How to start investing

Most people who ask me how to start investing already suspect the answer. They have savings sitting in a bank account, a nagging sense that this is wrong, and no idea what the first move actually is. The honest first move is not a stock or a fund — it is an emergency fund of three to six months' expenses, held in cash, so that the money you do invest can be left alone for years. This is the walkthrough I wish someone had handed me: what to do, in what order, and why.

Is keeping your money in a savings account safe?

Not in the way it looks. Money in a bank account feels safe because the number never goes down — but the number is not the point. What that number buys is the point, and inflation eats it quietly. At 2% annual inflation, the purchasing power of cash falls by half in about 35 years; at 3%, in a little over 20.

Put a real figure on it. Someone holding $500,000 in a savings account, with inflation running at 2.5%, has about $240,000 of today's purchasing power left 30 years later — less than half, without a single dollar ever leaving the account.

Nothing dramatic happens along the way. No crash, no headline, no single day you can point to. That is exactly what makes inflation such an effective destroyer of savings: it never triggers the alarm that would make you act.

First: build your emergency fund

Before a single dollar goes into the market, build a cash buffer of three to six months of living expenses. Not invested — held in an ordinary account, boring and instantly available. Its job is not to grow; its job is to make sure you never have to sell investments at a bad moment because the car broke or the job ended.

This buffer is the foundation of everything that follows. An investor with no cash reserve is one bad month away from becoming a forced seller, and forced sellers take whatever price the market offers. Three to six months is the range — pick the end of it that lets you sleep.

What should your first investment be?

A broad, low-cost index fund — one that owns hundreds or thousands of companies across the world in a single holding. You get the return of the market as a whole, diversification you could never assemble on your own, and no need to know anything about individual companies. Most professional fund managers fail to beat this plain default over long periods, which tells you a lot about how good a starting point it is.

The one variable fully under your control is cost, and it matters more than it looks. The gap between a 0.2% and a 1.5% annual fee sounds trivial, but over 30 years at a 7% market return the cheap fund turns your money into roughly 7.2 times the starting amount, the expensive one into roughly 5.0 times.

That is about 30% less end wealth — same market, same risk — handed to a fund company for no extra benefit. (The figures are a straightforward compounding illustration, not a promise about future returns.) Check the fee before anything else; it is the closest thing to a free decision you will make.

Which investment account should you use?

The one with the best tax treatment where you live — because where you hold the fund is a separate decision from which fund, and it compounds for decades.

In Sweden, the standard answer is the ISK (investeringssparkonto): instead of taxing your gains, it charges a flat annual schablon tax on the account's value — about 1.07% in 2026, and only on the part of your combined ISK and KF balances above 300,000 kronor, which is tax-free. In Germany, there is no equivalent wrapper: you use a normal Depot, pay 25% Abgeltungsteuer on realised gains and dividends (about 26.4% once the solidarity surcharge is added), and get €1,000 of gains tax-free each year, or €2,000 for a couple. In the UK, a Stocks & Shares ISA shelters up to £20,000 of contributions each tax year, and everything inside grows and is withdrawn entirely tax-free.

These numbers move with budgets and governments, so verify the current figures before you open anything — the ISK vs KF vs AF guide goes deeper on the Swedish choice. But the principle holds everywhere: the wrapper decision quietly compounds for decades, and it takes one afternoon to get right.

Automate it, then stop watching

Set up an automatic monthly transfer into the fund and treat it like rent. The exact amount matters less than you think — what matters is that it happens every month without a decision, because decisions are where beginners lose. A market that has just fallen feels like a reason to skip a month; historically, it was a reason to do the opposite.

Nobody reliably picks the good months in advance, including the people paid to try. Time in the market beats timing the market — not as a slogan, but as a plain fact about where long-run returns come from. The person who started five years ago with small monthly sums is almost always ahead of the one still waiting for the right moment.

Should you buy individual stocks?

Not at the start, and maybe never — and that is not a criticism. A cheap global index fund in the right account, fed automatically every month, is a complete investment plan on its own, and plenty of people should stop exactly there and never think about it again.

Buying individual companies — what I do — is a later, optional step with a real entry requirement: you have to be willing to read company accounts and work out where the cash actually comes from. If that sounds interesting rather than exhausting, the free cash flow guide is where I'd start. If it sounds exhausting, the index fund was the right answer all along.

Either way, the order above is the whole point. If you're still working out where you sit, start here; the thinking behind all of it is set out in the philosophy.