Curious about investing? Here's what to know

Summary

Life Kit (NPR): "Curious about investing? Here's what to know"

Host: Marielle Segarra
Guest: Mary Childs, financial journalist and co-host of NPR’s Planet Money
Date: December 2, 2025

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Episode Overview

This episode of Life Kit breaks down the fundamentals of investing, making an intimidating topic accessible for beginners. Marielle Segarra and guest Mary Childs discuss the basics of retirement accounts, how to pick investments, the importance of diversification, and key concepts like index funds, mutual funds, ETFs, bonds, and brokerage accounts. The episode emphasizes that anyone can learn to invest and that starting is more important than perfection.

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Key Discussion Points & Insights

1. The Intimidation Factor in Investing

• Feeling mystified by finance: Both Marielle and Mary admit finance can appear inaccessible, especially for beginners.
  • “When I started out as a journalist covering this, I was mystified by it.” — Mary Childs [02:12]
  • “It can feel really foreign.” — Mary Childs [02:29]
• Encouragement to learn: Mary highlights that these concepts become second nature over time.

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2. Why Investing Matters

• Participating in economic growth: Rather than just saving, investing allows you to benefit from the economy's overall growth.
  • “The stock market can allow you to generate more money than if you just saved your money in a savings account or invested it in safer assets like bonds ... you don’t want to get left behind.” — Mary Childs [02:51]

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3. Retirement Accounts: 401(k)s, 403(b)s, IRAs, and Roths

• 401(k)/403(b): Tax-advantaged employment-based retirement accounts.
  • 401(k): For employees of for-profit companies.
  • 403(b): For employees of public education and some non-profits.
  • Money is taken from your paycheck pre-tax; taxes are paid when you withdraw.
  • Employer match programs are free money—always maximize them if you can.
    • “...if your employer offers a match program, like, that’s free money and you should take it.” — Mary Childs [06:05]
• IRAs (Traditional and Roth):
  • Traditional IRA: Pay taxes when withdrawing in retirement.
  • Roth IRA: Pay taxes before contributing, but withdrawals—including gains—are tax-free.
  • Key difference: When you pay taxes (now vs. later), and Roths also allow penalty-free withdrawals of contributions at any time.
    • “With a Roth, you can invest money that’s already been taxed, and then you don’t have to pay any taxes on the gains at any point.” — Marielle Segarra [08:11]
• Mixing account types: It can help to invest in both Roth and traditional accounts to hedge against future tax uncertainty.
• Portability: Old 401(k)s can be rolled into new employer plans or IRAs easily.

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4. Investment Fund Basics: Index Funds, Mutual Funds, ETFs

• Index Fund: Passively tracks a market index (like the S&P 500), automates investment choices, and typically has low fees.
  • “An index fund is just a basket of whatever thing you have chosen—stocks or bonds—that aims to track an index like the S&P 500.” — Mary Childs [10:02]
• S&P 500: The 500 largest or most important US companies—used as a benchmark for market performance.
• Mutual Fund: Pooled investment, often actively managed (a person picks stocks), generally higher fees.
  • “Mutual funds are generally actively managed and they have higher fees because of that. But they don’t necessarily perform better than index funds.” — Marielle Segarra [12:56]
• ETF (Exchange Traded Fund): Passively managed, traded like stocks, usually lower fees, often mirrors index funds.
• Performance:
  • For most individual investors, passively managed index funds outperform actively managed funds, especially after fees.
    • “People like us are often best situated by just buying an index fund. We’re not going to beat the market.” — Mary Childs [14:07]

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5. Diversification and the Role of Bonds

• Diversifying reduces risk: Holding a mix of investments (stocks and bonds) helps smooth out potential losses.
  • “A basket of things with different risks, those risks can balance each other out.” — Mary Childs [14:58]
• Bonds explained:
  • By buying a bond, you’re lending to a company (or government), which promises to pay back with interest.
  • Bonds are generally safer than stocks but yield lower returns.
    • “Bonds are safer because they are higher in a company’s list of corporate promises than stocks ... unless the company goes bankrupt, you’re going to get that money back plus interest.” — Mary Childs [15:38]
• The 60/40 Rule: Classic recommendation is 60% stocks / 40% bonds.
  • “That means you’re taking some risk, you’re a little bit tilted toward risk, but you are not risking it all.” — Mary Childs [17:25]
• Adjusting with age: Younger people can afford risk (more stocks), while older investors should shift toward bonds to protect their money.
  • “As you get older, your priorities turn from generating money to protecting your money.” — Mary Childs [18:31]

