Investing Basics

Choose a brokerage and open an account

See the Brokerage Account section above for a few solid starting points. Opening an account is usually free and takes about 10-15 minutes online.

Fund your account

Link a bank account and transfer money in. Many brokerages let you set up automatic recurring deposits right from the start (consistency is key in investing).

Pick a stock or ETF

For help with this, visit the Stocks section.

Place your first order

Search for the ticker symbol, choose either a number of shares or a dollar amount (most brokerages support fractional shares now), and buy. There's usually a market order (buy now at the current price) or limit order (buy only at a price you set) option.

Set up automatic, recurring buys

Investing a fixed amount on a regular schedule (dollar-cost averaging) removes the guesswork of trying to time the market. Even a small, consistent amount adds up significantly over time!

Understand how a bond works

When you buy a bond, you're lending money to the issuer. In return, they pay you interest (the coupon) on a set schedule and repay the bond's face value on its maturity date. The key thing to know: bond prices move in the opposite direction of interest rates. If rates rise after you buy, your bond's market price drops, because new bonds now pay more. That only turns into a real loss if you sell before maturity, but it's why bond funds can lose value in a given year - the broad U.S. bond market fell about 13% in 2022 as rates climbed.

Pick the type of bond

Who you're lending to determines the risk, the yield, and how the interest is taxed.

• U.S. Treasuries: Backed by the federal government and considered the safest bonds available. Bills mature in a year or less, notes in 2-10 years, and bonds in 20-30 years. Interest is exempt from state and local income tax.
• TIPS (Treasury Inflation-Protected Securities): Treasuries whose principal adjusts with inflation (CPI), so your purchasing power is protected.
• Savings bonds (I Bonds and EE Bonds): Sold only through TreasuryDirect. I Bonds pay a rate tied to inflation; you can buy up to $10,000 per person per year electronically, must hold them at least 1 year, and give up the last 3 months of interest if you cash out before 5 years.
• Municipal bonds ("munis"): Issued by states and cities. Interest is generally exempt from federal income tax, and often from state tax too if you live in the issuing state - most valuable in higher tax brackets.
• Corporate bonds: Issued by companies and pay more than Treasuries to compensate for the risk the company can't pay. "Investment-grade" bonds come from financially strong companies; "high-yield" (junk) bonds pay more because default risk is meaningfully higher.

Decide: individual bonds or a bond fund

A bond fund (mutual fund or ETF) holds hundreds or thousands of bonds at once and trades like a stock - simpler for beginners, with instant diversification and a small annual expense ratio. A broad "total bond market" index fund is a common starting point. The catch is that a fund never matures, so there's no guaranteed date when you get your original money back. Individual bonds mean picking specific issuers and maturities yourself; if you hold to maturity and the issuer doesn't default, you get the full face value back regardless of what rates did in the meantime. Some investors build a bond ladder - several bonds maturing a year or so apart - to get that predictability while money keeps coming due regularly.

Choose where to buy

The same brokerage account you'd use for stocks (see the Brokerage Account section above) lets you buy bond funds and ETFs, and most major brokerages also sell individual Treasuries, corporate bonds, and munis - no separate account needed. You can also buy Treasury bills, notes, bonds, and TIPS directly from the government at TreasuryDirect.gov with no fees, and it's the only place to buy I Bonds and EE Bonds. The trade-off is that TreasuryDirect is clunkier, and selling a Treasury there before maturity requires transferring it to a brokerage first.

Check yield, maturity, and credit quality before buying

• Yield to maturity (YTM): The return you'll actually earn if you hold to maturity, based on the price you pay - more useful than the coupon rate when comparing bonds.
• Maturity: Make sure it matches how long you can leave the money invested. Longer maturities usually pay more but swing more in price.
• Duration (for funds): A rough gauge of rate sensitivity. A fund with a duration of 6 years would lose about 6% in value if rates rose 1 percentage point, and gain about 6% if they fell 1 point.
• Credit rating: Agencies like S&P and Moody's grade issuers. BBB/Baa or higher is investment-grade; anything below is high-yield.

