Beginners can start their financial management with these 6 investment vehicles to easily build an asset portfolio.

Want to make money work for you but don't know where to start? Don't worry, this guide will help you clarify your thoughts.

Step 1: First, secure emergency funds and a checking account

Many people rush directly into the stock market, but this is actually a pitfall. Financial advisors recommend first saving 3-6 months' worth of living expenses in an emergency fund—this money can save your life in case of a broken house, job loss, or medical emergencies. Then, find a reliable bank to open a savings account (don't actually stuff it under your pillow). This way, you can not only build a bank credit record but also access your money anytime.

High-interest savings accounts can also be considered. Although the interest rate is not high, it is better than a regular account, allowing you to earn a little more interest when your money is idle.

Step 2: Retirement accounts are accelerators for wealth management

401(k) - Free money given by the company

If the company has a 401(k) plan, this is a must-have option. You can save money pre-tax, with a maximum contribution of $20,500 per year (those over 50 can contribute an additional $6,500). The key is that many companies will match a portion of your contribution - this is essentially free money.

For example, if you deposit $5,000, the company matches you with $3,000, and you earn that directly. This money must wait until you are 59.5 years old to withdraw; otherwise, there will be penalties, but this effectively forces you to hold it long-term.

IRA - A retirement fund with greater flexibility

There are two ways to play IRA:

Traditional IRA: The money you put in now is tax-free, but you have to pay taxes when you take it out in retirement. It is suitable for people who have a high income now and a low income after retirement.

Roth IRA: You are currently saving after-tax money, but withdrawals in retirement are completely tax-free. If you are young now with a low income and expect your future income to be higher, a Roth IRA is more advantageous—it's like locking in a lower tax rate in advance.

You can save up to $6,000 a year ($7,000 if you are over 50), and you can have both a 401(k) and an IRA at the same time.

Step 3: Start Investing - Choose the Method That Suits You

Method 1: Buy stocks directly

Growth Stocks: Invest in tech companies like Google and Apple, betting on their continued innovation. These companies do not distribute profits as dividends; instead, they reinvest everything to expand their business, resulting in high volatility but rapid growth. The risks are significant, but if you can tolerate the fluctuations in stock prices, the average annual return can reach 10% in the long run.

Dividend Stocks: Invest in mature companies like Coca-Cola and General Motors, which pay you dividends (cash) every quarter. The price fluctuations are small, but the growth is slow. Suitable for those with a low risk tolerance or who are already retired.

How to Select Stocks: Use stock selection services like Motley Fool, which have outperformed the S&P 500 benchmark by 68 times over their 20+ years of performance. But remember: good stock selection strategies recommend holding for 3-5 years, avoid frequent buying and selling.

Method 2: Lazy Plan - Index Funds and ETFs

Instead of getting tangled up in which stock to buy, it's better to buy a basket of stocks. For example, the S&P 500 index fund includes the 500 largest companies in the United States. By investing at once, you can gain exposure to the overall market performance.

During the 2008 financial crisis, the S&P 500 index fund dropped nearly half in a short period, which sounds frightening. However, those who endured it saw an average annual return of 18% over the next 10 years. This is the power of long-term holding.

Index fund fees are very low (0.03%-0.2%), making them suitable for most beginners.

Method 3: Mutual Funds (Active Management)

Let professional managers help you select a basket of stocks in pursuit of outperforming the market. However, the downside is the high fees (1%-2%). It’s fine if the manager is capable, but most actively managed funds underperform index funds in the long run.

Step Four: Consider Your Situation

Financial Goals: Clearly write down how much money you want to have in 5 years, 15 years, and at retirement, and work backwards to determine how much you need to save each year.

Risk Tolerance: When young, you can be more aggressive (buy more growth stocks), but as you get older, you should be conservative (buy more dividend stocks and bonds).

Investment Cycle: Clearly define whether it is for short-term emergencies or long-term retirement, which will determine asset allocation.

Automated Investment: Set up automatic transfer for regular investments, without worrying about market fluctuations. Continuous investment will provide you with answers over time.

Bottom line

There is nothing mysterious about financial management. The core is: first have an emergency fund, then use the tax advantages of retirement accounts, and finally allocate to index funds for long-term holding. The earlier you start, the stronger the magic of compound interest becomes. You don't need a lot of money to start - even a few hundred can be invested; the key is to take the first step.