Skip Navigation
Edvisors Star Logo
Edvisors Logo
  • Compare Lenders
      • Compare Lenders
      • Best Private Student Loans in March 2023
      • Student Loan Comparison: Federal Loans vs Private Loans
      • Parent PLUS Loans vs Private Student Loans
      • How Does Interest on Student Loans Work?
      • Private Student Loan Cosigner: Everything you Need to Know
      • View All Articles >
      College ave student loans apply now

      This is an advertisement.

      • Compare Lenders
      • Best Student Loan Refinance Companies for March 2023
      • Federal Student Loan Repayment Plans
      • Student Loan Forgiveness: How to Get Student Loans Forgiven
      • Repayment Plans for Private Student Loans
      • Parent PLUS Loan Forgiveness
      • View All Articles >
      refinance student loans with college ave get started

      This is an advertisement.

    • Private Student Loans
    • Refinance Student Loans
  • Plan for College
      • Best Job Search Sites
      • Resumes That Get Noticed
      • High Paying Careers
      • STEM Careers
      • View All Articles >
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • Measuring Academic Fit: Reach, Match and Safety Schools
      • Need-Blind Admissions
      • How Long is a College Essay
      • When are College Applications Due
      • How to Write a Good College Essay
      • View All Articles >
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • Filing the FAFSA 2023-24: A Simple Guide for Students
      • FAFSA Deadlines for 2023-2024
      • FAFSA FAQ - Your FAFSA Questions Answered
      • View All Articles >
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • Most Popular Scholarships for College Students in 2023
      • Apply for Free Scholarships for College
      • College Scholarships for Kids
      • Most Prestigious Undergraduate Scholarships
      • Las mejores becas para estudiantes hispanos y latinos
      • View All Articles >
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • How to Pay for College
      • Tuition Payment Plans
      • Pros and Cons: Borrowing From My 401K to Pay for College
      • Paying College Tuition with a Credit Card
      • Best Ways to Pay for College Without Financial Aid
      • View All Articles >
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • Financial Aid Disbursement: When and How You Will Get It
      • Should I Pay Off My Student Loans Right Now
      • How to Minimize Student Loan Debt
      • View All Articles >
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

    • Careers
    • College Admissions
    • FAFSA
    • Scholarships
    • Paying for College
    • Student LIFE Blog
  • Student Loans
      • Filing the FAFSA 2023-24: A Simple Guide for Students
      • FAFSA FAQ - Your FAFSA Questions Answered
      • FAFSA Deadlines for 2023-2024
      • FAFSA School Codes
      • FAFSA 2023-2024 Guide & Resources
      • View All Articles >
      College ave student loans apply now

      This is an advertisement.

      • Best Private Student Loans in March 2023
      • Student Loan Comparison: Federal Loans vs Private Loans
      • Parent PLUS Loans vs Private Student Loans
      • How Does Interest on Student Loans Work?
      • Private Student Loan Cosigner: Everything you Need to Know
      • View All Articles >
      College ave student loans apply now

      This is an advertisement.

      • Filing the FAFSA 2023-24: A Simple Guide for Students
      • FAFSA FAQ - Your FAFSA Questions Answered
      • The complete guide to federal undergraduate student loans
      • What are Federal Parent PLUS Loans and How to Apply?
      • Financial Aid for Graduate School
      • Compare Subsidized and Unsubsidized Student Loans
      • View All Articles >
      College ave student loans apply now

      This is an advertisement.

      • Best Student Loan Refinance Companies for March 2023
      • Federal Student Loan Repayment Plans
      • Student Loan Forgiveness: How to Get Student Loans Forgiven
      • Repayment Plans for Private Student Loans
      • Should You Refinance Federal Student Loans?
      • Parent PLUS Loan Forgiveness
      • View All Articles >
      • Sallie Mae Student Loan Review
      • College Ave Student Loan Review
      • SoFi Student Loan Review
      • Ascent Student Loan Review
      • View All Articles >
      College ave student loans apply now

      This is an advertisement.

