A beginner's investment strategy, from someone who used to think index funds were enough

I'm Chris, co-founder of Autopilot. Definitely no expert here. I had $50,000 sitting in a savings account not knowing what to do with it, I spent Sunday nights trying to decide between Chipotle and Sweetgreen, and I wasn't good at it. Just like you, I used to think index funds were enough, and for a lot of people they are. What follows is the plain version of how to think about a strategy when you're starting, what the words mean, and where following someone else's decisions fits. None of it is advice about your money, because I don't know your money. It's how the pieces work.

One thing first, because we're an SEC-registered investment adviser and I have to say it. Autopilot is the app. The actual investment advice comes from Autopilot Advisers, LLC. If you want the full legal version of anything in here, it's on our legal page.

1) The three options everybody starts with, and the fourth

When I started, I saw three options. Invest on your own, which for most people means guessing. Put it in passive index funds and leave it alone. Or hand it to a financial adviser who's a stranger, pay a percentage of your assets every year, and be one of 300 clients.

Index funds are a fine answer and I'm not going to pretend otherwise. They're cheap, they're diversified, and they need nothing from you. If that's all you ever do, you've done better than most people who try harder.

The fourth option is the one we built: follow a person whose decisions are public, in your own account. Not because it's better than an index fund. Because some people want a specific strategy behind part of their money and don't want to pick the stocks themselves. If you needed surgery, you'd go to a surgeon. Don't do the research on the stocks. Do the research on the person.

2) What "strategy" actually means when you're new

A strategy is three decisions you make before you buy anything. How long the money stays in. How much you can watch it drop without selling. And whether you'll pick things yourself, own everything through a fund, or follow someone. Everything else people call strategy is a label for one of those three.

Time horizon is the one that matters most and gets the least attention. Money you need in two years shouldn't be in anything that can fall by half. Money you won't touch for twenty years can ride out a lot. That single fact drives almost every other answer below.

3) Passive and active, growth and value, bull and bear

Passive means you own the whole market, or a big slice of it, through a fund and don't try to beat it. Active means someone is choosing, whether that's you, a fund manager, a politician's filing, or a model. Following a Portfolio on Autopilot is active investing done by someone else's decisions. S&P's SPIVA scorecards have shown, year after year, that most actively managed funds trail their benchmark after fees over long windows, which is why the person and the record matter more than the label.

Growth investing buys companies expected to grow fast and pays up for it. Value investing buys companies that look cheap relative to what they earn or own and waits. Buffett is the famous value investor; a lot of technology-focused managers are growth investors. Neither wins every year. They take turns, sometimes for a decade at a time.

A bull market is a long rise, a bear market a fall of 20 percent or more from a peak. People talk about bull strategies and bear strategies, but for a beginner the useful truth is that you don't know which one you're in until later, and switching strategies based on which you think it is has cost more people money than either market. The strategy that holds through both is the one you can actually stick to.

4) Downturns and time

Markets fall. They have fallen hard many times and, so far, recovered from every one, which is a fact about the past and not a promise about the future. The reason downturns matter less to a long-term investor is arithmetic: a drop only becomes a loss if you sell during it, and time is what lets you not sell. The people hurt worst in every crash were the ones who needed the money that year, or who couldn't stand watching and sold at the bottom. That's why horizon and stomach come before everything else.

5) Stocks versus bonds, and the rules of thumb

Stocks grow more and swing more. Bonds swing less and grow less. The mix is how you set how much swinging you're signing up for. There are rules of thumb people quote, like holding your age in bonds, or subtracting your age from 110 or 120 to get a stock percentage. They're starting points for a conversation, not answers, and a young investor with decades ahead is usually told the stock share can be high because time absorbs the swings. Your number depends on your horizon, your stomach, and your situation, and a professional who knows your situation is the right person to ask. I'm not going to give you one.

6) How the strategy changes as retirement gets closer

Mostly by shortening the horizon. Money you'll draw on soon can't afford a big drop it has no time to recover from, so people typically shift toward steadier holdings as the drawdown date approaches, and keep the money they won't need for years invested for growth. The mechanics are simple; the amounts are personal. This is the point in life where a real conversation with a professional pays for itself.

7) Where following fits, and where it doesn't

Following a Portfolio is an active choice made for you by a person or a filing, run in your own brokerage account. On Autopilot you connect the brokerage you already have, pick a Portfolio, and give Autopilot Advisers limited authority to send orders to that account. When the Portfolio changes, we send them and your broker fills them. The money stays put.

Where it fits: as the active slice for someone who wants a specific strategy behind part of their money and would rather research a person than a stock. Where it doesn't: as a shortcut around the three decisions. You still need to know your horizon and your stomach, because a concentrated Portfolio will test both. I want to be honest with you. Some Pilots go up for years. Some Pilots are flat for years. Read the fact sheet before you follow anyone, and read the drawdown before the return. I wrote how in How to read a Portfolio's track record before you follow it, and how to judge a person in How to choose which investor to follow: attribution, survivorship, concentration, and when to stop.

