Upbeat music plays throughout.
Narrator: Investing is a tool to help you set your money aside for long-term financial goals, whatever those may be. While it can sound intimidating, investing doesn't have to be complicated.
I'll show you seven investing principles that can help establish a foundation for investing success.
Principle number one: Establish a financial plan based on your goals.
This begins with setting clear, realistic goals, then writing down a plan to get there. Investors who plan are more likely to take steps necessary to achieve their financial goals and tend to have better saving habits than those who don't have a written plan.
On-screen text: Source: Schwab Modern Wealth Survey. The online survey was conducted March 4–18, 2024, in partnership with Logica Research among a national sample of Americans aged 21 to 75. Survey sample size was 1,000.
Narrator: In fact, 75% of investors who have a written financial plan have an emergency fund compared to only 27% of those who don't. Additionally, those with a written plan are more than three times as likely to feel "very confident" about reaching their financial goals.
Once you've made a financial plan, make sure you review it at least once a year and adjust it as your life circumstances change.
Principle number two: Start saving and investing today.
To grow wealth, you need time. Regularly contribute as much as you can afford, and don't worry about trying to time market highs and lows.
To illustrate, let's say Maria and Ana each invested $3,000 every year on January 1 for 10 years—regardless whether the market was up or down.
Animation: Chart shows the power of compounding interest over 20 years.
On-screen text: Source: Schwab Center for Financial Research with data from Morningstar. Past performance is no indication of future results. Indexes are unmanaged, do not incur management fees, costs, and expenses, and cannot be invested in directly.1
Narrator: Maria started contributing in January 2005 and stopped after 2014, but she kept the money invested through 2024. Ana, on the other hand, didn't start investing until January 2015, and continued contributing through 2024.
Animation: Chart shows the growth of $30,000 over 20 years vs. 10 years.
On-screen text: Maria ends with $187,709 over 20 years, and Ana ends with $67,936 over 10 years.
On-screen text: Source: Schwab Center for Financial Research with data from Morningstar. Past performance is no indication of future results. Indexes are unmanaged, do not incur management fees, costs, and expenses, and cannot be invested in directly.1
Narrator: Even though they both invested a total of $30,000 and Maria hadn't added anything to her account since 2014, Maria ended 2024 with about $120,000 more than Ana because she was in the market longer.
Even if you can't afford to contribute as much as the example, any contribution can help. And the sooner you start, the more time compounding has to work its magic. Think of investing like planting trees: The best time to start was years ago. The second-best time is now.
Principle number three: Build a diversified portfolio based on your tolerance for risk.
Putting all your eggs in one basket is risky. Different types of investments can carry different types of risk, so try to invest in a variety of asset classes—like stocks, bonds, and cash—and within those asset classes, further diversifying with different kinds of investments.
Animation: Chart shows the performance of $100,000 in different asset classes.
On-screen text: Source: Schwab Center for Financial Research with data from Morningstar. Past performance is no indication of future results. This hypothetical example is only for illustrative purposes.2
Narrator: Take a look at this chart. If you invested $100,000 at the beginning of 2005 in large company U.S. stocks, it would have grown to over $806,000 by the end of 2025. But look at how volatile the journey was. If you invested in just fixed income assets like bonds or cash equivalent investments, it would have been a smoother ride, but you'd have earned less. Investing in a mix of stocks, bonds, and cash would've captured some of the growth of stocks with lower overall volatility.
To decide the right mix of assets for you, consider your risk tolerance. How comfortable are you with temporary losses? It may depend in part on your time horizon or how far off your financial goal is. If you're investing for retirement and it's more than 30 years away, you may be able to take more risk. If it's more like five to 10 years away, you may want to take on less risk.
Principle number four: Minimize fees and taxes. Markets are uncertain, but fees and taxes are guaranteed.
Even if fees seem small, over time, they can eat away your returns.