    • FAFSA
    • Private Student Loans
    • Federal Student Loans
    • Repay Student Loans
    • Lender Reviews
  • Credit Cards
      • Petal® 2 Visa® Credit Card Review
      • SoFi Credit Card Review
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • Best Credit Cards for 2023
      • Best Cash Back Credit Cards
      • Best 0% Introductory APR Credit Cards
      • Best Secured Credit Cards for 2023
      • Best Balance Transfer Credit Cards
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • How to Build Credit?
      • What Age Can You Get a Credit Card?
      • What is a Secured Credit Card?
      • What is an Unsecured Credit Card?
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

    • Card Reviews
    • Best Credit Cards
    • Credit Card FAQs
  • Money Management
      • Best Budgeting Apps
      • Budgeting Tips
      • Budgeting for Beginners
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • Financial Goals
      • How to Save Money as a College Student
      • What is an Emergency Fund
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • How to Pay Off Debt
      • Debt Relief
      • What is a Debt Management Plan
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • How to Check Your Credit Score
      • Best Credit Building Apps
      • What is Credit?
      Self Credit Builder: Build Credit. Build Savings. Build Dreams.

      Sponsored Ad

      • Investing for Beginners
      • Best Investment Apps
      • Understanding the Stock Market
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • What is Risk Management
      • How to Prevent Identity Theft
      • What is Insurance
      Info compromised in a breach? Don't compromise on identity theft protection.

      Sponsored Ad

    • Budgeting
    • Saving
    • Debt Management
    • Credit
    • Investing
    • Risk Management
Search Box Form
School Search Form
Advertisement Disclosure
Advertisement Disclosure
×

Edvisors (“Edvisors Network, Inc.”) provides independent advertising-supported platforms for consumers to search compare and apply for private student loans. Loan offers from participating lenders that appear on our websites are not affiliated with any college and/or universities, and there are no colleges and/or universities which endorse Edvisors’ products or services. Lender search results do not constitute an official college preferred lender list. Edvisors receives compensation from lenders that appear on this site. This compensation may impact the placement of where lenders appear on this site, for example, the order in which the lenders appear when included in a list. Not all lenders participate in our sites and lenders that do participate may not offer loans to every school.

Edvisors is not a lender and makes no representations or warranties about your eligibility for a particular loan or financial aid. Lenders are solely responsible for any and all credit decisions, loan approval and rates, terms and other costs of the loan offered and may vary based upon the lender you select. Please check with your school or lender directly for information related to your personal eligibility.

Edvisors has endeavored to provide accurate information. However, the results provided by lenders are for illustrative purposes only and accuracy is not guaranteed, as such, Edvisors assumes no responsibility for errors or omission in the information provided.

×
Get Your Free Guide to Filing the FAFSA Today!

Thank you for your interest in Edvisors' 2020-2021 Guide to Filing the FAFSA.

Please complete the form below to access your free copy.

Thank you! Click here to download your free FAFSA Guide.

I am a:

×
College knowledge starts here!

Enter your email below to receive your Student Loan Handbook from Edvisors.

Please check your email for the Student Loan Handbook.

After Navigation
Home Money Management Investing Investing for Beginners
  • Contents
  • What is Investing?
  • Considerations When it Comes to Investing
  • Best Beginner Investments

Investing for Beginners

ARindfleisch
By Ainsley Rindfleisch
November 7, 2022
Email This Article
Fill out the form below to send a copy of this article to your email.
By clicking "Submit" I have read and agree to the Edvisors' Terms of Use and Privacy Policy. We strongly encourage you to read our Privacy Policy to understand how we use and share your information.
A copy of this article has been sent to your email.

You may be new to the world of finance and have heard the terms “investing,” “stock market,” or “retirement account” and wondered what are these things? While there are many ways to invest, the goal of investing is always the same—a desire to grow your money. 

What is Investing?

Investing is the act of using money in a manner that will cause your initial investment to increase in value (hopefully). While you can put your money safely in a savings account and your money can grow there with no risk of losing value, it will grow so very slowly. Investing involves some level of risk, dependent upon your investment, but can also yield returns much greater than the very safe savings account. You might invest in real estate hoping the value of the property will rise.  You could invest in other valuable assets such as gold or silver with the expectation the value will increase over time.  A common type of investment is to purchase stock in a company that is publicly traded on the stock market or invest in a mutual fund (a collection of investment products bundled together. Any of these options are no guarantee that your money will increase in value, you could very well lose some of all of your money, but you could also grow your money exponentially as well. It’s a traditional risk-return proposition. 