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6. Ethical and Socially Responsible Investing

• You can invest according to your values (environment, social, governance concerns).
• Studies show that ESG-style funds can perform as well as traditional ones.
  • “Funds that focus on doing better by those metrics have performed at least as well as traditional portfolios.” — Mary Childs [20:41]
• There are both actively managed and passively managed (index-style) ethical funds.

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7. Brokerage Accounts & Short-Term Investing

• What’s a brokerage account?
  • Not tied to retirement, accessible at any time, for personal investments.
• No tax benefits or employer match, but gives flexibility and liquidity.
• Investment strategy differs: For money needed soon (e.g., within a few years), shift toward less risky investments/bonds.
  • “If you think that we’re in an AI bubble and there’s a crash coming ... don’t put your money in the stock market. ... You may not make 10%, but you’re not going to lose 30%.” — Mary Childs [23:13]
• Important:
  • Emergency savings should NOT be in investments—keep those in an FDIC-insured high-yield savings account.

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Memorable Quotes & Moments (with Timestamps)

• “When I started out as a journalist covering this, I was mystified by it.” — Mary Childs [02:12]
• “If your employer offers a match program, like, that’s free money and you should take it.” — Mary Childs [06:05]
• “With a Roth, you can invest money that’s already been taxed, and then you don’t have to pay any taxes on the gains at any point.” — Marielle Segarra [08:11]
• “People like us are often best situated by just buying an index fund. ... We’re not going to beat the market.” — Mary Childs [14:07]
• “A basket of things with different risks, those risks can balance each other out.” — Mary Childs [14:58]
• “As you get older, your priorities turn from generating money to protecting your money.” — Mary Childs [18:31]
• “Funds that focus on doing better [ethically] ... have performed at least as well as traditional portfolios.” — Mary Childs [20:41]
• “There’s no one right answer.” — Mary Childs [24:34]

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Timestamps for Key Segments

• [02:12] – Overcoming intimidation with finance
• [05:27] – What are 401(k), 403(b), IRA, and Roth IRA?
• [09:47] – Index funds, S&P 500, and basics of mutual funds & ETFs
• [14:07] – Passive funds tend to beat active ones (for the average investor)
• [14:58] – The importance of portfolio diversification and the role of bonds
• [18:31] – How age changes your ideal investment mix
• [20:41] – Ethical/socially responsible investing
• [22:03] – Brokerage accounts and short-term investing
• [24:07] – No one right way to invest; value of guidelines and history

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Actionable Takeaways

1. Start investing—even small amounts count, and learning gets easier over time.
2. Maximize employer-matched retirement contributions whenever possible—it’s free money.
3. Understand the basics: index funds are simple, often low-fee, and tend to outperform more complex, actively managed funds for most people.
4. Diversify—don’t put all your eggs in one basket.
5. Re-balance risk as you age: younger? More stocks. Closer to retirement? Slowly increase bonds.
6. Consider your values—there are ethical funds that don’t sacrifice performance.
7. Separate your emergency fund (keep it safe and accessible) from investments.

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Closing Thoughts

The episode concludes by emphasizing that it’s normal to feel insecure about investing, but knowledge and practice make a big difference. There’s no “perfect” way—just guidelines, history, and research to help steer your choices. Be kind to yourself, stay curious, and start investing at whatever level feels right.

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Summary by [your summarizer].
Useful for new and aspiring investors who want a friendly, understandable guide to getting started.

