Stash Learn

Introduction to Investing: Start Your Journey

By learning about investing, you're taking a big step toward building your financial future.

Beginner 5 Chapters 13 min read

Chapter 1

What's investing?

  • Investing is purchasing a bond, stock, or fund
  • Investors expect to make money on their money
  • Savings is money you set aside for a rainy day
2 min read

Investing. Buying. Selling. We all know the language of investing from books, movies and television. But what are people actually doing when they invest?

Never mind the buzzwords or the fast-talking financial news analysts. The world of investing is actually very straightforward and easy to grasp. You just have to start with the basics.

What is investing?

Investors expect to make money on their money, on a consistent basis.

When you invest in the stock market you are purchasing an asset, usually a stocktooltip, a bondtooltip, or a fundtooltip. When you purchase stock, you’re buying a small percentage of a company. When you purchase a bond, you are purchasing the debt of a company or a government. When you purchase a fund, you’re acquiring a bundle of stocks, bonds or cash, or potentially all three.

(We’re going to delve more into stocks, bonds, and funds in the next guide, so don’t worry if you’re not totally sure what these terms mean.)

People buy stocks, bonds, and funds with the hope of earning more money on these investments than they would from putting that money in a savings account.

Why do people invest?

People invest for a lot of reasons.

Maybe you want to put money away for retirement. Or save for a down payment on a house. Perhaps you want to start a college fund for your child.

Or maybe you believe in the future of a company that produces innovative software or your favorite soft drink. Maybe you want your money to grow along with a sector’s (say healthcare or energy) profits.

No investor is the same. Everyone’s goals are different. Here’s what all investors have in common: The hope of growing their money over time.

How is investing different than saving?

Investing and saving are both essential parts of a solid financial strategy. But they actually serve different purposes.

Savings means cash, the kind you keep in your checking or savings account. Savings are great for a “rainy day.” This could mean unexpected bills or a household emergency. It’s the money that’s there when you need it.

A good rule of thumb: Have enough savings to meet six months of expenses in case of an emergency.

Here’s the thing. The money in your checking or savings account may not earn you much interest. Most savings accounts offer pretty low rates these days. (We’ll talk more about that in the next chapter.)

In short, building your savings is critical to making sure you have cash ready, even though it’s not necessarily great for growing your money.

Chapter 2

How do people invest?

  • Investing is accessible to regular people
  • Your investing goals may change over time
  • Investing lets you take advantage of compounding and earning dividends
3 min read

In the old days, before the web and smartphones, it wasn’t easy for the average Joe (or Joanna) to invest. It took money, access and a lot of know-how.

Is investing accessible to regular people?

In most cases, you needed to pay a financial planner or an advisor at a bank to help you set up an investment portfolio. Many advisors charged hefty fees. Not only that, most wealth advisors required their customers to come to the table with a minimum of six figures before even beginning to invest their money.

Fact: Many of them still do.

Investing is now available to everyone. You don’t need a minimum balance or to pay high fees to set up a portfolio that’s tailored to your risk and goals and that includes investments that reflect the things that excite you. That’s pretty cool.

Can investing goals change over time?

Most people invest according to their tolerance for risk and the goals they want to achieve. And just as our goals may change as we get older, so can your investment strategy.

That’s where risk tolerance comes in–how much volatilitytooltip you’re willing to take on in order to get to your goal, according to your timeline.

If you’re in your twenties, you have time to absorb the gains and losses in the market over many years. You may want to invest more aggressively. But if you’re in your fifties and looking to retire in a few years, you may want to be more conservative in your approach.

Your goals can change over time.

How does your money make money in the market?

There are three main ways your investments can make money over time.

Your investments can earn interest.
For example, if you’re invested in money market securities, or even just hold your cash in a savings account, both pay interest. If you’ve invested in bonds, these will also pay you a regular stream of interest.

Your investments can increase in value.
That’s called making a return on your investment.

Your investment may pay dividends.
Dividends are a percentage of company profits, distributed to shareholders on a set schedule. These dividends are typically either sent to your investment account or reinvested in the fund.

Stocks and funds also typically pay quarterly dividends, which are a portion of earnings that some companies return as cash to their investors. And if you reinvest those, and continue adding to your holdings, a long-term investing strategy could really pay off.

