powerful is that it’s going right inside my tax-advantaged account. So, not only do I get the benefits of diversification and low cost, but I also get to avoid paying taxes on dividends or capital gains while it grows. Of course, it’s important to remember that stocks can go up as well as down, and your capital is always at risk when investing. However, if you choose to invest in an index fund like the S&P 500, which tracks the performance of the top publicly traded companies in the United States, it’s worth noting that historically, no one has lost money when they’ve bought and held for over 20 years. Past performance isn’t a guarantee of future results, but long-term investing in diversified funds like this can help reduce risk compared to individual stocks.

Step 3: Set Up Auto-Invest

The third thing you need to do is set up auto-invest. The most common mistake I see people make when investing is assuming that once they put some money into an account like this, their money will automatically start to grow. Let me make one thing very clear: this box only protects your money from tax. It doesn’t actually invest it for you. So, how do you do this? Well, you’ll need to set up auto-invest. This feature isn’t just great for a $5 challenge; it’s essential for any investor, no matter how much you’re putting in. This is because it takes your emotions out of investing and leverages the power of dollar-cost averaging. Let me explain. The reality of the stock market is that it’s completely unpredictable. It doesn’t just move in one direction. Sometimes the market will be going up, other days it’ll be moving sideways, and then there are times it’ll be going down. When the market is down, your money is actually buying more shares because prices are lower. For example, my $5 stretches further, letting me pick up more shares at a discount. And when the market is up, my $5 buys fewer shares because prices are higher. The idea is that over time, these ups and downs balance each other out, which is the magic of dollar-cost averaging. It’s been such a reliable and stress-free strategy for me because it takes the pressure off trying to time the market perfectly. I’ll be using this exact strategy by investing the same amount every single day. And if you don’t want to do it daily, you can invest monthly and still see the same results. It’s entirely up to you.