5 Tips for Beginning Investors
Kiplinger's Personal Finance editor Janet Bodnar shares our best investing advice in a letter to her son -- and any twentysomething looking to get into the market.


I was impressed when my twentysomething son, Peter, told me recently that he was reading Benjamin Graham’s classic, The Intelligent Investor. Peter also subscribes (on his own) to Kiplinger’s Personal Finance magazine, of which I’m the editor, and he occasionally asks me for advice. I’m fortunate to have the expertise of our staff at my disposal, plus some thoughts of my own for beginning investors. I distilled them into an e-mail that Peter says he found “really helpful,” so I thought I’d share it:
Dear Peter,
1) Put safety first. Before you invest in anything, you should have money in the bank that you can easily get to in an emergency (say, your car breaks down) or that you can use for a new car, a trip abroad or even a house. Kiplinger generally recommends that you have at least enough in a cash reserve to cover your expenses for six to 12 months. Savings accounts are paying almost nothing right now, but you can eke out 1% or so in top-yielding accounts.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
2) Build a solid base. For longer-term money that you don’t need right away—such as money in your 401(k) plan or IRA—you can afford to take risks in the stock market. The best thing to do when you’re starting out is to stick with mutual funds, which let you spread your risk—or diversify—by investing in a lot of different stocks.
The best funds to start out with, in my opinion, are index funds, which try to match a particular benchmark, such as the broad-based Standard & Poor’s 500-stock index or a total stock market index. Another benefit of index funds: They have very low fees, which means more of your money is working for you and not for the company that manages the fund.
Note: Peter, you asked about exchange-traded funds, or ETFs. An ETF is a kind of index fund. There are hundreds of ETFs that invest in all kind of indexes, some well known (such as the S&P 500) and some so obscure that you’d never need them. They are popular because their fees are even lower than those of index mutual funds, and you can trade them throughout the day like stocks. We’ve compiled our favorite ETFs into the Kiplinger ETF 20.
3) Aim for a target. Another broad-based way to invest is a target-date fund, which you probably have access to through your 401(k) plan. That’s a one-stop fund with a mix of stocks, bonds and other assets that are tied to the date of your retirement and gradually become more conservative as that date approaches. If you go this route, a target-date fund is probably all you need.
4) Add a little spice. With actively managed funds, managers use their own judgment to try to get returns that beat the stock market. That’s tough to do, and some managers are better at it than others. The trick is to pick the best ones that have staying power. At Kiplinger, we try to do this for you by choosing the Kiplinger 25, our 25 favorite actively managed funds. If you have index funds as a base, you can use actively managed funds to complement your portfolio.
5) Take a flier on stocks? In some ways, stocks are the most fun to invest in, but they also require a lot of research to choose the right ones. And, of course, if you invest in any single stock, you’re taking on more risk than if you invest in a mutual fund that holds shares in many companies. For someone in your position, I’d recommend starting with a solid fund foundation. Then, if you have extra money and want to take a flier on a stock (or stocks), you can do that.
There’s a lot more, of course. But I think this gives you a good overview of the basics, and I hope it helps.
Love,
Mom
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Janet Bodnar is editor-at-large of Kiplinger's Personal Finance, a position she assumed after retiring as editor of the magazine after eight years at the helm. She is a nationally recognized expert on the subjects of women and money, children's and family finances, and financial literacy. She is the author of two books, Money Smart Women and Raising Money Smart Kids. As editor-at-large, she writes two popular columns for Kiplinger, "Money Smart Women" and "Living in Retirement." Bodnar is a graduate of St. Bonaventure University and is a member of its Board of Trustees. She received her master's degree from Columbia University, where she was also a Knight-Bagehot Fellow in Business and Economics Journalism.
-
Stock Market Today: Good Feelings and Solid Data Lift Stocks
Resilience and de-escalation defined another generally positive day for financial markets.
-
Five Home Upgrades for Surviving Record-Breaking Heat
With global temperatures expected to hover at record highs for years to come, now’s the time to upgrade your home for long-term heat resilience.
-
Stock Market Today: Good Feelings and Solid Data Lift Stocks
Resilience and de-escalation defined another generally positive day for financial markets.
-
Stock Market Today: Tesla Drags on Stocks Amid Musk-Trump Feud
Sentiment has soured between President Trump and his once-loyal ally, Tesla CEO Elon Musk.
-
Stock Market Today: Stocks Brush Off Weak Jobs Data
The yields on the 2-year and 10-year Treasury notes fell sharply after a pair of weak economic reports.
-
Stock Market Today: Rally Extends on Good-Enough Expectations
Fiscal policy still has markets' attention, but taxes rather than tariffs and deficits rather than inflation are participants' primary focus.
-
Stock Market Today: Markets Move With Fresh Trade War Winds
The new uncertainty is the same as the old uncertainty, which is fine with investors, traders and speculators.
-
Stock Market Today: Stocks Bounce as US-China Tensions Escalate
Stocks were volatile to end the week and the month amid concerns a trade truce between the U.S. and China is splintering.
-
Stock Market Today: Stocks Chop as Judges Block Then Reinstate Tariffs
The Trump administration has asked for and received a stay in a case that seems headed for the Supreme Court.
-
Stock Market Today: Stocks Struggle Ahead of Nvidia Earnings
The three main indexes closed lower as Wall Street awaited the AI bellwether's quarterly results.