At Credit.org, we're mostly concerned with helping people get educated and on their feet financially. Our clients are typically trying to eliminate revolving debt, or become homeowners. We don't provide investment advice.
But we are concerned with financial success. We want all of our clients and everyone we educate to have a bright future and a secure retirement. Our Basics of Financial Planning booklet is available as a free .pdf download.
Investing can feel overwhelming at first, but it’s one of the most effective ways to grow your money and reach your financial goals. Whether you’re saving for retirement, a home, or your child’s education, learning the basics of investing is an important step in building a secure financial future. Investing helps you make your money work for you over time by generating returns, often higher than traditional savings accounts.
This article is part of our Financial Literacy Month series, designed to help everyday people build confidence with money and develop smarter habits. As you get familiar with investing, keep in mind that it’s not about quick wins or guessing the next big stock. Instead, it’s about consistency, discipline, and planning for the long term.
Saving money is a good first step, but investing is what helps it grow. With inflation, the money in your savings account loses value over time. Investing offers a way to stay ahead of inflation and earn more through interest, dividends, or increased asset values. If you’re already saving but not investing, you might be missing an opportunity to build real wealth.
Check out our article on the Basics of Saving to understand how saving and investing work together.
The key to building wealth is staying invested over the long haul. This means allowing your investments to grow over years, even decades. Compounding interest plays a major role here: when your investments earn returns, and those returns earn more returns, your money grows faster over time. The longer you keep your money invested, the more potential you have for growth.
Some people shy away from investing because they fear losing money. While investing always carries some level of risk, avoiding it entirely can also be risky, especially when it comes to reaching long-term goals like retirement or buying a home.
There are many different types of investment products to choose from, and each comes with its own risks and benefits. The most common products include:
Diversifying your portfolio by including different products helps spread your risk.
For a deeper look at savings tools that support investing, explore our Basics of Banking guide.
Mutual funds are popular with beginner and seasoned investors alike. They allow you to invest in a broad mix of stocks, bonds, or other assets, all in one package. A professional fund manager selects and monitors the investments, making mutual funds a hands-off option for investors who prefer not to manage their own portfolios.
One key benefit of mutual funds is diversification. Since the fund includes many assets, you’re not relying on the success of a single investment. This reduces your overall risk while still offering the chance for solid returns.
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An exchange traded fund (ETF) is like a cousin to the mutual fund. It also contains a bundle of assets, but instead of being managed like a mutual fund, ETFs trade on the stock exchange just like individual stocks. This gives investors more flexibility with buying and selling throughout the day.
ETFs usually have lower fees compared to mutual funds, making them a cost-effective option. Some ETFs follow major indexes like the S&P 500, which means you can invest in a broad section of the market with a single purchase.
For more on how markets work, see our guide to the Basics of Supply & Demand.
You don’t have to invest alone. Investment professionals—including financial advisors and planners—can help you choose the right products based on your goals, risk tolerance, and timeline. They can also assist with creating a strategy that includes retirement planning, tax considerations, and regular portfolio reviews.
When choosing a professional, make sure they are certified and operate with your best interest in mind. You can find a trustworthy advisor through the Financial Industry Regulatory Authority (FINRA).
If you’re carrying high interest debt, like from credit card debt, it’s wise to pay that down before investing aggressively. That’s because the interest on your debt could cancel out any returns you might earn from your investments.
Let’s say your credit card charges 20% interest. If your investment only earns 7%, you’re losing money overall. Focus first on reducing high interest balances. Our team at Credit.org offers help through credit counseling and budgeting services to support you on your financial journey.
A 401(k) is one of the most powerful tools for wealth building, especially for retirement. Offered by many employers, a 401(k) allows you to contribute a portion of your paycheck into an investment account before taxes are taken out. Often, employers will match your contributions up to a certain amount, which is essentially free money.
The earlier you start contributing to a 401(k), the more time your investments have to grow. Even small contributions can turn into a sizable retirement fund over the course of decades, thanks to compound interest. Keep in mind that 401(k)s often include a mix of stocks, bonds, and mutual funds, depending on the options your employer offers.
To learn more about how taxes factor into investment decisions, visit our Basics of Taxes article.
If you’re new to investing, start simple. Open a retirement account, such as an IRA or 401(k), and choose investment products like mutual funds or ETFs. Robo-advisors and apps can automate the process and help you stay on track.
Make sure to:
You can begin with small amounts; many apps allow you to start with just $10 or less. Over time, consistent investing can lead to significant growth.
If you’re wondering how to choose the right investment vehicle, our Basics of Incentives article explores how motivation plays into smart financial decisions.
Successful investing isn’t about timing the market or picking the hottest stock. Instead, it’s about long-term consistency and sticking to your plan. Here are a few tips:
Stay focused on your goals and resist the urge to chase quick wins or follow market hype.
Many of these lessons also apply to saving and budgeting. If you’re working on overall financial wellness, check out What Is Financial Literacy? to build a stronger foundation.
We touched on credit card debt earlier, but it’s worth repeating: high balances can hold you back. Paying down debt with interest rates in the double digits should be a top priority before putting money into long-term investments.
That doesn’t mean you can’t save while paying off debt, but investing in a risky stock or fund while juggling balances on multiple cards can be costly. A better plan is to tackle your debts first, then shift focus to growing your money.
If you’re working toward that goal, Taking the Right Steps to Achieve Your Pledge offers practical strategies that can help.
Be cautious of “hot tips” and guaranteed investment schemes. If someone promises big returns with no risk, it’s likely a scam. Stick with trusted investment professionals, do your own research, and always understand what you’re putting your money into.
The Securities and Exchange Commission (SEC) provides alerts and guidance on how to spot fraud and protect your hard-earned money.
When you choose investments, think about how long you plan to leave the money invested. If you’re saving for something 20 years away, you can usually take on more risk. But if you need access to your money in a few years, you’ll want more stable investments.
This concept, known as your time horizon, is essential for selecting the right mix of assets. Your risk tolerance—how comfortable you are with ups and downs—also matters. Combining these two factors helps determine your ideal investment strategy.
Investing and retirement planning go hand in hand. If your employer offers a 401(k), take full advantage of it. If not, consider opening an IRA. Retirement accounts offer tax advantages that help your money grow faster, and the earlier you start, the better.
Use resources like the Consumer Financial Protection Bureau’s retirement savings guide to plan effectively for the future.
The most important thing to remember about investing is this: start early and stay consistent. Even if you begin with a small amount, time and steady contributions can lead to big results.
Investing and trading on the market are complicated tasks and have many risks. We don’t offer investment advice, and urge anyone who is interested to consult a Certified Financial Planner. For help with debt, budgeting, or credit, contact us today for personal, confidential help.
