To invest, or not to invest, that is the question. Thankfully, Liz Young (she/her), head of investment strategy at SoFi, knows the answer. And as someone who’s always liked math and has a passion for business, she seems like the perf person to get our investment inquiries from. But first, Liz wants you to know: “It’s completely natural to be nervous about investing, money is a very emotional thing for many people. But the only way to gain more comfort and confidence is to get your hands dirty. The opportunity cost of not investing is far worse than the cost of making a few missteps over a long-term time horizon.”

Here’s to getting our hands dirty! 🙌💰

What’s a simple step-by-step guide on how to get started in investing?
Investing without a lot of expendable income or while you’re paying off student loans may seem challenging, but it’s essential for building wealth. The trick is that dollar amount doesn’t matter; you can literally start with $1. The longer your dollar is invested, the more money you will potentially end up with in the long run:

1. The first step is to decide what to prioritize now. A rule we use at SoFi is if you have debt with a higher interest rate than what you can reasonably expect as an annualized return on the S&P 500 over the long-term (~7%), paying down that debt should be the top priority.

2. The next step is to start building investing habits. My advice would be to prioritize a tax-advantaged long-term investing plan (IRA, 401k, Roth IRA, etc.), especially an employer sponsored plan if that’s available to you. And if it comes with a company match, do what you can to receive the full match. It’s free money! Get in the habit of contributing to it every paycheck and soon enough you won’t even remember it’s happening, but your wealth is building in the background.

3. Beyond that, get started with a low-cost or no-cost brokerage account and start building experience with the market. Exchange traded funds (ETFs) are a cost-effective way to get broad exposure to the market without needing a lot of money.

4. Lastly, always keep in mind that investing is a lifelong learning experience. You won’t get all of it right, none of us do. You’ll learn more from the times when things go wrong, but the key is to stay persistent and consistent.

Are there risks we should know about when it comes to investing?
When we think about investing, we often focus on returns but it’s equally important to focus on risk. I like to think of risk as a budget, and once my budget is spent, you either have to hold steady, or reduce risk somewhere else before increasing it any further. Investment risks come in many forms, but the two that newer investors can think about are: concentration risk (ex: too much invested in one security or industry group) and volatility risk (ex: investments that are more prone to big swings in price). Concentration risk is like putting all of your eggs in one basket. To understand volatility risk, imagine putting your baskets of eggs on a rollercoaster vs. floating them down a lazy river. If your risk budget is low, you want to spread out/diversify your investments to smooth out some of the bumps, rather than rollercoasters. If you decide ahead of time how much risk you can stomach rather than how much return you would prefer, your investment decisions are likely to be more rational and diversified.