Every once in a while, your Future Self sends you a brainwave. This is one of those times.
Thank your Future Self, because, yes, you probably should be investing.
Here’s why: Investing in stocks and bonds is a powerful way to grow your money, and it’s easy to get started.
The more time you have — looking at you, millennials and Gen Z — the more you stand to gain from investing. The stock market is ideal for long-term goals like retirement because overall it has paid annualized returns of about 10% over the past 10 years. Compare that with the best bank savings accounts, which top out at about 2% interest, or the 0% you earn from stuffing money under your mattress.
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First, decide how much you want to invest. In general, you shouldn’t put money into stocks if you can’t afford to leave that money invested for at least five years. That’s because those healthy long-term returns are tempered by moments of volatility, or significant swings in stock prices. You want to let your money sit and ride out the downturns. You don’t want to need the money urgently and be forced to sell at a bad time.
Second, pick an account, and a handful of investments. Don’t worry — this is not rocket science.
To find an account, start close to home. If you have a 401(k) or similar investment plan at work, start with that. Often, employers offer a tasty carrot: If you contribute, they’ll throw in some money as well. That’s free money; don’t pass it up.
If you don’t have a retirement plan at work, consider an individual retirement account, aka IRA. They’re easy to open, and you can send money from your bank to your IRA on a regular schedule, or just once, or whenever the mood strikes you.
If retirement is not one of your #lifegoals (which, maybe reconsider?), consider a brokerage account.
Finally: What should you invest in? At NerdWallet, we’re big fans of index mutual funds and exchange-traded funds. When you buy a fund, you’re buying shares in hundreds, maybe thousands of companies. It’s one-stop diversification. Easy peasy.
Or you could buy shares of your favorite company. Maybe you love Nike, or Netflix. That’s fine. Just know that buying shares in one company — if that’s all you invest in — means you’re not diversified. If that company’s shares lose value, your savings will, too.
With a mutual fund, the individual stocks within the fund will go up and down at various times. That smooths out the ride.
One caveat to all this: If you have high-interest debt, you probably should pay that off first. But if you're in good shape and want to build a nest egg, investing is the way to do it. Your Future Self will thank you.
» MORE: What to invest in