Disclaimer
The information provided in this series is for educational purposes only and does not constitute investment advice. The University of Illinois System Student Money Management Center does not endorse or promote any specific investment products, financial institutions, or investment strategies. Individuals should conduct their own research and consult with qualified financial professionals before making investment decisions.
Want to invest but don’t know where to start? You’re in the right place.
There are many ways to invest and, in this post, we'll walk through common ways to get involved at multiple scales. It's also worth keeping in mind that investing isn't an all-or-nothing decision. It can be done in increments, starting small, if that’s what works for you. You might find that you're already doing it!
Regardless, there's a wide range of options, and the right approach looks different for everyone depending on their situation. Let’s discuss how to figure out what works best for you and your situation.
Who's Investing?
Before diving into the how, let’s understand the landscape. According to FINRA's National Financial Capability Study, the pace of new investors entering the market has slowed significantly in recent years. In a 2024 study, only 8% of investors reported beginning to invest within the last two years. This is a sharp drop from 21% in the two years preceding the 2021 study. (FINRA, 2025)
That said, there are signs of renewed momentum. A recent report found that from 2023 to early 2025, lower-income individuals increased their investing activity somewhat more than higher-income individuals, continuing a narrowing of the participation gap that began during the pandemic. Younger adults are also entering the market earlier than past generations: 37% of 25-year-olds in 2024 used investment accounts, compared to just 6% in 2015. (JPMorganChase, 2025)
Leverage Time
One reason to start investing sooner rather than later is the power of compounding interest. This is when your returns generate their own returns over time. Time is one of your biggest advantages as an investor. But don’t worry, even if you haven’t started your investing journey you can still take advantage of compound interest by getting started now. To paraphrase a much-cited proverb, “The best time to plant a tree was 20 years ago. The second-best time is now”.
Getting Started: 6 Steps
Step 1: Build a solid financial foundation first.
Before putting money into the market, it's important to make sure your financial footing is stable. That means paying down high-interest debt (as the interest on this debt often costs more than investments return), building an emergency fund, and having adequate insurance coverage.
It's also important to plan around your broader financial situation: your time horizon (Time horizon, 2026), your goals, and how much risk you can realistically absorb. This isn't a strict sequence of “do this before that”, it’s about understanding your own situation. This starts with having a financial plan and a budget—knowing your income, expenses, and what's left over. From there, you can think about a contribution amount or strategy that fits your situation.
Want to learn more about how incremental steps can help move you towards your goals? Check out our blog post:
Building Wealth After Graduation (Pellegrini, 2024)
Step 2: Determine how much you can contribute.
Before choosing a specific approach to investing, it’s important to figure out what you can actually afford to invest.
With that in mind, a helpful concept is dollar cost averaging: rather than investing a lump sum all at once, you invest a fixed amount on a regular schedule regardless of market conditions (Dollar cost averaging, n.d.). This approach smooths out the impact of market fluctuations over time, so you buy more shares when prices are low and fewer when prices are high. This removes the pressure of trying to time the market. You can automate this too, for example by investing a fixed amount with each paycheck.
As for how much you need to start... it may be less than you think. For example, some IRAs allow contributions as low as $25/month via direct deposit, as well as one-time contributions. This means that if you have irregular income, you can invest when you have a little extra—a tax refund, for example—rather than committing to a fixed monthly amount.
There’s also an array of round-up investing apps and services. These allow you to round up when you make everyday purchases and invest that amount that was rounded up. That being said, the fees may be high for the return so it’s important to compare your options.
All this to say: small investments are useful and thanks to compounding interest can add up to quite a bit over time. Automating even a modest contribution can reduce the cognitive load of managing investing alongside everything else in your financial life.
Step 3: Inventory your options.
Once you have a contribution amount in mind, take stock of what's available to you.
Employer-sponsored accounts are one of the most common entry points. If your employer offers a defined contribution plan like a 401(k) or 403(b), you may already be investing. Illinois residents without access to an employer plan can also participate in Illinois Secure Choice (Illinois Secure Choice, n.d.), the state's retirement savings program.
Make sure you check how vesting (Retirement topics—Vesting, 2025), or ownership, of the money in the account works for your employer, too. Vesting determines how much of your employer's retirement contributions you actually own, which depends on how long you've stayed with the company. Your own contributions are always fully yours, but employer contributions typically vest either all at once after a set number of years or gradually over time. If you leave before you are fully vested, you may forfeit a portion of that employer money.
Individual investment accounts are another option for investing independently of an employer. One example of these is an Individual Retirement Account (IRA) or a 529 Plan. These can offer tax advantages that may benefit your longer-term savings strategy.
There are loads of options and getting a handle on them all can maybe feel a bit overwhelming. To learn more, check out our Investing 101 webinar (Student Money Management Center, 2025)
Step 4: Reflect on your risk tolerance.
Knowing how much risk you're comfortable with isn't just an abstract exercise—it has real practical value. Investors who overestimate their risk tolerance might react emotionally to market downturns, like pulling all their money out when a stock price drops, which can lock in losses and undermine long-term returns.
