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You don’t have to be good at picking stocks to invest. You can choose ETFs and can gain exposure to the market with minimal risk. Find out how.
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Opening a brokerage account and investing money is very important if you want to build wealth. Unfortunately, some people are afraid to invest money because they don’t know how to pick stocks. And that’s understandable, as it can be really intimidating to learn the ins and outs of what makes a particular company a good investment.
The good news is, there is no reason for you to buy shares of individual companies if you don’t want to — and your concern about your investing abilities should not stop you from getting your money into the market and taking a real chance at growing your net worth. That’s because there’s a very simple alternative that anyone can do.
Here’s what you can do if you don’t know how to pick stocks
If you don’t know how to pick stocks, you can get your money into the market very easily by buying shares of an ETF instead.
“ETF” stands for “exchange-traded fund.” These are traded like stocks, but your money is pooled with tons of other investors and used to invest in a group of different investments. There are lots of different ETFs, including some that track specific industries. But there are also many that track the performance of the stock market as a whole, or that track the S&P 500. This is a financial index of around 500 of the largest U.S. companies that has consistently produced 10% average annual returns.
Brokerage firms have ETF screeners that can help you find ETFs based on what you want to invest in. If you want to invest in the market as a whole or the S&P 500, you can find an ETF that does that and charges low fees. Or if you want to invest in small companies or healthcare stocks or the cannabis industry, you can find an ETF that does that, too.
Using your brokerage firm’s tools, you can narrow down the type of ETF you want and quickly check fees and past performance to find one that’s right for you with essentially no specialized investment knowledge at all. That’s especially true if you simply invest in a financial index like the S&P.
Get started investing today
You can’t afford to wait to invest. The returns you’d earn from a savings account simply are not substantial enough to help you build wealth.
In fact, consider what would happen if you invested $100 a month in a high-yield savings account at 4% versus if you invested that same amount in a brokerage account and earned a 10% average annual return by putting the funds into an S&P 500 index fund.
Do not let your fear of investing cost you hundreds of thousands of dollars. Just sign up for a brokerage account, use its ETF screener to find an ETF that’s right for you (or invest in the S&P 500 to keep things simple), and get started on growing the investment account balance you deserve.
Our best stock brokers
We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.
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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
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