How to Start Investing

What is the best financial advice you’re not getting?

It’s to invest.

Okay, that was sort of a trick question, but it doesn’t make it any less true.

People who keep their money in a standard savings or checking account and overlook investing have historically missed out on earning hundreds of thousands of dollars—for some women, millions of dollars. We know that women keep the majority of their money in the bank; meanwhile, more men are investing, and the wealth gap (opens in new tab) continues to grow. That means many women might be missing out on having the freedom to leave the job they hate, or the confidence to go for the job they really want. (Or break up with the person who no longer treats them as they deserve.)

And while you don’t need to spend hours and hours studying before you invest, there are a few things you should know. First up, busting a few myths:

Trading isn't investing.

You hear a lot these days from people who are buying stock in Bitcoin or GameStop. They say they’re investing. But that’s not investing: That’s trading…some might even say gambling. (It’s me. It’s me who says it’s gambling (opens in new tab).)

That’s because trading without doing the research on what you’re buying means you’re placing a bet; it’s also placing a bet that the broader market is wrong. Being right like that—by betting against the wisdom of the stock market—is so hard to consistently do, that fewer than 0.1 percent of professional “active managers” (for whom this type of trading is their full-time job) consistently “win” over a five-year period.

Put another way, you know plenty of people—perhaps your grandparents—who have invested their way to a comfortable retirement. But I would guess you know almost none—and more likely exactly none, zero, zilch—who have traded their way to one.

Now, to be clear, I’m not saying don’t trade if you enjoy it; just don’t do it with money you can’t afford to lose.

The stock market doesn't go up and down.

The second myth to be busted about investing is that most of us think that the stock market goes up and down, up and down. What’s more accurate is that it has historically gone up and down, but with an upward bias. In fact, the stock market has historically gone up by about 9.7 percent annually since the 1920s. Some years (like last year) it went up a good deal more, and other years it went down, sometimes by a lot. But, on average, it increased by 9.7 percent each year. This means had you invested in the stock market on any given day since the 1920s, and you kept your money there for 15 years, you had a 99 percent chance of a positive return (i.e. your money is making money).

This tells us that investing for the long term has historically been less risky than many of us think. And it’s actually been less risky to our financial standing than keeping our money in the bank, because that money—while safe—barely grows (sometimes, you might make small interest on it).

Which gets us to what you should know before investing.

No need to brace yourself, because it’s not a lot. At Ellevest, we believe that the keys for successful investing are:

Invest in a range of investments.

Think stocks (in which you own a sliver of a company) or bonds (in which you are essentially making a loan to a company), and even real estate (which is, you know, real estate). Investing across a range of investments is called diversification, and it is the financial equivalent of not keeping all of your eggs in one basket.

Have more stocks in your investment portfolio.

If you’re younger and your financial goals are further out. That’s because that gives you the opportunity to earn the higher returns that stocks have historically earned, but also allows you time to ride out any volatility in the market. The flip side of this is to invest more in bonds when you get older: They’ve had lower returns but haven’t had the big swings that stocks have had. For more on bonds, read this.

Less is more when it comes to fees.

I know that we have all learned that more expensive equals better quality. Not true in investing, where higher costs are taken right out of your investment account and can drain away your returns.

Less is more when it comes to taking action.

Remember what we said about trading? And that people who trade a lot tend to do worse than people who trade less? After you have your diversified investment portfolio set up, it’s often much better to let that money sit and continue to grow until you need it—even during periods of market volatility.

Don't constantly check how your stocks are doing.

It might stress you out. And, because checking your investment portfolio can make you want to do something…like trade it. (See above.)

Find a fiduciary to manage your investments.

A fiduciary is someone who is obligated to to put your interests ahead of their own.

Prioritize companies with women investment professionals on staff.

Because, representation and fairness, of course. But also, because women have been shown to be as good, or better, professional investors than men.

There’s a lot more we can share about investing and a lot more that you can learn. But getting started sooner—even if it’s starting with just a small amount invested in a diversified portfolio—has historically been more meaningful than waiting to learn more, and then getting busy with life, and then getting busy with work and then getting busy...you get the point. Even a small percentage of your take-home pay directly deposited into an investment account—an amount you may not even miss—can begin to do the work to help make a difference in your life.

Ellevest is giving Marie Claire readers $20 to start investing today. (opens in new tab) Go forth and invest!

Sallie Krawcheck is the CEO and cofounder of Ellevest, a financial company built by women, for women. She is the former CFO of Citi, and the former CEO of Merrill Lynch and of Smith Barney.