Opening and funding an investment account is a great first step toward your financial goals. To get invested, make sure you choose and buy your investments—otherwise, your money may sit in cash or a default money market fund, potentially missing out on meaningful growth.
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 2 questions:
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. 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.
How long do I plan on staying invested?
This is known as your time horizon. Generally, the longer you invest, the more risk you may be willing to take on. That's because while historically the overall stock market has increased in value over time, it hasn't done so in a straight line. There may be times when it dips over the short or medium term, and the longer you're investing for, the more time you have to ride out any stumbles to the market's recovery.
Your time horizon and risk tolerance play a big role in what you choose. For example, let’s say you’re investing for a getaway trip you hope to take in 5 years. Because your time horizon is relatively short, you may not want to take on as much risk—there’s less time for your investments to recover if the market drops.
2. Choose your investments
When you're just starting out as an investor, understanding your investment options is a key part of building a smart financial plan. This step is all about finding the right fit for you. Each type of investment offers something different.
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. While investing in stocks can be very rewarding, offering the potential to help your money grow, they're also considered a riskier option. Stock prices go up and down all the time, depending on a number of factors, including company performance and the news. Before buying individual stocks, do your research, and avoid putting all your eggs in one basket.
Stocks might be right for you if you're comfortable with risk and have time to ride out market ups and downs. For example, stocks can be a good fit for long-term goals like retirement—which might be 20 or 30 years away—giving you time to recover from short-term market ups and downs and benefit from potential long-term growth.
Bonds
Investing in bonds is like giving out loans to companies or governments that agree 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, or fail to keep their promise to repay you.
Bonds might be right for you if you're looking for more stability in your portfolio or want to balance out the risk of stocks. They can be especially useful for shorter-term goals—like buying a home in 3 to 5 years—or if you're nearing retirement and prefer less market volatility.
ETFs
Buying an exchange-traded fund (ETF) means that you're investing in a group of securities, such as stocks or bonds, all at the same time. They're like bundles of investments, often built around an investment theme—such as a specific industry or a group of companies in a major market index. For example, some follow the S&P 500® Index, which includes 500 of the largest US companies, or the Nasdaq Composite Index, which features many tech-focused firms. Thanks to this diversification, ETFs are often considered less risky than buying individual stocks.
ETFs might be right for you if you're looking for a simple way to diversify your investments and keep costs lower—since most are passively managed and trade efficiently, they typically have lower fees than active funds. Depending on the assets they hold, such as stocks or bonds, ETFs can support a range of financial goals. Stock-focused ETFs could be useful for long-term goals such as charitable giving in retirement. Investing in bond-focused ETFs can be a practical approach for saving toward major life expenses, such as a wedding.
Mutual funds
Mutual funds let many investors pool their money to buy a mix of investments like stocks or bonds. These funds are often actively managed, which means a team of professionals picks investments and tries to beat the market. In contrast, ETFs are usually passively managed—they aim to match the performance of a market index, not outperform it. One other key difference: Mutual funds trade only once a day after the market closes, while ETFs and stocks can be bought and sold throughout the day.
Picking mutual funds might be right for you if you prefer a more hands-off approach and want professionals to manage your investments. They can be a good fit for long-term goals like retirement or saving for a child’s college education—especially if you're looking for built-in diversification and don't need to trade throughout the day.
By learning how these investment options work and thinking about your timeline and comfort with risk, you're not just picking an investment—you’re building a strategy that supports your goals and helps protect your money over time.
3. Buy your investments
After deciding what to invest in, make sure to buy those investments. Even if you don’t consider yourself a trader, you’ll still need to place a trade to actually purchase the investment. Follow these steps to complete your order:
- Select the account you want to trade in.
- Enter the symbol of the stock, ETF, or mutual fund.
- Select Buy.
- Choose between transacting in dollars or number of shares, then enter an amount (for example, buy 5 shares of company XYZ).
- For stocks and ETFs, choose an order type. The 2 most common order types are market and limit orders.
- Select the time in force or how long you want the order to be in effect (1 day only or up to 180 days).
- Preview and place your order.
4. Check in
As your life changes, your risk tolerance, time horizon, and goals probably will too. That’s why it’s important to check in on your investment plan regularly—at least once a year, or whenever a major life event occurs. During these check-ins, ask yourself: Have my goals changed? Is my time horizon shorter or longer? Am I still comfortable with the level of risk I’m taking?
You might find that it’s time to rebalance your portfolio—adjusting how much you have in stocks, bonds, or other investments—to stay aligned with your updated goals. Even if you’re investing on your own, you’re not alone. Fidelity offers tools, resources, and support to help you review your plan and make informed decisions.