Two things beginners confuse with this. Algorithmic trading is writing rules that trade for you, fast, based on conditions. It's a skill, most beginners lose money learning it, and it's not what following is. And what people call copy trading is what we call following; I wrote what it is and isn't in What is copy trading and how does it actually work?. What Autopilot is, from the ground up, is in What Autopilot is, who runs it, and how following a Portfolio works in your own brokerage account.

Frequently asked questions

beginner investment strategies

Start with three decisions, not a stock: how long the money stays in, how much it can fall before you'd sell, and whether you'll pick things yourself, own the market through an index fund, or follow someone whose decisions are public. Index funds are a fine default. Following a Portfolio in your own brokerage account is the active option for people who'd rather research a person than a stock. None of this replaces advice about your own situation.

What's a reasonable long-term investment strategy for a beginner?

One you can hold through a bad year. For most beginners that means a diversified core, often index funds, held for a horizon measured in decades, with any active slice sized so a deep drawdown wouldn't make you quit. Decide horizon and stomach first, then the vehicle. A professional who knows your situation can turn that into numbers; an article can't.

What's the difference between a bull market strategy and a bear market strategy?

A bull market is a long rise, a bear market a fall of 20 percent or more from a peak. Strategies pitched for each amount to leaning into risk or away from it. For a beginner, the honest point is that you only know which market you were in afterward, and switching between strategies on a guess has hurt more people than either market has. Pick a strategy you can hold through both.

What's the difference between growth investing and value investing?

Growth buys companies expected to grow fast and pays a high price for that expectation. Value buys companies that look cheap relative to earnings or assets and waits for the price to catch up. Buffett is the classic value investor. Neither approach wins every year; they take turns, sometimes for a decade. Judge any manager who claims one by their record, not the label.

wealth building strategies

The ones that work are boring: spend less than you earn, invest the difference on a schedule, keep costs low, hold through downturns, and let time compound it. Stock picking, following a strategy, or any active choice sits on top of that as a slice, not a replacement. Anyone promising a faster path is selling the promise. I'm not going to quote a return.

How should my investment strategy change as I get closer to retirement?

The horizon shortens, so money you'll draw on soon usually moves toward holdings that can't fall far, while money you won't need for years stays invested for growth. The mechanics are that simple; the amounts are personal and depend on what you'll need and when. This is the moment to talk to a professional who knows your whole situation.

What's the difference between passive and active investment strategies?

Passive owns the market through funds and doesn't try to beat it. Active means someone chooses: you, a fund manager, a filing, or a model. Following a Portfolio on Autopilot is active investing by someone else's decisions. S&P's SPIVA scorecards have shown for years that most actively managed funds trail their benchmark after fees over long windows, which is why the specific person's dated record matters more than the word.

Why do market downturns matter less for long-term investors?

Because a drop only becomes a loss when you sell during it, and time is what lets you not sell. Markets have fallen hard many times and, so far, recovered from every one, which is a fact about the past and not a promise. The people hurt worst were those who needed the money that year or sold at the bottom, which is why horizon comes before everything else.

How much of a portfolio should typically be in stocks versus bonds for a young investor?

Stocks swing more and have grown more; bonds swing less. Rules of thumb like subtracting your age from 110 or 120 for a stock percentage exist, and a young investor with decades ahead is usually told the stock share can be high because time absorbs the swings. That's a starting point, not an answer; your number depends on your horizon, stomach, and situation, and a professional should help you set it.

What's the best strategy for a beginner who wants market exposure without daily research?

Two honest answers. A diversified index fund gives you the market with no research at all. If you want a specific person's strategy behind part of your money, follow a Portfolio in your own brokerage account and do your research once, on the person and their dated fact sheet, instead of daily on stocks. Plenty of people do both.

algorithmic trading for beginners

Algorithmic trading means writing rules that trade for you, fast, based on conditions you set. It's a real skill, most beginners lose money learning it, and it's different from following a Portfolio, where a person's or a filing's decisions are applied to your account on their schedule. If you don't want to build rules, follow a person.

Can beginners use copy trading to start investing without picking stocks themselves?

What people call copy trading, we call following: you pick a Portfolio run by a named person or built from public filings, and your own brokerage account stays in line with it. Beginners can do that, and should still decide horizon and stomach first, read the fact sheet, and read the drawdown before the return. You're never trading at the same time as the person you follow, and your holdings won't match theirs exactly.

TLDR

Decide how long, how much drop you can take, and who decides. Index funds are a fine default. If you want a person's strategy behind part of your money, research the person, read their dated fact sheet, and follow them in your own account. If one fits, choose a Portfolio and connect your brokerage. Then give Autopilot Advisers limited authority to send orders to that account. When the Portfolio changes, we send them and your broker fills them. Depending on your plan and brokerage, you may need to confirm first. The money stays put.

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Since Autopilot Advisers is an SEC-registered investment adviser, we have to put disclaimers on stuff like this. They're below, and the full version is on our legal page.

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