Considerations When it Comes to Investing

When investing, it’s a good idea to only use money that you will not need in the next five years, so as not to compromise your current financial situation. Investing can seem scary with market crashes and dips, but for the most part, the market tends to grow more than it shrinks. When you invest, you can put your money to work for you with the measured expectation that you will be able to receive profit after a certain period of time. 

Before you begin investing all your extra cash into stocks or bonds (we’ll get to those in a minute), you should take a moment to decide what you are comfortable with, what your overall goal/outcome should be, and how often you can or want to put money towards your investments. Choosing the right types of investments as a beginning investor can help you build a collection (or portfolio) of investments that will allow your money to go to work for you. Even if you have an extra $10 at the end of the month, using that cash to start investing now can help you have a healthy financial future. 

Risk Tolerance

Every investment comes with some level of risk, as there is always a given amount of uncertainty in the world. Always be prepared for the potential of a negative financial outcome when investing. The value of your investment(s) will rise and fall based upon on the conditions of the market. The market can be affected by a variety of factors, but the main driver is typically the current economy. There is a chance that you can end up losing money and your level of comfort with this uncertainty is the risk tolerance you are willing to accept when investing your money. 

While it is impossible to predict the economic upturns and downturns that will happen in the future, carefully look over the risks associated with each investment. You may want to vary your investments (known as diversification) as you invest over the years and with different goals in mind. No matter what kind of investment you choose, all come with some degree of risk. 

Investment Goals

Many people begin investing aiming toward a particular financial goal or plan for their future. Common investment goals are: 

  • Saving for college
  • Creating an emergency savings fund
  • Buying a home
  • Having and raising children
  • Changing a career
  • Retirement
  • Or any other decision that may require a large amount of money in the future

When you are looking to create investment goals, you may want to use the following SMART goals outline to help you create a more specific vision for your goal:

Specific: have a clearly defined goal
Measurable: give yourself a specific target for when you know you’ve achieved the goal
Achievable: make sure your goal is something that you can realistically accomplish
Relevant: your goal should be applicable to the life you’re living and creating
Timely: lay out a realistic timetable that enables you to track your progress

Hold yourself accountable for your goals, but also be willing to understand that sometimes circumstances might require your goals to change. Life doesn’t always happen the way we think it should and your goals may need to be flexible. 

Consistency

When you decide to begin investing, it’s a good idea to consistently build up your investments. Whether it’s through your employer’s 401(k) program that you make contributions to each pay period, or if it’s just $5 that you are able to put towards your investment portfolio, the intent is the same—what you are doing today is putting money towards the future for you. 

Depending on your type of account, you might be able to set it up so money will automatically be deposited into an investment account by your employer right out of your paycheck. Other accounts require you to choose what stock or fund you want to invest in. However you choose to do it, creating a habit of investing a portion of your income creates the opportunity for your money to grow. 

Best Beginner Investments

401(k)s, Roth IRAs & Traditional IRAs

If you are looking to begin investing toward your retirement (and it’s never too early to start), signing up for a 401(k) or an IRA is a great place to start. These accounts are created specifically with long term goals in mind (such as retiring) and so the sooner you start putting money into these accounts, the greater growth potential they have. 

If you work, your employer may have a 401(k) program already set up and may offer to match whatever you put in up to a set percent. Matching means that whatever amount of money you put in, your company will also put in a portion of money to your account. Essentially, this is free money from your employer and guarantees at least some return on your investment.

High-Yield Savings Accounts

A high-yield savings account typically offers higher interest rates than regular savings accounts and is especially useful in helping you save money for an emergency fund. Traditional savings accounts may pay you an interest rate as low as 0.01%, but high-yield savings accounts can allow you to access interest rates that range from 1-2.2%. 

Different high-yield accounts may have different requirements, such as maintaining a required amount of money in the account at all times (a minimum balance) or paying a monthly or yearly service fee. Not all accounts come with these stipulations and there may be ways to waive these requirements. You may also be able to link a debit card to your account. This will allow you access to your money at an ATM (which may also have a fee associated with it). You may want to research a few different banks to see what terms and conditions are available to you when it comes to a high-yield savings account. 

Certificates of Deposit (CDs)

CD accounts are a bit like a savings account, but the money you put into the account is usually a set amount, also known as the principal or a lump sum and this money is meant to remain in the CD for set time period. The money deposited into a CD typically has an interest rate that is locked for the same set period of time (also known as the term). Many CD accounts will charge you a penalty if you need to take out (withdraw) your money early. Once the account reaches the end of the time period, (or it reaches maturity), you can withdraw your money without paying the penalty, or you may have the option to renew your CD with the current balance (including earned interest) with the same terms, thus allowing you to tap into compound interest.