What’s compounding?

Investing offers the opportunity to benefit from compounding, which is essentially earning money on your money, or interest on your earnings.

Assuming the value of a stock continues to go up, the longer you hold the stock, the value gets amplified. And that can make a big difference toward your long-term goals, as opposed to just putting your cash in a savings account.

Say you start putting away $50 a week in an investment account that owns a variety of stocks, bonds, and cash. If that account earns an average of 5% annually, you’ll have over $159,669 in 30 years when the interest is compounded annually.

Investing $50 per week

*See disclaimer

Remember in the last chapter when we talked about investing versus saving?

Compare all that to having put just $50 a week in a savings account earning 1% interest for 30 years. You’d see $83,551 in 30 years.

That’s a big difference.

Saving $50 per week

*See disclaimer

1 The rate of return on investments can vary widely over time, especially for long-term investments including the potential loss of principal. For example, the S&P 500® for the 10 years ending 1/1/2014, had an annual compounded rate of return of 8.06%, including reinvestment of dividends (source: Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). The S&P 500® is an index of 500 stocks seen as a leading indicator of U.S. equities and a reflection of the performance of the large-cap universe, made up of companies selected by economists. The S&P 500 is a market value weighted index and one of the common benchmarks for the U.S. stock market.

Chapter 3

How much money do I need to start?

  • You don’t need a lot of money to start investing
  • It’s all about time in the market
  • Start small, learn as you go
1 min read

You don’t have to be rich to be an investor. Really!

Fact vs. fiction: Movies and television tend to portray investors as rich, Wall Street suit-and-tie wearers who make and lose millions in the snap of a finger. Commercials for investment banks or financial services often show older, wealthy-looking people who live in big houses with white picket fences.

Don’t believe everything you see on TV or in the movies.

The idea that you need lots of money is a myth–the kind that keeps regular people from getting off the sidelines and investing.

Anyone, even a “thousand-aire,” can be an investor.

It’s not how much, it’s how long (you’re in the market)

Investing money in the market over time, on a consistent basis, matters a lot more than having a lump sum of money to invest. People think they have to wait until they have money to invest to start investing. That’s just not the case.

This is one of the most important things you’ll read in this guide:

It doesn’t matter how much you have when you start. You just have to start. The best time to start investing is today.

Stash believes in the concept of dollar-cost averaging. We’ll discuss this strategy more in-depth in Expand Your Horizons With Basic Investing Concepts. 

Dollar-cost averaging (a beginner explanation)

By investing small amounts of money consistently, typically on a weekly or monthly basis and over a period of years, you’re likely to see a positive return on your money.

You’ll be buying stocks, bonds, and funds regardless of whether share prices are increasing or decreasing. What started off as a small amount of money can grow over time as your money compounds. Your investments pay dividends.

Is the market high? Is it low? When you dollar-cost average, you’re investing for the long-haul and automatically buying low and selling high. You buy more shares of stock when prices are low and less when prices are high.

Your portfolio can really grow as prices rise over time as a result.

At Stash, we recommend keeping your money in the market over time, rather than timing the market. Think long-term, years, not days.

That’s the long-term Stash Way.

Chapter 4

What should I expect when I'm investing?

  • Investing is not a way to get rich quick
  • Investing comes with risk, you need to decide your risk level
  • Diversification can help offset your risk
1 min read

Blame it on Hollywood again. Leonardo DiCaprio on his yacht in The Wolf of Wall Street, peeling hundreds off his bankroll can be fun to watch. But in real life, investing is not the way to get rich quickly. On the flip side, not all investors lose their money and end up in the poorhouse.

Hollywood loves extremes. But when it comes to investing, that’s far from reality.

Investing isn’t gambling

Ask anyone familiar with gambling and she’ll say “the house always wins.” Casinos are in the business of making money for themselves. That means you’re likely to lose.

Investing involves a certain amount of uncertainty. Understanding risk and possible losses is a key part of investing. But when you have a solid long-term strategy, a loss on one investment shouldn’t be catastrophic to your entire portfolio.

Understanding diversification

Important word alert! Diversification.

Diversification is a risk management technique that mixes a wide variety of investments within a portfolio. In simpler terms, it means not putting all your eggs in one basket. The theory is that by investing in a variety of stocks, bonds, cash, and other asset classes across many economic sectors and geographical regions, you can reduce your risk.