Narrator: For example, let's say in 2005 you started investing $3,000 at the start of every year for 10 years in a hypothetical portfolio that tracked the S&P 500® index. Then, in 2015 you stopped adding and let it sit.
Animation: Chart shows $3,000 a year invested in a hypothetical S&P 500® portfolio from 2005 to 2024.
On-screen text: Source: Schwab Center for Financial Research with data from Morningstar. Indexes are unmanaged, do not incur management fees, costs, and expenses, and cannot be invested in directly.3
Narrator: If you didn't have to pay fees, you would have almost $188,000 by the end of 2024. But if you paid just a 1.5% fee each year, over the life of that portfolio, you'd pay almost $40,000 in fees.
Animation: Screen shows a FAHN Fund with a 1% expense ratio, and a PHYL Fund with 0.25% expense ratio.
Narrator: One way to limit fees is to choose investment funds with low expense ratios, which is a percentage of your investment that is paid to the fund provider each year.
On-screen disclosure: Schwab does not provide tax advice. This information does not constitute and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.
Narrator: Just like fees, taxes can cut into returns as well. To minimize the impact of taxes if your goal is retirement, consider contributing to tax-deferred accounts like a 401(k) or an IRA before contributing to taxable investment accounts.
Principle number five: Protect against significant losses.
Some losses are inevitable when investing. But you want to protect yourself from bigger losses that can be hard to bounce back from.
This ties in with diversifying your portfolio—having a mix of investments can help reduce big losses from riskier assets like stocks.
Animation: Chart shows a blended portfolio of 60% stock and 40% bonds vs. an all-stock portfolio during bear markets.
On-screen text: Source: Schwab Center for Financial Research, with data provided by Morningstar, Inc. Past performance is no guarantee of future results.4
Narrator: You can see that in market downturns in the 2000s and the 2020s, an all-stock portfolio got hit harder and took longer to recover than a diversified portfolio.
Consider managing your risk with government bonds, cash equivalent investments, and other common defensive assets like precious metals.
Animation: Chart shows defensive asset classes vs. stocks.
On-screen text: Source: Schwab Center for Financial Research with data provided by Morningstar. Past performance is no indication of future results. Indexes are unmanaged, do not incur fees and expenses, and cannot be invested in directly. This chart is for illustrative purposes only.5
Narrator: During market downturns in 2002, 2008, and 2022, defensive assets had positive returns while overall U.S. stocks contracted.
Principle number six: Rebalance your portfolio regularly.
Rebalancing means buying and selling assets to keep your portfolio in line with your risk tolerance. As assets grow, an allocation you set years ago can shift if left unattended.
On-screen text: Source: Schwab Center for Financial Research with data from Morningstar.6
Animation: Screen shows a pie chart with 78% stocks and 22% bonds.
Narrator: For example, if you invested 50-50 in stocks and bonds in 2009 in a hypothetical portfolio and left it alone for the next 12 years, the stocks would've grown to be 78% of the portfolio, leaving the portfolio open to more potential risk.
Discipline is important here; rebalancing is one of those things you should do at regular intervals like checking your credit report or changing your oil.
Finally, principle number seven: Ignore the noise.
Markets fluctuate day to day, but it's often best to tune out the headlines and focus on your long-term goals.
Animation: Chart shows the growth of $5,000 in the S&P 500.
On-screen text: Source: Schwab Center for Financial Research with data from Morningstar. The chart illustrates the growth of $5,000 invested in the S&P 500 Index from January 1, 1970 to December 31, 2024. Past performance is no indication of future results.7
Narrator: Historically, markets have increased over the long term. You'll go through some ups and some downs—even some big ones, but long-term investors who stuck to their plans have typically been rewarded.
Whew, that was a lot, so let's sum it up.
Establish a financial plan. Start saving and investing today. Build a diversified portfolio. Minimize fees and taxes. Protect against significant losses. Rebalance your portfolio regularly. And ignore the noise.
These seven principles can guide you toward investing success.
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