Because you agree to “loan” your money to the lender for a specific amount of time, CD accounts usually will have higher interest rates than typical savings accounts. This also allows for you to earn more savings while avoiding the risk associated with other types of investments. Some accounts may have a minimum amount required to open the account, and typically the longer you allow your money to be in a CD, the higher the annual percentage yield (AYP). 

Stocks

When you invest your money in stocks, you are buying shares (or parts) of ownership of a company. By purchasing shares, you are hoping the company will do well and grow over time. If the company does well, the shares you own may become worth more than you paid for them and other investors may be willing to buy your stocks for the new higher price, resulting in a profit for you. 

The stock market has had some historic highs and lows. However, in general stocks perform well over time for those who are patient. The stock market has an average annual return of 10%, but that also means when you invest, you should be ready to leave your money in the market for several years to realize meaningful gains. 

When investing in stocks, you will need a brokerage account to start buying and trading. A professional financial advisor can help you navigate the stock market with your financial goals in mind, but keep in mind they may charge you a fee or a percentage of what you gain. If you are just beginning your stock investing journey, the majority of your needs can be met with the help of online brokers and robo-advisors. 

Online brokers allow you to purchase and manage your own individual stocks through the broker company’s website. A robo-advisor takes the place of a human investment advisor and is replaced by computer algorithms intended to choose, manage, and track your investments for you depending on your declared goals and timeline. 

Bonds

Bonds are a different financial product as they are created in a similar structure as a loan. You buy a bond from a company, municipality or government, and the bond issuer agrees to pay a declared interest rate over a certain amount of time. When companies or governments need to raise money, they often turn to bonds. 

Each bond comes with a face value, or the value you will receive when the bond reaches maturity (the agreed upon time period the bond is issued for). The coupon rate of a bond is the annual rate of interest that you will receive for your bond. Higher coupon rates mean that you will collect higher interest payments on the bond. You may receive semi-annual, quarterly, or monthly payments depending on the terms of the bond. Lastly, each bond will have a maturity date in years that tells when the money you loaned will be repaid back to you in full. 

Target-Date Mutual Funds

If you hold a retirement plan you may have a target-date mutual fund. These are investments that are automatically invested in with an estimated retirement year as a goal. These mutual funds often hold a variety of stocks and bonds, depending on the planned target-date fund. How aggressive or conservative your fund is will depend on how close you are to your target-date.

If you are planning to retire in 35 years, or around 2057, your fund will mostly hold stocks since your retirement date is far away and stock returns tend to be better for long term investing. (Tip: if you are looking at target-date mutual funds, look for the date you plan to retire in the name.) As you near retirement, your mutual fund will move more of your money toward bonds as they are less risky investments as you near retirement and will be counting on your money. 

Index Funds

Index funds are a collection of investments that are representing a particular portion of the market. A popular market index is the S&P 500 which holds stocks of about the 500 of largest U.S. companies. If you were to buy an S&P 500 index fund, the intent of the fund would be to copy the performance of the S&P 500. 

Index funds do not have the human element of active traders, but rather are an investment tool for investors who are looking for lower risk and prefer to be more passive in their investing. 

Exchange-Traded Funds (ETFs)

Like index funds, ETFs give you access to a particular group of investments. This could be a particular industry (such as technology), commodity (such as crude oil), or currency (such as for bitcoin and speculating on the prices of other countries’ currency.) EFTs are traded daily, and EFT share prices fluctuate in a similar manner to that of a stock. Investment apps such as Robinhood allow investors to purchase EFTs, or you can use brokerages with dedicated investors to buy and trade EFTs. 

