Introduction to Investing

By Matthew Segal 

Published on December 3, 2025

Abstract

Investing is a topic that can sound confusing, especially if you’re new to it. However, the ideas behind investing are very easy to understand – and learning the basics early can play a huge role in your future. This short paper explains what investing is, why starting young is so powerful, and the common types of investments you’ll hear about

What Is Investing?

Investing means putting your money into something that can grow over time. Instead of letting money sit in a savings account, investing gives it the chance to earn more.

Here are the reasons people invest:

• To grow their wealth

• To reach future goals

• To protect money from inflation

Inflation is when prices slowly rise throughout a certain period. In the U.S., inflation tends to be around 2-3% every single year, meaning that money loses some of its value every year if it’s not growing faster than that.

Why Starting Early Matters

The biggest advantage that young people have is time. When you start investing your money as early as possible, it has a lot more time to compound – which means your money earns money, and that new money earns even more money.

Here’s a simple example:

If you invest $100 every month starting at age 18, and your money grows by about 7% each year:

• You could have around $250,000 by the time you’re 60 years old

But if you wait until age 30 to start:

• You’d end up with less than half that amount

The earlier you start, the more your money can grow.

Common Types of Investments

1. Stocks

When you purchase a stock, you are essentially buying a small piece of a company. If the company grows or becomes more valuable, your stock tends to become more valuable as well.

The U.S. stock market has returned about 10% per year on average over many decades – though not every year is good.

2. Bonds

Bonds are basically IOUs. In buying a stock, you are lending money to a company or government, and they pay you back with interest. Bonds are primarily safer than stocks but tend to grow much slower.

3. Index Funds/ETFs

These are beginner-friendly tools that allow you to invest in hundreds of companies at once instead of trying to pick one. They lower your risk and are common in long-term investment portfolios.

4. Other Investments

Some people invest in real estate, cryptocurrency, gold, and other assets. These can be riskier or harder to understand, so beginners usually start with stocks, bonds, and index funds.

Understanding Risk

Every single investment has some level of risk, meaning the value can go up and down.

Low-risk examples:

• Savings accounts

• Government bonds

Medium-risk examples:

• Index funds

• Corporate bonds

High-risk examples:

• Individual stocks

• Cryptocurrency

The goal isn’t to avoid risk completely – it’s to balance it. One way to do this is through a process called diversification, which means spreading your money across different investments so you are not just relying on one.

Easy Beginner Strategies

1. Start Small and Stay Consistent

Even small monthly investments can grow a lot over time

2. Dollar-Cost Averaging

This means investing the same amount of money on a regular schedule (like $50 or $100 each month). It helps you avoid guessing when the “best time” is to buy is.

3. Avoid Common Mistakes

Beginners often:

• Try to get rich quickly

• Follow random tips online

• Put all of their money into one stock

• Panic when the market drops

Sticking to long-term, steady investments usually works better.

In Conclusion

Investing doesn’t require being rich or having Wharton-level knowledge. It simply requires starting early, being consistent, and understanding the basics. Small steps taken now can turn into huge opportunities later in life. Learning these ideas as a student gives you an advantage many adults wish they had when they were your age.

Sources

Bodie, Zvi, Alex Kane, and Alan J. Marcus. Investments. 12th ed., McGraw-Hill Education, 2022

Malkiel, Burton G. A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing. 13th ed., W.W. Norton & Company, 2020.

Investopedia. “Types of Investments.” Investopedia, IAC Publishing, 28 Mar. 2023, www.investopedia.com/terms/i/investment.asp.

Securities and Exchange Commission. “Investor.gov: Beginner’s Guide to Investing.” U.S. Securities and Exchange Commission, 2023, www.investor.gov/introduction-investing 

Vanguard. “The Basics of Investing.” Vanguard, 2023, www.vanguard.com/basics-of-investing 

Chen, James. “Stock Market Investing for Beginners.” Investopedia, 15 Jan. 2023, www.investopedia.com/articles/basics/06/invest1000.asp.