How to Invest Money: A Beginner’s Guide

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Investing can feel intimidating, especially if you’re just starting out. But here’s the good news: learning how to invest money doesn’t have to be complicated. With the right approach, anyone can start building wealth for the future.

Whether you’re looking to grow your savings, plan for retirement or just make your money work harder, this guide breaks down the basics in a simple, approachable way.

Why Should You Invest?

You might be wondering, “Why should I invest my hard-earned money?” The answer is simple — investing helps your money grow over time. Here’s why it matters:

• The Power of Compound Interest: When you invest, your earnings generate even more earnings. Over time, this compounding effect significantly boosts your wealth.
• Beating Inflation: Keeping money in a savings account may feel safe, but inflation can eat away at its value. Investing helps your money outpace inflation.
• Building Wealth for the Future: Whether it’s for retirement, buying a home or starting a business, investing helps you reach your financial goals faster.

Different Ways to Invest Your Money

There are many ways to invest, each with its own level of risk and reward. Here are some of the most popular options:

1. Stocks

Investing in individual companies through stocks is one of the most common ways to build wealth. Stocks offer high return potential but come with higher risks due to market fluctuations.

Pros:

• Potential for high returns.
• Ownership in companies.
• Easy to buy and sell.

Cons:

• Prices can be volatile.
• Requires research and market knowledge.

2. Bonds

Bonds are essentially loans you give to governments or corporations. In return, you earn interest over a set period.

Pros:

• Generally lower risk than stocks.
• Provides steady, predictable income.

Cons:

• Lower returns compared to stocks.
• Sensitive to interest rate changes.

3. Mutual Funds and ETFs

Mutual funds and ETFs (exchange-traded funds) allow you to pool money with other investors to buy a diversified mix of stocks, bonds, or other assets.

Pros:

• Diversification reduces risk.
• Professionally managed (mutual funds).
• Easy to trade (ETFs).

Cons:

• Management fees may apply.
• Less control over specific investments.

4. Real Estate

Investing in property — like rental homes or commercial buildings — can generate income and appreciate in value over time.

Pros:

• Generates rental income.
• Property values can increase over time.

Cons:

• Requires significant upfront capital.
• Ongoing maintenance and management needed.

5. Savings Accounts

While not technically an “investment,” savings accounts are a low-risk option for storing emergency funds.

Pros:

• Extremely safe.
• Highly liquid (easy to access).

Cons:

• Very low returns.
• Doesn’t keep pace with inflation.

How to Choose Where to Invest Your Money

Not sure which option is best for you? Here are some things to consider:

• Know Your Risk Tolerance: Are you comfortable with market ups and downs, or do you prefer a safer, more predictable option? Gauging your level of risk tolerance is important before getting started investing.
• Think About Your Timeline: If you’re investing for the long-term (like retirement), you can take on more risk. For short-term goals, safer investments may be better.
• Define Your Financial Goals: Are you saving for a house, retirement or a rainy day? Your goals will shape your investment strategy.

How to Get Started with Investing

Starting small is perfectly fine. Here’s how to ease into investing:

1. Open an Investment Account: Choose between a brokerage account (for flexible investing) or a retirement account like an IRA or 401(k).
2. Pick a Platform or Advisor: Whether it’s an online brokerage, robo-advisor or financial advisor, find the option that matches your comfort level.
3. Start Small and Grow: You don’t need thousands of dollars to start. Many platforms let you begin with as little as $10.
4. Stay Consistent: Regular, small investments (like monthly contributions) can add up over time thanks to compound interest.

The Risks of Investing and How to Manage Them

Every investment carries some level of risk, but there are ways to minimize it:

• Understand Market Volatility: Prices can fluctuate, but remember — investing is a long-term game.
• Diversify Your Portfolio: Don’t put all your eggs in one basket. Spread your investments across different asset types.
• Stay Informed: Keep learning and stay up-to-date with market trends to make better decisions.

How to Track Your Investments

Keeping tabs on your investments is key to long-term success. Here’s how:

• Use Tracking Tools: Investment apps and online platforms make it easy to monitor your portfolio.
• Set a Review Schedule: Check in monthly or quarterly — not daily — to avoid stress from short-term market shifts.
• Adjust as Needed: If your goals or risk tolerance change, it’s okay to rebalance your portfolio.

Final Take to GO

Investing is one of the best ways to build wealth, achieve your financial goals, and prepare for the future. Whether you start small with ETFs or dive into real estate, the key is to get started, stay consistent and keep learning along the way.

Remember, it’s not about timing the market — it’s about time in the market. So, take the first step, invest in your future, and watch your money work for you.

Looking for more tips? Explore investment platforms, compare options, and see which strategy fits your goals best.

John Csiszar and Melanie Grafil contributed to the reporting for this article.

Information is accurate as of March 14, 2025.

Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.

Methodology: GOBankingRates analyzed investment types over time to find how much someone could have made by investing in different strategies. First, GOBankingRates found some of the most commonly traded stocks through recent history as sourced from Kiplinger. Next, GOBankingRates used the Bureau of Labor Statistics Inflation calculator to find that $1,000 in 2024 was worth $529 in 1999, 25 years ago. For each stock, a $529 investment was calculated using DQYDJ.com’s stock return calculator, which allows us to calculate the value of a stock from one period of time to another. These calculations assumed you follow the DRIP investing plan which states that dividends are to be reinvested in the same stock. Trading prices were taken from July 30, 1999, to July 30, 2024, along with every five years in between to calculate 25-year investments. The 401(k) was calculated using AARP’s 401(k) calculator. To calculate the 401(k) investment, GOBankingRates made the following assumptions; starting 401(k) balance of $0, current age is 40, annual rate of return is 6%, annual salary is $59,428 (average national salary), expected annual salary increase is 3%, percent to contribute is 6%, employer matches 100% up to 4% of salary. This 401(k) estimation follows the financial model that recommends investing 10% towards your 401(k). Using the calculations to find the estimated current value of the 401(k) and stocks, GOBankingRates calculated how much you would have made by investing in different strategies. All data was collected on and is up to date as of March 14, 2024.

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