To invest, first match the money to a goal and the date you will need it, then compare suitable investments for risk, liquidity, diversification, and total costs. In the U.S., you can buy investments through a brokerage account or use a workplace retirement plan or IRA for retirement savings; the account is the container, while the investment is what you hold inside it. All investments involve risk, and you can lose principal.
How to decide where and what to invest in
Start by deciding what the money is for and when you expect to use it. A long-term goal may allow more exposure to market fluctuations than a near-term goal, when a loss or a delay in accessing funds could cause problems. Consider your risk tolerance, liquidity needs, and the possibility of loss alongside the return you hope to earn.
This is a general U.S.-focused guide, not personalized financial or tax advice. Account eligibility, tax treatment, and investing rules vary by account, individual circumstances, and jurisdiction. Check current rules and official disclosures before investing.
Compare investments using the same questions
Stocks, bonds, mutual funds, ETFs, money market funds, and U.S. Treasury securities are among the choices investors may encounter. Real estate, precious metals and other commodities, and private equity are other categories, each with its own risks. These choices are not interchangeable or suitable for everyone.
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| What to compare | Questions to ask |
|---|---|
| Risk and potential return | How much could the investment lose, and what risks drive its potential return? Higher potential returns generally come with a greater chance of loss; past performance does not promise future results. |
| Time horizon | When will you need the money, and could you wait through a decline before selling? |
| Liquidity | How quickly can you sell or access the money, and could selling involve a substantial cost? |
| Diversification | What does the investment actually hold? Is it concentrated, and does it overlap with other investments you own? |
| Fees | What fund, advisory, account-maintenance, commission, or other brokerage charges apply? |
| Verification | Have you read official disclosures and understood the investment before buying? |
The SEC’s investment products guidance discusses factors such as risk, time horizon, liquidity, diversification, and fees.
Where to hold investments
“Where” has two meanings: the account that holds your money and the investments you buy inside it. A brokerage account can hold securities such as stocks, bonds, mutual funds, and ETFs. Workplace retirement plans and IRAs are common account types for retirement goals. Education savings plans, ABLE accounts, health savings accounts, and other specialized accounts may also be available, depending on eligibility and circumstances.
Tax treatment, contribution rules, and withdrawal restrictions vary. Confirm current account rules rather than relying on a general description or an outdated threshold.
Brokerage cash accounts and margin accounts
In a brokerage cash account, you pay the full amount for securities you buy. In a margin account, the brokerage lends money using your account as collateral. Borrowing is not necessary to invest. Understand the account terms and risks before choosing margin. The SEC explains this distinction in its brokerage accounts guidance.
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If you need the money soon, consider whether market fluctuation or restrictions on access could jeopardize the goal. The SEC discusses money market funds, certificates of deposit, and investment-grade bonds as options with less potential risk and volatility than some alternatives, but none should be assumed to be risk-free or equivalent to an insured bank deposit. Short-term funds are generally best held where they can be accessed without tax penalties or significant fees.
Securities and funds are not federally insured like FDIC-insured deposits, even when purchased through a bank. You can lose principal. See the SEC’s explanation of what it means to invest.
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How to buy and sell stocks
A brokerage account is one way to place stock trades. Before placing an order, understand what you are buying, the account terms, and any transaction or account charges. The SEC’s brokerage account information explains account types and their basic features.
- Choose a registered brokerage firm and review its services, account terms, and fee schedule.
- Open an account type that fits your purpose. Understand whether it is a cash or margin account; you do not need to borrow to invest.
- Research the investment using its official disclosures. For a fund, review its holdings, risks, and fees; do not assume its name guarantees diversification.
- Decide whether the investment fits your goal, time horizon, need for liquidity, and ability to tolerate loss.
- Place an order only after understanding how it works and what charges may apply. Review your holdings and account statements over time.
Funds, diversification, and costs
Mutual funds and ETFs pool money from investors and can provide exposure to multiple underlying assets. A fund is not automatically diversified: it may focus on one sector or hold only a small number of investments. Check the fund’s actual holdings and compare them with other funds you own. The SEC’s asset allocation and diversification guidance explains why holdings matter.
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A fund’s expense ratio is one cost, not necessarily the whole bill. Other charges can include shareholder fees, sales loads, redemption or exchange fees, account fees, advisory fees, commissions, and other brokerage charges. Review the prospectus fee table, the latest shareholder report, and your brokerage’s fee schedule. Some intermediary charges may not appear in the prospectus.
The SEC’s mutual fund and ETF fees bulletin describes fund expenses and other fees. Its fee bulletin also discusses costs investors should consider. FINRA’s Fund Analyzer is identified by the SEC as a tool for comparing certain mutual fund and ETF costs.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.A practical checklist before investing
- Write down the goal and when you will need the money.
- Decide how much fluctuation and potential loss you could tolerate without disrupting the goal.
- Choose an account that fits the purpose, and verify its current eligibility, tax treatment, and withdrawal rules.
- Compare investment risks, liquidity, actual holdings, and overlap with investments you already own.
- Review fund disclosures and the full account and investment fee schedules.
- Invest only when you understand the product and its risks; do not treat past performance as a promise.
FAQ
How do I start investing?
Begin with a goal and time horizon, decide how much risk and loss you can tolerate, then compare account options and investments. Read official disclosures and review all applicable fees before buying.
Where can I invest money in the U.S.?
Depending on your goal and eligibility, you may invest through a brokerage account, a workplace retirement plan, or an IRA. Specialized accounts may also be available. Account rules and tax treatment vary, so verify current details.
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Are mutual funds and ETFs automatically diversified?
No. They pool investor money, but a fund focused on one sector or a small group of holdings can remain concentrated. Review holdings and overlap with other funds you own.
Can I lose money investing through a bank?
Yes. Securities and funds are not federally insured like FDIC-insured deposits, even when bought through a bank. You can lose principal.
What fees should I check before buying a fund?
Check the expense ratio and look for other costs, including shareholder, account, advisory, redemption, commission, or brokerage fees. Review the prospectus, shareholder report, and account fee schedule.
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