Once you know your risk tolerance, you can think about asset allocation—how to divide your investments across different types of assets in a way that reflects your values, goals, and risk tolerance. Diversification within those categories further reduces exposure to any single investment's volatility. Fortunately, products exist that handle this automatically: target-date mutual funds, for example, gradually shift from higher-risk to more stable allocations as you approach your retirement date. ETFs that track a specific index—say, a green energy ETF—offer instant diversification across a sector or market segment without requiring you to pick individual stocks.
Step 5: Consider the features of different securities.
Different types of investments work differently, and it's useful to have a basic understanding of several before you start. We will focus on five types of investment products here, but more do exist (for example, investing in gold or real estate).
Stocks
Stocks represent ownership in a company. They offer potential for capital gains (the stock increasing in value) and dividends (a share of company profits), but they also come with higher volatility.
Bonds
Bonds are essentially loans you make to a government or corporation in exchange for regular interest payments. They're generally lower risk than stocks but also offer lower returns.
Mutual Funds
Mutual funds pool money from many investors to purchase a diversified mix of securities. They can be actively managed by professionals or passively track a market index.
ETFs
ETFs (Exchange-Traded Funds) function similarly to mutual funds in terms of diversification, but they trade on exchanges like individual stocks throughout the day, often with lower fees.
Target-Date Funds
Target-date funds are a type of mutual fund that automatically adjusts its asset allocation over time—starting more aggressive (higher stocks) and becoming more conservative (more bonds) as the target retirement date approaches. They also sometimes include ETFs. Many people use target-date funds as a "set it and forget it" option for retirement saving.
Step 6: Choose your investment platform.
Your choice of platform will depend on your goals, experience level, and what features matter to you. Options range from traditional full-service broker-dealers (in-person or online) like Vanguard, Fidelity, and Charles Schwab to investment apps and robo-advisors like Betterment or Acorns, which automate portfolio management for a small fee. We mention these options as an educational reference, not an endorsement.
Considerations to Protect Yourself
When evaluating any platform, consider fees, customer support, user interface, available products, and security. Before handing over your money, verify that the firm is properly licensed—you can look up registered brokers and investment advisors in Illinois the IDFPR license lookup (IDFPR, 2026). Be cautious of imposter scams: if someone you don't know contacts you through social media or messaging apps like WhatsApp with investment advice or opportunities, that's a red flag. Your investment decisions should be driven by your own research and goals, not outside pressure.
One more thing to watch for: gamification. Some investment apps are designed to make trading feel like a game—with notifications, streaks, and reward mechanics. Research has found that gamified features can encourage over-trading, which typically hurts long-term returns (CFA Institute, 2022). A platform that makes investing feel exciting isn't necessarily one that will serve your financial interests.
Summary & Next Steps
Investing doesn't have to be complicated, but it does take time—and that's actually the point. Compound returns work best when you give them room to grow, which means starting earlier, even with small amounts, beats waiting until you feel "ready."
A few principles to carry with you: consider investing regularly using dollar cost averaging rather than trying to time the market; know your risk tolerance before you start so you're less likely to make reactive decisions during downturns; and stay alert to scams.
You don't have to have it all figured out before you begin. Start with what you have and revisit your approach as your situation changes.
References
An introduction to 529 plans—Investor bulletin. (n.d.). Investor.gov. Retrieved February 16, 2026, from https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/introduction-529-plans-investor-bulletin
Asset allocation, diversification, and rebalancing 101. (n.d.). Investor.gov. Retrieved February 16, 2026, from https://www.investor.gov/introduction-investing/getting-started/asset-allocation
CFA Institute. (2022). Fun and games investment gamification and implications for capital markets. https://rpc.cfainstitute.org/sites/default/files/-/media/documents/article/industry-research/investment-gamification-implications.pdf
Dollar cost averaging. (n.d.). Investor.gov. Retrieved February 16, 2026, from https://www.investor.gov/introduction-investing/investing-basics/glossary/dollar-cost-averaging
FINRA. (2025, December 4). New FINRA Foundation research examines shifting investor behaviors, preferences and attitudes. https://www.finra.org/media-center/newsreleases/2025/new-finra-foundation-research-examines-shifting-investor-behaviors
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JPMorgan Chase Institute. (2025). A decade in the market: How retail investing behavior has shifted since 2015. https://www.jpmorganchase.com/institute/all-topics/financial-health-wealth-creation/a-decade-in-the-market-how-retail-investing-behavior-has-shifted-since-2015
Owusu-Cyrus, R., & Pellegrini, A. (2025). Roth vs. traditional retirement plans: What's the difference? https://blogs.uofi.uillinois.edu/view/7550/1975058643
Pellegrini, A. (2024). Podcast: Building wealth after graduation. https://blogs.uofi.uillinois.edu/view/7550/1678220570
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Shimpi, S. (2025). Emergency mode: Why you need a rainy day fund. https://blogs.uofi.uillinois.edu/view/7550/1972738353
Student Money Management Center. (2025a). Episode 91: Retirement savings in Illinois [Audio recording]. SoundCloud. https://soundcloud.com/idfpr/episode-91-retirement-savings-in-illinois
Student Money Management Center. (2025b). Investing 101: Wealth building basics #GetSavvy webinar recording [Video]. YouTube. https://www.youtube.com/watch?v=o2SNtTE2ZC4
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Note: This article was written with assistance from Claude (Anthropic, 2026), an AI assistant developed by Anthropic.
Anthropic. (2026). Claude [Large language model]. https://claude.ai
