Easy Ways to Start Investing Your Money

Investing early can allow you to take advantage of compound interest, which could help increase your wealth significantly over time. You can get started by opening a brokerage account, contributing regularly to retirement accounts like a 401(k) or IRA, and investing in mutual funds, exchange-traded funds (ETFs) or diversified portfolios, among other strategies. Here's a roundup of seven common investing strategies that could get you started.

If you're interested in building an investment portfolio, a financial advisor can help you analyze and manage investments.

1. Individual Retirement Accounts (IRAs)

Individual retirement accounts (IRAs) are tax-advantaged investment accounts designed to help individuals save for retirement. There are several types of IRAs, but the most common are the traditional and Roth IRAs .

Traditional IRA contributions may be tax-deductible, allowing individuals to reduce their taxable income. However, withdrawals made during retirement are subject to income tax.

Roth IRAs contributions, on the other hand, are made with after-tax dollars, so the funds grow tax-free. Qualified withdrawals from Roth returns are also tax-free.

Opening an IRA can typically be done with a bank, online brokerage firm or financial institution. Many providers offer low initial investment requirements, allowing individuals to begin contributing with modest amounts of money.

2. Workplace 401(k)

A 401(k) plan is an employer-sponsored retirement savings plan that can help workers invest a portion of their paycheck into a retirement account. Essentially, you contribute pre-tax income into an investment account, where your money will grow tax-deferred until you make withdrawals during retirement.

Additionally, many employers match 401(k) contributions to encourage employee participation in the retirement plan. Employers match a percentage of your 401(k) contributions up to a limit, which is like getting free money to boost your retirement savings.

To get started, enroll in your employer’s 401(k) plan, decide how much to contribute, and choose your investment options based on your retirement goals and risk tolerance.

3. Savings Bonds

A savings bond is a low-risk government security that pays interest over time and can be redeemed for its face value plus accrued interest upon maturity. This asset generally offers lower yields when compared with other investments like stocks or mutual funds, which have higher potential returns and greater risk.

There are primarily two types of U.S. savings bonds: Series EE bonds and Series I bonds . EE bonds earn a fixed interest rate, but I bonds adjust for inflation and are more popular during times of economic uncertainty.

Savings bonds can be purchased at any time from the TreasuryDirect website, which allows individuals to buy, manage and redeem their bonds online. The minimum purchase amount is as low as $25, and there are no fees involved. Any earned interest is exempt from state and local taxes, and federal taxes can be deferred until the bonds are cashed in or reach maturity.

4. Certificates of Deposit (CDs)

Certificates of deposit (CDs) are time deposits offered by banks or credit unions that pay a fixed interest rate over a specific term. CDs are generally considered safe, offering predictable returns and higher interest rates when compared with traditional savings accounts.

When you open a CD , you agree to deposit a specific amount of money for a few months to several years. Withdrawing funds before the CD matures typically incurs a penalty, so it's important to compare CD rates before you invest your money.

5. Real Estate Investing

Real estate investing can offer many ways to build wealth , including buying rental properties, investing in real estate investment trusts (REITs) , or participating in real estate crowdfunding platforms, among other strategies.

Real estate investing makes money through rental income , property appreciation, and potential tax benefits from deductions and depreciation. Additionally, it can diversify your portfolio by providing exposure to property markets, which can reduce overall risk and volatility when compared with traditional asset classes like stocks and bonds.

6. Mutual Funds or ETFs

Mutual funds and exchange-traded funds (ETFs) pool money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other assets.

A mutual fund is managed by a professional portfolio manager who actively selects and manages the fund’s investments with the goal of beating a specific benchmark.

ETFs, on the other hand, are traded on stock exchanges like individual stocks, and are designed to track the performance of a specific index like the S&P 500 .

Both options aim to reduce risk by spreading investments across various securities and sectors.

You can invest in mutual funds and ETFs by opening an account with a brokerage or financial institution. You can then select and purchase these funds based on your investment goals and risk tolerance.

7. Fractional Shares of Stock

Fractional shares of stock allow investors to purchase a portion of a share, making the stock market accessible to people who may not have the capital to buy full shares. Investors can decide how much money to invest, rather than how many shares to buy.

Many brokerage firms now offer the option to purchase fractional shares through their online platforms. Investors can open an account with a brokerage that supports fractional shares, such as Robinhood , Fidelity , or Charles Schwab , and start with as little as $1.

These platforms often provide intuitive interfaces and educational resources, making it easier for new investors to understand the process and make informed decisions.

Bottom Line

Easy ways to start investing your money can include opening a retirement account, buying mutual funds or ETFs, and simply setting up automatic contributions to retirement plans that can build wealth through compound interest. Even small, consistent contributions can have a significant impact when invested over time. As with all financial investments , you will need to consider how they fit into your overall financial goals and risk tolerance.

Investment Planning Tips

• A financial advisor could help you create a personalized investment portfolio based on your specific needs and goals. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now .
• SmartAsset's free online investment return and growth calculator can help you estimate how much an investment could grow based on the current value, plans for additional contributions and anticipated average return.

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