4 steps to picking your investments

Here's what to do after putting money in your investment account.

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Key takeaways

  • After opening an investment account and funding it, the next step is to pick your investments.
  • Some options include individual stocks and bonds, ETFs, and mutual funds. Choose what's right for you according to your risk tolerance and your goal's time horizon.
  • Review your investments regularly. As your life changes, so can your risk tolerance and goals.

Opening and transferring money to an investment account means that you've taken a big step toward making your financial goals a priority. But there's another step you don't want to miss: selecting, then buying your investments. If you don't, your money will sit in cash or a default money market account—and won't have an opportunity to grow as much as it could.

Follow these 4 steps to picking your investments and making sure they work for you over time.

1. Create a game plan

Investing works best with a plan. Begin creating yours by asking yourself two questions:

How long do I plan on staying invested? This is known as your time horizon. Generally, the longer you invest, the more time your money has to potentially grow (and recover from dips in the market)—meaning you may be able to take on more risk.

How much risk am I willing to take? This is also called your risk tolerance, or how comfortable you are with the idea of losing money. Market ups and downs are normal, and all investing involves some risk. So there's no right answer. Knowing both your willingness and ability to accept risk can make it easier to stick with your investing plan in order to hit your goals.

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2. Choose your investments

With your time horizon and risk tolerance in mind, it's time to look at your investment options. Here are some of the most common:

Stocks: Stocks represent a piece of ownership, or a share, in a public company. Stock prices go up and down all the time, depending on a number of factors, including company performance and the news. So while investing in stocks can be very rewarding, they're also considered a riskier option. Before buying individual stocks, do your research, and avoid putting all your eggs in one basket.

Bonds: Investing in bonds is like giving out loans companies or governments that agrees to pay you back with interest. Bonds are typically considered lower risk compared with stocks and are assigned grades, so you can better understand the risk that the issuer will default on their promise to repay you.

ETFs: Buying an exchange-traded fund (ETF) means that you're investing in a group of securities, such as stocks or bonds, at once. They're like an investment bundle and are often created to follow a theme or category—such as a sector or market index (for example the S&P 500© Index or Nasdaq composite index). Thanks to this diversification, ETFs are considered less risky than buying individual stocks.

Mutual funds: Mutual funds pool money from many investors to buy a collection of stocks, bonds, or other investments. Like ETFs, mutual funds spread out your money across a mix of investments and can be categorized according to the underlying investments. Often, mutual funds are actively managed by a team of pros. Also, unlike ETFs and stocks—which can be bought or sold throughout the trading day—mutual funds trade only once a day, at the end of the day. So you'll see the prices change only after the market closes.

3. Buy your investments

After deciding what to invest in, make sure to buy those investments. Use your cash (or the money in your default money market account) to purchase the investment option.

4. Check in

As your life changes, your risk tolerance, time horizon, and goals probably will too. Don't be afraid to adjust your investment plan when necessary. And remember that we're always here for you. You might be investing on your own, but you're not investing alone. Contact us anytime.

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