Where to invest if you're scared of investing

Investing isn’t only for those who know stock symbols or have a fat stack of cash to throw into the market. If you know investing is a good idea but you’re worried about losing it, there are a few places to start.

Making money moves can have major impacts. Some are easier than others — buying groceries and paying your bills seem like a given. But what about thinking about your future self, now?

Methodical, logical, long-term investing might feel scary, but you might already be doing it. Regardless of your risk level, here’s where you can start investing so you’re not scared of it anymore.

For the very scared: savings

If you need a place to put extra cash and you don’t want to chance losing it, take a no-risk option with a savings account, like a Certificate of Deposit (CD) or a high-yield savings account (HYSA). 

A CD is a type of savings account where you put in a lump sum of cash for a set amount of time without touching it and lock in a set interest rate. Most banks or credit unions charge an early withdrawal fee if you take money out before your terms are up. Terms vary by institution, but some are as short as three months and some as long as five years. If you lock in a high interest rate, that rate is good for the whole term, regardless of market conditions.

A savings account gives you access to your money whenever you’d like, earning regular interest on that savings. Many banks offer traditional savings accounts, while some offer HYSAs. Higher yields mean earning more interest and you’ll have access to it when you need it. But with variable interest rates, you risk a drop in earnings if those rates dip.

Savings accounts up to $250,000 are FDIC-insured or NCUA-insured (if you have an account at a credit union), which means if the institution declares bankruptcy, you get your money back up to that amount. If you have more than that to invest, consider opening many savings accounts to cover the full amount.

For the ultra newbie: exchange-traded funds

When you’re new to investing, putting money into something with the expectation that you may not get something back feels a little scary. Kevin Matthews II, founder of BuildingBread, a wealth education company, is also a former financial adviser. Money is personal, and it’s important to figure out your investing goals both now and in the long run. 

“How long [do you] plan on investing this way?” he said. “Is this for retirement or something just to get started? For someone with a basic understanding of the stock market, an ETF that tracks the S&P 500 can be a decent place to start.”

ETFs are exchange-traded funds, or an investment fund that holds a bunch of securities that can be bought and sold on an exchange like the S&P 500. Because ETFs hold multiple assets, they are low-risk investments and instantly diversify your portfolio. Depending on your investment setup, you can buy them through traditional brokerages or robo-advisers.

“Between 1980 and 2024, we have only had 10 years with negative returns,” Matthews said. “It doesn't guarantee the future, but it might help ease someone's fear.”

There’s a chance you’re already investing

You might be investing right now without even realizing it. 

“There are a lot of people who contribute to their 401(k) at work but don't consider themselves investors, but they are,” Matthews said.

According to the Bureau of Labor Statistics, nearly 3 in 4 Americans had access to retirement benefits as of 2023, and 56% participated in those plans.

Employer-sponsored retirement plans can take many different forms, such as a 401(k), 403(b) or profit-sharing plan. They all have differences, but they usually involve taxes and payout options. Many of these plans allow company workers to tailor investments to individual preferences. 

If you aren’t participating in your company’s plan, you might miss out on a company match. This is when your employer contributes to your retirement plan up to a certain amount, which is essentially free money for your future. That’s extra money to put toward your investments. Don’t be afraid to ask if you are unsure what your company offers. It’s better late than never.

“You can expand your knowledge and habits by adding one short 10-15 minute podcast or YouTube video to your regular social media diet during the day,” Matthews said. “Just like compounding interest, your knowledge and skills will build up.”

Recognize red flags

Rather than jump into the deep end, take your time by walking down the steps in the shallow end. Make sure you can hold your breath underwater before moving into more complicated investments. 

“Avoid cryptocurrency if your risk-averse history has shown that it might not be the best place for you at the moment,” Matthews said. He also recommends avoiding penny stocks — shares of small public companies that trade for less than $5 per share. They are often associated with startups and companies in niche markets. 

Some places are better for beginners than others, and not every investment type is right for every investor. 

Grow when you’re ready

If you’re unsure whether to take the next step, think about how far you’ve come. There was once a time when you didn’t feel like you could start investing, and now you’re here. It’s OK to work on your own time. 

The best way to know when you’re ready is to make sure your basics are covered, “like budgeting and having your emergency fund in a good place,” Matthews said. “After that, it's just a matter of personal comfort and confidence.”