Investing Basics: Putting Money to Work

Money sitting in a checking account earns almost nothing and slowly loses purchasing power to inflation. Investing puts that money to work for potential long-run growth — in exchange for giving up some easy access and accepting short-term ups and downs.

That trade only makes sense for money you won't need soon. Investments can fall in value at exactly the wrong moment, so short-term money (rent, an emergency fund, a purchase you're making next year) belongs in cash, and long-term money belongs invested.

Where that long-term money actually goes — which type of account, and which mix of investments inside it — is a separate set of decisions. The lessons that follow work through them one at a time.