Let’s say you have a portfolio that owns shares in healthcare, technology, and energy companies, as well as U.S. Treasury bonds. If the technology sector takes a hit, your energy stocks may not be affected. The price of bonds and stocks, for example, also often go in opposite directions depending on how well the economy is doing. So by having both, you’re diversifying.

We’ll talk more about this in the Expand Your Horizons With Basic Concepts.

Yes, investing has risks. But the amount of risk you take depends on you. Are you young enough to weather the ups and downs in the market? Or are you getting close to retirement and want to be more conservative about your strategy?

You’re in the driver’s seat.

Chapter 5

When should I start investing?

  • You can’t time the market
  • Studies suggest investors do poorly when they make frequent guesses about where and when to invest
  • Now is the perfect time to start investing
6 min read

Repeat after us: There is no perfect time to invest. There is no perfect time to invest.

If you’re like a lot of people, you might think the best time to invest is when the stock market is going up and the economy is roaring ahead. Or you might think you’ll keep your cash when markets aren’t doing as well, and then venture in once things seem to be recovering.

You’d be trying to time the market, and people are terrible at it, even financial experts.

Don’t try to time the market

We mentioned this in an earlier section but it’s a point worth returning to. Numerous studies show that investors tend to do poorly when they make frequent guesses about when and where to invest.

A recent study by financial advisory firm Dalbar shows that the average investor doesn’t stay invested for longer than four years in any one particular fund. Investors tend to move money in and out of funds depending on what’s going on in the market.

What does that mean? When the economy goes through a rough patch and stocks fall, investors generally panic and yank their money out of the market. In contrast, when times are good and markets go roaring ahead, that’s when most people want to invest.

Here’s what’s wrong with this strategy.

It means you’re pulling money out of the market after your stocks have decreased in value, and in so doing are locking in your losses. At the other extreme, when times are great and stock market values go up, that’s when most investors tend to invest, ensuring they’re buying in when prices are at their highest.

That’s not a great strategy.

Buy and hold

In fact, by making frequent guesses about the market, you’re likely to end up with half what you might have if you’d just put your money in a fund that invested in the S&P 500 basket of stocks and left it there, according to Dalbar.

Per the study, over a 30-year time frame, a $100,000 investment from someone guessing market trends would have a value of approximately $500,000, compared to a portfolio of nearly $1 million for someone who stays fully invested over the same period of time.

*See disclaimer

Starting small on Stash

You can open an investment account on Stash with $5. Learn as you go. Stash will recommend investments that are tailored to your risk preference. 

When you can, you start contributing a little more, maybe $10 or $20 a week. And if your income rises, maybe you’ll find that you can start investing $30 a week.

Add investments that excite you. Stash offers over 40 curated funds in a variety of sectors, from green energy to healthcare to emerging markets, to stocks that pay dividends. We also offer a selection of single stocks, carefully chosen by our investment committee. 

Create a unique portfolio that’s an expression of who you are and the goals you want to achieve. Stay consistent, turn on Auto-Stash to add money every week. 

Stash doesn’t charge fees to buy and sell your investments — but we also don’t encourage you to time the market. It’s important to remove emotion from investing, as people often make financial mistakes when feelings are running high.

Keep reading our Learning Guides, quizzes, and jargon hacks. You have all the tools to make it happen.

To sum up, there’s no perfect time to invest — except today.

Investing, simplified

Start today with as little as $5
Get the App

1Disclaimer: All graphs are hypothetical illustrations of mathematical principles, is not a prediction or projection of performance of an investment or investment strategy, and assumes weekly contributions at an annual rate of return (compounded annually) and does not account for fees or taxes. It is for illustrative purposes only and is not indicative of any actual investment. Actual return and principal value may be more or less than the original investment.
2The content on the quiz does not imply any level of skill or training on the part of any customer and should not be construed as a recommendation of any specific security. This is for educational purpose only.


Introduction to Investing: Start Your Journey

1 What's investing? 2 min read 2 How do people invest? 3 min read 3 How much money do I need to start? 1 min read 4 What should I expect when I'm investing? 1 min read 5 When should I start investing? 6 min read