Investing Money to Make Money Grow

The idea of investing your money to make it grow may conjure images of frenetic traders at the New York Stock Exchange or sound like something that’s only for people who are older, wealthier or further along in their careers. But the truth is that anyone can invest and it doesn’t take much to get started. In fact, it’s better to start small and get into the habit of saving and investing early in life.

When you save money in a savings account, the biggest benefit is that you’re not just making it grow through interest but also growing it through compounding. Essentially, when you earn interest on an investment, the amount that grows is equal to the initial deposit plus the accumulated interest from previous periods. This is why it’s important to set aside as much as you can each month.

With this in mind, it’s a good idea to start with a savings account at a major bank that offers high interest rates and great user experience, such as the best high-yield savings accounts. Then, once you’re ready to move on, you can open a more advanced investment account. This is where you can buy and sell shares of companies (stocks) or other investments, such as bonds, through a market called the “market.” This is more complicated than your average banking system, but large brokerage firms like Schwab or Fidelity will let you open an investment account with just a little cash to fund it.

Once you’ve got an investment account, you can consider the options for growing your money based on your own risk tolerance and time horizon. Mutual funds and exchange-traded funds are affordable ways to diversify and invest in bundles of stocks or bonds. Government and corporate bonds can provide income, cushion stock market volatility and even offer tax benefits. People with a higher risk tolerance can consider alternative investments, including cryptocurrency and nontraditional assets.

No matter what you choose, there is always the chance that you could lose some or all of your money. That’s because any asset you buy and sell can rise or fall in value. For example, if other investors feel optimistic about the future of a particular company, that can push the price of its stock upwards. Conversely, bad news or investor fatigue can push prices down.

But you can mitigate the risks of losing money by limiting the amount of money you allocate to riskier assets, choosing lower-cost investments and staying calm when markets are volatile. You should also keep in mind that you can’t always predict the future, and you might not be able to achieve your goals for buying a home, sending children to college or retiring comfortably. That’s why it’s important to have a savings and investment plan, avoid getting carried away by social media posts of people making big money on risky investments and only invest with money that you can afford to lose.