 
Get this article in your inbox.
Email This Article

Related Content

Understanding the Stock Market
By Ainsley Rindfleisch
11/08/2022
It is possible to navigate the stock market once you understand the basics of what a stock is, how to buy and sell stocks, and why you would want to invest in stocks.
Read More
What is Wealth Management
By Ainsley Rindfleisch
11/14/2022
Wealth management is a service that offers financial advice and combines other financial services to address the needs of clients.
Read More
Investments - smart phone with investment app displayed showing graph of stock performance
Best Investment Apps
By Ainsley Rindfleisch
11/14/2022
Knowing the basics about investments can help you make smart money choices. Investment apps often offer educational resources to help you understand how to grow your money. 
Read More
Understanding the Stock Market
By Ainsley Rindfleisch
11/08/2022
It is possible to navigate the stock market once you understand the basics of what a stock is, how to buy and sell stocks, and why you would want to invest in stocks.
Read More
What is Wealth Management
By Ainsley Rindfleisch
11/14/2022
Wealth management is a service that offers financial advice and combines other financial services to address the needs of clients.
Read More
Investments - smart phone with investment app displayed showing graph of stock performance
Best Investment Apps
By Ainsley Rindfleisch
11/14/2022
Knowing the basics about investments can help you make smart money choices. Investment apps often offer educational resources to help you understand how to grow your money. 
Read More
Could You Be Saving More?
Subscribe to Edvisors' Student LIFE Newsletter to receive up-to-date financial aid information and advice, explore scholarship opportunities, loan repayment options, and learn expert strategies on how to plan and pay for college.
Newsletter Form
By clicking "Subscribe" I have read and agree to the Edvisors' Terms of Use and Privacy Policy. We strongly encourage you to read our Privacy Policy to understand how we use and share your information.
Thank you for subscribing to our newsletter.
We care about your privacy

This website uses cookies to offer you the most relevant marketing and targeted advertisements.  These cookies can collect information to personalize your experience and in some states are considered a sale of your personal information. You may exercise your right to opt out by clicking on deny cookies.  If you opt out, we or our partners will not be able to provide you with personalized ads and we will not provide your personal information to any third parties.   Please accept cookies for the optimal experience.  You can withdraw or modify your consent for non-essential cookies at any time by visiting Cookie Preference page.

Ask the Edvisor
Blog
Contact Us
Edvisors in the News
Link to Us
Newsletter
Partners
Press
Student Aid FAQ
Testimonials
Tools and Calculators
About Edvisors
Video Resources
Financial Terms Glossary
Accessibility Statement
Sitemap
Disclaimer
Notice of Collection
Interest-Based Ads
Cookie Settings
Privacy
Terms of Use
Your Opt-out Rights
Your Privacy Choices Privacy Options

Better Business Bureau logo

Edvisors provides expert advice on planning and paying for college. On Edvisors.com easily compare student loan lenders, learn how to apply for financial aid, and discover scholarships. Learn about federal and private student loans for students and parents, how and when to apply to college, and more!

Edvisors (“Edvisors Network, Inc.”) provides independent advertising-supported platforms for consumers to search compare and apply for private student loans. Loan offers from participating lenders that appear on our websites are not affiliated with any college and/or universities, and there are no colleges and/or universities which endorse Edvisors’ products or services. Lender search results do not constitute an official college preferred lender list. Edvisors receives compensation from lenders that appear on this site. This compensation may impact the placement of where lenders appear on this site, for example, the order in which the lenders appear when included in a list. Not all lenders participate in our sites and lenders that do participate may not offer loans to every school.

Edvisors is not a lender and makes no representations or warranties about your eligibility for a particular loan or financial aid. Lenders are solely responsible for any and all credit decisions, loan approval and rates, terms and other costs of the loan offered and may vary based upon the lender you select. Please check with your school or lender directly for information related to your personal eligibility.

Edvisors has endeavored to provide accurate information. However, the results provided by lenders are for illustrative purposes only and accuracy is not guaranteed, as such, Edvisors assumes no responsibility for errors or omission in the information provided.

Copyright © 1998-2023 by Edvisors Network, Inc. All rights reserved.

All other trademarks and service marks displayed on Edvisors Network, Inc. websites are the property of their respective owners.

Edvisors Network, Inc. 350 S. Rampart Blvd, Suite 200, Las Vegas, NV 89145

Copyright © 2023 by Edvisors.com. All rights reserved.

×
You Got In - Now How Do You Pay for It?

Get the money you need from leading lenders

1 Pick Your College
2 View Your Options
3 Click to Apply
Exit Modal

PrivateStudentLoans.com recommends you consider all financial aid alternatives including grants, scholarships and federal loans (Federal Stafford, Federal Parent PLUS, Federal Grad PLUS) prior to applying for private student loans.