Getting Started with Investing

What Is Investing and Why Is It Important?

Investing means putting money to work with the goal of a financial return. A common form is buying stocks, which happens in the stock market, a network of exchanges where people buy, sell, and issue shares of publicly traded companies.

Investing early may provide more time for your money to grow. For example, putting $1,000 into a savings account with a 0.06% return, over 10 years, would earn under $10 in interest. By contrast, if you invested that same $1,000 into an equity mutual fund the amount could nearly double over time.

Ways to Start Investing

Even if you don’t have a large amount of money, there are investment options that fit many budgets. You can start by saving a little now whenever you can. Common account types include employer‑sponsored retirement plans, Individual Retirement Accounts (IRAs) and standard brokerage accounts. Within these accounts you can invest in stocks, mutual funds, bonds and more.

Retirement Accounts

Relying solely on a pension or Social Security for retirement income is no longer realistic for many. To build sufficient retirement funds you should consider investing through a retirement account, whether via your employer or an IRA. If offered, contribute to the employer plan and aim to receive any available matching funds. Be aware that Traditional IRAs and Roth IRAs both have annual contribution limits.

Traditional IRAs

With a Traditional IRA your contributions may be tax‑deductible and investment earnings are not taxed while inside the account. Later when you withdraw the money in retirement, withdrawals are taxed at your income tax rate.

Roth IRAs

With a Roth IRA you contribute money that has already been taxed. Later withdrawals in retirement are generally tax‑free. You may withdraw your contributions (the cost basis) at any time, but withdrawing investment gains early may trigger penalties.

Apps and Robo‑Advisors

Robo‑advisors are automated platforms designed to provide investment management services at a lower cost than traditional advisors. They use algorithms to assess your risk tolerance, financial goals and time horizon, and automatically rebalance your portfolio as needed.

While robo‑advisors offer accessibility and cost‑effectiveness, they may lack the personalized advice and human interaction of a traditional financial advisor. It is important to consider your preferences and investment needs when choosing between a robo‑advisor and a traditional advisory service.

What Is the Stock Market?

When you buy stocks in a public company you become a small owner of that company. The stock market is where people buy and sell shares of public companies. It is made up of a network of venues regulated by the U.S. Securities and Exchange Commission. Investors often reference large indexes such as the S&P 500 or the Dow Jones Industrial Average, but many other indexes and venues also exist.

Why Do Companies Offer Shares of Stock?

Companies sell shares to raise money for growth initiatives such as:

• Paying off debt
• Launching new products
• Expanding operations
• Hiring additional staff
• Building new facilities

Funding research and development

Key Points Before You Invest

1. Do your research. Explore companies, mutual funds or bonds you want to invest in and understand their current and potential value.
2. Decide how much money you want to invest and how many shares or units makes sense for you.
3. Understand the risks. Every asset carries risk. Learn about the risks and benefits before deciding where to invest.

How Do You Start Trading in the Stock Market?

Here are some common account types and strategies:

• Online Brokerage Accounts: Open an account, deposit funds, and buy stocks, mutual funds or ETFs.
• Discount Brokers: These brokers execute trades on behalf of clients for low or zero fees but typically offer little advice.
• Full‑Service Brokers: These brokers offer advice, research and other services but charge higher fees.
• Direct Stock Purchase Plans: Allows purchase of company shares directly from the company, often with fewer fees.

Investment Advisors: Professionals who manage investments for clients for a fee, percentage of assets or commission.