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[Prefer to listen? You can find a podcast version of this article here: E5: Investing 101]

In the last post, we talked about the building blocks of investing: stocks, ETFs, mutual funds, and why the market moves the way it does. That foundational knowledge matters, but it’s incomplete without understanding how all of those pieces come together into a strategy that actually works in real life, not just on paper.

What follows isn’t a trendy framework or a reaction to whatever the market is doing this week. These are the principles of investing that don’t change. They hold up through market booms, recessions, pandemics, elections, and whatever crisis inevitably comes next. And personally, I find a lot of peace in that. When the world feels noisy, having rules you trust makes it much easier to stay grounded and stay invested.

Before we go any further, though, I want to make one thing very clear: there is no one-size-fits-all way to invest. Your portfolio should reflect you- your goals, your timeline, your tolerance for risk, and even your personality. I’m not here to hand you the “perfect” allocation or tell you exactly what to buy. I don’t know you like that. My job is to give you a framework that helps you make smart, confident decisions that work for you.

Why We Invest at All

Let’s zoom out for a moment. Investing isn’t about having something impressive to talk about at dinner parties. At its core, investing is about freedom, options, and building a financially secure future.

That’s worth pausing on, because even being able to participate in this conversation is a privilege. Many people don’t have the financial flexibility to invest at all. If you do, that’s something to treat with respect and an immense amount of gratitude. Gratitude doesn’t mean guilt, and it doesn’t mean you can’t want more. It simply means recognizing where you are while you’re working toward where you want to go.

And before we invest a single dollar, there are a few things we should prioritize so that investing actually helps us instead of creating more stress.

The Three Things to Handle Before You Invest

First: an emergency fund. Ideally, this is three to six months of essential expenses in cash or cash equivalents. I know there’s a popular narrative that a thousand dollars is enough for your emergency fund, but in my opinion, it’s not. Rent alone makes that unrealistic for most people. An emergency fund is what gives you options when life throws something unexpected at you, and options are the whole point. Figure out what your essential monthly expenses are, multiple that amount by 3, and then set that aside for a rainy day.

Second: high-interest debt. If you’re carrying credit card debt at 20% or more, investing is not going to reliably save you. A helpful rule of thumb is that anything above about 7–8% interest deserves attention first. We want compound interest working for us, not quietly snowballing against us.

Third: your time horizon. Investing is a long game. Money you’ll need in the next year or two , for a wedding, a move, a big trip, should generally stay in cash. The market doesn’t care about your travel plans. Longer-term goals, on the other hand, are where investing really shines.

Once those pieces are in place, you’re usually in a solid position to start.

A Mindset Shift That Changes Everything

One of the biggest hurdles for new investors is separating price from value.

Stock prices move constantly, but that doesn’t mean the underlying businesses are changing just as fast. When markets are high, you’re often buying at a premium. When markets are down, you’re often buying the same companies at a discount. And yet, the stock market is the only place where a big sale makes people panic and run away.

We can’t reliably predict when markets will rise or fall. Anyone who claims they can is someone you should run away from as quickly as possible. So instead of trying to time the market, the most effective approach is consistent investing. Invest a set amount on a regular schedule, regardless of what the headlines say. This approach works because sometimes you’ll be investing when markets are high, and other times when they’re lower. Over time, those purchases naturally average out, helping you stay invested through all market cycles and reducing the risk of missing out altogether.

Where and How to Invest

Once you’ve chosen a platform that feels right , the next decision is account type.

Retirement accounts, like 401(k)s and IRAs, are designed specifically for retirement and come with tax advantages and withdrawal rules. Taxable brokerage accounts, on the other hand, offer flexibility. There are no contribution limits and no age restrictions, which makes them useful for those medium-term goals that may arise before you reach retirement age. Most people benefit from having a mix of account types, because life doesn’t happen on a neat retirement-only timeline.

The Confidence Ladder: A Simpler Way to Think About Asset Allocation

When it comes to what you actually invest in, I like to think of asset allocation as a ladder - something you can climb over time as your confidence and interest grow. I call this the Confidence Ladder, and it has four levels.

At the first level we have the Chill Investors. These individuals invest in a single fund that provides exposure to the entire global stock market. U.S. stocks, international stocks, large companies, small companies- all in one place. It’s low-cost, diversified, and incredibly effective. This is the ultimate set-it-and-forget-it approach, and yes, you can stay here forever and still do very well.

The second level, the Intentional Investor, uses two funds instead of one: one for the total U.S. market and one for international markets. This adds a little customization without adding much complexity and is a popular middle ground.

The third level, the Strategic Investor, breaks things down further into specific asset classes- large cap, mid cap, small cap, emerging markets, and any other sector that sparks your fancy. This requires more involvement and rebalancing, and it tends to work best for people who enjoy being hands-on or who are working closely with an advisor.

The fourth level, the Active Investor, involves selecting individual stocks. This approach can be rewarding and exhilarating, but it also requires more research, more monitoring, and a higher tolerance for risk. For most people who want a reliable formula for investing success, this is not the right portfolio for them. Remember, we are standing on a ladder here... the higher you climb the farther you can fall.

Here’s the most important thing to understand: complexity does not equal success. Many investors do just as well, and often better, staying at the lower levels of the ladder. If you are the chillest of chill investors, then you do you!

How Much to Invest (Without Overthinking It)

Start with what you can. Always prioritize getting your employer match if you have one, because that’s free money. Beyond that, automatic contributions are your best friend. They remove emotion, reduce stress, and help you pay yourself first.

One of the most effective habits you can build is scheduling investments right after your paycheck hits. If the money never sits in your checking account, you’re far less likely to spend it.

A Note on Asset Allocation and Risk

At a high level, asset allocation comes down to how much of your portfolio is in stocks versus bonds. Stocks tend to offer higher long-term growth with more volatility. Bonds generally smooth the ride but can reduce long-term returns.

There’s no universally correct mix. It depends on how much risk you can tolerate without panicking. If market downturns make you want to sell everything and hide the cash under your mattress, you may want more bonds. If you can stay invested through volatility and you’re focused on long-term growth, you may lean more heavily toward stocks.

The key is choosing an allocation you can stick with. The market will be dramatic. You don’t have to be.

The Investing 101 Recipe  

If you want a simple place to start, here it is:

1. Open an investment account.
2. Choose a diversified index fund or a small group of funds.
3. Automate your contributions.
4. Ignore short-term noise.
5. Increase your contributions over time.

That’s it. No crystal ball required.

Investing doesn’t have to be complicated to be effective. The goal isn’t to outsmart the market, it’s to stay invested, stay consistent, and build something meaningful over time.

And that’s Investing 101 in a nutshell.