Using different investment tools, like Digital Investor, can make even the smallest start toward your financial goals worthwhile. These 5 steps will help you understand how to start investing.

1. Investments Take Time

Before you even get started, it’s important to remember to be patient and understand that returns take time. This is where the “Rule of 72” can help. The “Rule of 72” is one method people use to estimate how long it will take their money to double if they continuously reinvest. It’s a simple equation:

72 / Rate of Return = Time It Takes to Double Your Money¹

Imagine you’ve invested a sum of money in a high-yield savings account. You’ve been promised a rate of return of 6%. How long would it take to double your money? Let’s plug in the numbers:

72 / 6% = 12 years

It’s helpful to remember this equation when you’re starting to think about investing so you can understand the big picture.

2. Decide How Much Money You’re Going to Invest 

Now that you can estimate how long it will take to double your investment, you’re ready to decide how much to invest. Even if you only have $100 to invest, that’s a great start! Otherwise, we have ways to invest with smaller amounts. Our Digital Investor tool, for example, allows you to invest as little as $1 per individual stock or exchange traded fund (ETF). 

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3. Set Clear Goals for Your Investment

Knowing where you want your finances to be when you retire can help you know where to start today. Consider how much you'll need to cover your living expenses in retirement and work backwards in figuring out what you need to save now. Once you have that number in mind, it’s an ideal time to open an automated or self-directed Digital Investor account to save for your future even faster.

4. Consider Your Risk Tolerance 

Although investing money does involve risk, keeping your money in a savings account won’t help you grow your money faster and keep up with inflation like investing does. If you prefer managing your investment account on your own, you can sign up for a Digital Investor account as a low-cost option.

5. Choose an Investment Account That Makes Sense for You 

When selecting an investment account, you want to choose one that makes sense with your goals and how much you want to risk. If you’re investing for short-term goals, you might choose a short-term corporate bond fund. For long-term goals such as retirement, you could open your own traditional IRA or Roth IRA.