Get answers to your most important and commonly asked questions.
Saving is putting money aside for future use. It's important to save so you can cover fixed expenses, such as mortgage or rent payments, and to make sure you're prepared for emergencies. Generally, people put their savings in bank accounts, where up to $250,000 is insured by the Federal Deposit Insurance Corporation (FDIC). Charles Schwab & Co., Inc. is not an FDIC-insured bank and deposit insurance covers the failure of an insured bank.
Investing is when you put your money "to work for you," another way to think of investing is when you put your money "at risk." You buy an investment like a stock or bond with the hope that its value will increase over time. Although investing comes with the risk of losing money, should a stock or bond decrease in value, it also has the potential for greater returns than you'd receive by putting your money in a bank account.
Investing can help investors pursue financial goals, such as buying a home or funding retirement. By investing, you're putting your money to work, and at risk, to pursue your goals. Let's see how it works.
Investing has risks. The goal is to manage them. Many investors choose to do this by having a plan, which should include a deadline for when the money is needed, and diversifying their portfolio.
Diversification spreads assets across different types of investments, so you're not putting all your eggs in one basket. Investors tend to divide funds among stocks, bonds, and cash equivalent investments based on risk tolerance and timeline. Dividing further, investors often diversify their stock portion into different types, such as large cap Tooltip , small cap Tooltip , and international. And then within those divisions, investors can also break it even further down by adding stocks that represent different sectors like technology and health care. The ultimate goal is to own investments that don't historically move in tandem.