Investing Basics: Stocks, Bonds, and Building Wealth

If you’ve ever felt overwhelmed by the idea of investing, you’re not alone. Many people simply don’t have any basic knowledge of investing because they weren’t taught it in school — or at home.

The good news? You don’t need to be a finance pro to start investing. Nor do you have to be wealthy. You just need to start.

Because taking that first step can feel like the most challenging part, we’re going to break down all the investing basics — including stocks, bonds, and more — so you can feel equipped to move forward in your financial journey with confidence and clarity.

Why Investing Matters, Now More Than Ever

When it comes to creating and building generational wealth and establishing long-term financial security, investing is one of the most powerful ways to do so.

While saving money in a traditional savings account is essential — especially for an emergency fund — low interest rates limit your long-term earning potential. That’s why it’s important to diversify your accounts and introduce investing into your financial portfolio. Even small investments made early can grow significantly over time, thanks to the power of compound interest.

By learning how to invest in stocks and how to invest in bonds, you’re not just growing your money — you’re laying a firm foundation for future generations.

What to Know About Investing: The Basics

Before you dive into investing, it’s helpful to understand the basic types of investments you can choose — and how you can use them to make the most of your money.

Basic Investing: Stocks

What Are Stocks? 

When you buy a stock, you’re essentially purchasing a small share of ownership in a company. And, as such, you get to share in the company’s earnings. While stocks have faster potential growth — and higher potential earnings than other types of investments — that reward comes with higher risk.

Over time, the stock market has historically delivered strong long-term growth, but you do have to get comfortable with some fluctuations with market volatility in the shorter term.

How to Invest in Stocks

You can buy stocks through a brokerage account or even a financial app. Some platforms today even allow you to start with as little as $1 through fractional shares.

Basic Investing: Bonds

What Are Bonds?

Bonds are loans that you give to a company or government in exchange for regular interest payments and the return on your original investment at maturity.

Bonds are lower risk than stocks, but the return is also generally lower. That said, they’re still a valuable part of a balanced investment portfolio because they provide stability and income — which is especially important as you approach retirement or if you simply prefer lower-risk investments.

The most common types of bonds include U.S. Treasury bonds, municipal bonds, and corporate bonds, and each has slightly different levels of risk and return.

How to Invest in Bonds

You can buy individual bonds or bond funds through most brokerage and investment platforms.

Basic Investing: ETFs and Mutual Funds

What Are ETFs and Mutual Funds?

Think about ETFs (Exchange-Traded Funds) and mutual funds as baskets of stocks, bonds, or other investments that pool money from many investors. In general, they include a diversified mix of investments, so they can offer less risk than individual stocks and bonds. They also can help you diversify your investment portfolio without having to buy a range of individual stocks and bonds. Just know that they both charge management fees that are based on the percentage of your overall investment.

How to Invest in ETFs and Mutual Funds

You can open an account with an online broker or a traditional brokerage firm to invest in ETFs and mutual funds.

Getting Started with Investing: Your Checklist for Success

Now that you have some basic knowledge of investing and investment types, use this checklist to take the next steps.

Before You Invest

1. Create a budget: Get a handle on your expenses and your spending to determine how much you want to save and invest.
2. Pay off high-interest debt: High-interest debt, such as credit card balances, can offset your potential returns from investing. So, pay this off first before reallocating that money to investments. Home mortgages and student loans generally don’t fall within this category of high-interest debt, so it’s usually okay to carry those debts while also prioritizing investments.
3. Save for an emergency fund: A rainy-day fund (at least three to six months’ worth of expenses in a savings account) can keep you covered in case of emergencies. It’s important to have this in place before you start investing.
4. Establish your financial goals: It’s essential to have clarity around your financial goals for investing, so you can work towards achievable targets and milestones. Knowing your purpose and what you want to achieve can help you choose the right mix of investments and create a sound investment strategy.

Consider the following “whys”:

• Retirement savings 
• Education for your children
• Down payment for a house or another big purchase like a car
• Generational wealth creation

Now, Start Where You Are

One of the biggest myths about investing is that it’s only for the wealthy. But you don’t need a large lump sum or lots of discretionary income to get started.

With today’s technology and tools, anyone with a smartphone can (and should!) start investing — even with just a few dollars.

By starting sooner rather than later and maintaining consistency, you give your money more time to grow.

Here are some key things to keep in mind as you begin investing:

• Choose the right investment mix: After outlining your goals, determine what investments are right for you in this season of life.

Consider the following:

• Your willingness to take risk (risk tolerance)
• The amount of risk you can afford to take (your risk capacity)
• The amount of risk you would have to take to achieve your goal within a certain timeline (risk needed)

For example, if you have a generous time horizon before retirement or sending a child to college, you generally can take on more risk. That’s because you have the time to ride out any short-term market ups and downs. Of course, the opposite is true with a shorter time horizon.

• Use automation to your advantage: If you can set aside just $25 or $50 a month, you’re already taking steps in the right direction. Automate your investment contributions if possible. Over time, those small amounts add up.

• Remember the trade-offs: Like many things in life, investing also requires some trade-offs. Investments that have the potential to make more money usually involve more risk, while less volatile investments may not return enough to get you where you want to go.

• Diversify: In a perfect world, your investments would only increase. In the real world, all investments hit some speed bumps along the way — no matter how savvy you or your financial advisor are. Spreading your money across different types of investments can help mitigate the effects of those ups and downs in the market.

• Stay consistent: Investing regularly and staying the course — rather than hopping in and out of the market — is generally going to be more impactful than trying to time the market, especially if you’re a novice investor.

Help for the Investing Basics — and Beyond

There’s no better time than right now to start investing. Whether you’re just learning how to invest in stocks or exploring other options, the most important step is the first one.

If you’re looking for some support to build your financial foundation, JPMorgan Chase has the tools and resources to help you develop the basic knowledge of investing — whether you’re just starting out or looking to deepen your financial understanding.

From mobile banking options to financial education workshops, JPMorgan Chase is here to help you build wealth with confidence. It’s time to invest in yourself, your family’s future, and your legacy.