Think about which account holds them

Bond interest is generally taxed as ordinary income, which is higher than the rate on long-term stock gains. Because of that, many investors hold taxable bonds (like corporates and bond funds) inside tax-advantaged accounts such as a 401(k) or IRA. Munis already pay tax-exempt interest, so they're typically held in a regular taxable brokerage account instead.

Decide what the money is for

Cash equivalents are for money you can't afford to see drop in value: an emergency fund (a common guideline is 3-6 months of essential expenses), or savings for something you'll pay for in the next few years, like a down payment, car, or tuition. They prioritize safety and access over growth, so they aren't the right home for long-term wealth building - after inflation, their real return is often close to zero.

Choose a cash equivalent

Cash equivalents are highly liquid, low-risk places to hold money that can be converted to cash quickly with little or no loss in value.

• High-Yield Savings Accounts (HYSA): Bank savings accounts that pay significantly more interest than traditional savings accounts while keeping your cash fully accessible. The rate is variable and can change at any time.
• Money Market Accounts (MMAs): Bank accounts that blend checking and savings, typically offering competitive interest along with limited check-writing or debit card access. Some require higher minimum balances.
• Money Market Funds (MMFs): Mutual funds, bought through a brokerage, that invest in very short-term debt like T-bills. They aim to hold a steady $1.00 share price and often pay rates at or above HYSAs. Many brokerages use one as the default place your uninvested cash sits.
• Treasury Bills (T-Bills): Short-term U.S. government debt that matures in one year or less, making it one of the safest investments available. You buy it at a discount and receive the full face value at maturity; the difference is your interest, which is exempt from state and local income tax.
• Certificates of Deposit (CDs): Time deposits where you agree to leave your money untouched for a set term (e.g., 6 months, 1 year, 5 years) in exchange for a fixed interest rate. Longer-term CDs are less liquid than the others here, but they lock in a rate even if rates fall.

Understand how your money is protected

Savings accounts, money market accounts, and CDs at a bank are insured by the FDIC (or the NCUA at a credit union) up to $250,000 per depositor, per institution, per ownership category. Money market funds are not FDIC-insured - they're investments, and while losses are very rare, they're possible. SIPC coverage at a brokerage protects you if the brokerage itself fails, not against investment losses. T-bills are backed by the full faith and credit of the U.S. government.

Choose where to open it

Where you actually open one depends on which type you picked above. A high-yield savings account or money market account is opened directly with a bank - often an online-only one, since those tend to pay noticeably more than a traditional brick-and-mortar bank. Money market funds are bought through a brokerage. Treasury bills can be bought two ways: directly from the government at TreasuryDirect.gov with no fees, or through the same brokerage account you'd use for stocks and bonds. CDs are available at most banks and credit unions, and many brokerages also offer "brokered CDs" that can be sold before maturity on the secondary market instead of paying an early-withdrawal penalty (though the price you get isn't guaranteed). If you already have a brokerage account, check what it offers first - and check what rate your uninvested cash is earning there, since some brokerages sweep it into accounts that pay very little by default.

Compare rates before committing

Interest rates on savings accounts, money market accounts and funds, and CDs all shift over time and vary by provider, so it's worth a quick comparison across a few options rather than picking the first one you see. Compare the APY (annual percentage yield, which includes compounding), and watch for monthly fees, minimum balance requirements, and introductory rates that drop after a few months.

Know the liquidity trade-off

A savings account, money market account, or money market fund stays accessible any time (a bank transfer may take a business day or two). A CD locks your money for a set term, and withdrawing early usually means giving up some interest as a penalty - "no-penalty" CDs exist but typically pay a bit less. T-bills are easy to sell before maturity through a brokerage, though the price may be slightly above or below what you paid. Splitting money across terms (a CD or T-bill ladder) keeps some cash coming due regularly.

Remember the interest is taxable

Interest from savings accounts, money market accounts and funds, and CDs is taxed as ordinary income in the year you earn it, and you'll typically get a 1099-INT or 1099-DIV form. T-bill interest is exempt from state and local income tax, which can make T-bills pay more after taxes than a savings account with a slightly higher rate, especially in high-tax states.