Transcript

[Announcer]

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[Mariel Segarra]

Hey, it's Marielle. Before we get to the show, I want to make sure you know it's a special day for NPR because it's Giving Tuesday. NPR celebrates this global day of generosity every year, but we've never had a year quite like this one. You've probably heard by now that federal funding for public media was eliminated as of October 1st. That means NPR is now operating without federal support for the first time ever. It's a big change and a big challenge, but it's one that we can overcome together. We are so grateful for the listeners who've already stepped up to donate, like Stephanie from Kansas, who says, I frequently listen to life kitsch jump start my morning. Everything I learn helps me practice productive habits. Stephanie, we are so glad to hear it. Please make your Giving Tuesday gift right now by signing up for NPR plus, it's a simple recurring donation that gets you perks like bonus episodes of NPR podcasts and curated collections of Life Kit episodes by topic, like health and parenting. Join us at plus.NPR.org thanks again for your support and thank you if you're already an NPR supporter. All right, let's get on to the show. You're listening to Life KIT from npr. I remember when I interviewed for my very first full time journalism job at a corporate finance magazine. I actually tried to talk my future boss out of hiring me. I told her, look, finance isn't my thing. I was an English major. I don't know anything about this. She told me I could learn. And that was true. Over the years, I learned about accounting and taxes, city finances, macroeconomics, the Federal Reserve. I became fluent in a lot of these things. But I think it's worth noting that I felt like finance as a topic was just not accessible to me. Mary Childs felt like this, too.

[Mary Childs]

When I started out as a journalist covering this, I was mystified by it. And you start to just sort of rhythmically understand that there's like capital flows that just means money moving and like different asset classes. That's just stuff you can buy, all this different terminology that like becomes second nature. But it, it can feel really foreign.

[Mariel Segarra]

Mary is a longtime financial journalist and a co host of the NPR show Planet Money. Anyway, I think this is how a lot of us feel, journalist or not, especially when it comes to investing, mystified, intimidated, ill equipped but we can't let that stop us from trying to. Because the truth is, you can learn, and you should.

[Mary Childs]

The stock market can allow you to generate more money than if you just saved your money in a savings account or invested it in safer assets like bonds and to kind of participate in broader economic growth. So as the economy around you is growing and more transactions are happening and businesses are growing, stocks are going to be going up. And you want to be a part of that. You don't want to get left behind.

[Mariel Segarra]

On this episode of Life Kit Investing 101, we'll talk about different types of retirement plans and their tax benefits, the various kinds of investment funds and how to diversify. And we'll also get into brokerage accounts which you can use to invest for the shorter term.

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[Mariel Segarra]

Of people invest through a company sponsored retirement plan like a 401k or a 403b. Can you just explain what those are?

[Mary Childs]

Those are both simply vehicles that have been created by legislation to have tax benefits to kind of allow employees to invest with a little bit of a boost from the tax regime. So a 401k is typically for employees of for profit corporations and a 403b is for employees of public education organizations and some tax exempt nonprofits. And they let employees contribute money before paying taxes. So you get to defer your taxes until you start withdrawing at the latest age 73 when you're retired. And hopefully at that point your pile of money is so much bigger because you have been investing in this plan this whole time. I can't give investment advice, but this is so huge. If your employer offers a match program like that's free money and you should take it and you should just wring every dollar you can afford to put into your 401k and get matched because that's just going to benefit you later.

[Mariel Segarra]

Okay. Yeah. I think this is how a lot of folks are introduced to investing. Just to go through some of the basics. What happens to a retirement plan when you leave a job?

[Mary Childs]

It just continues so it will stay as you left it. It's like frozen in time, but it's just chugging along, still being invested in the market. And so you got a new job, say, and they have a 401k plan or a 403 and you can actually combine them. So there are all these like buttons you can push at Vanguard or Fidelity or whatever to roll your old retirement account into your new one. And it's pretty easy, I think.

[Mariel Segarra]

What are some other ways besides these company sponsored plans that people can invest for retirement?

[Mary Childs]

Yeah, there are a bunch of different options. There's a Roth IRA and there's a regular ira. Basically it just games. When you pay taxes, are you going to pay taxes today and then put all your money in it and never have to pay taxes again on it when you withdraw? When it's like, you know, compounded annually for the past 30 years and it's a bajillion dollars now. Congratulations. Or do you want to pay taxes at the end when you have a bazillion dollars?

[Mariel Segarra]

All right, takeaway one. There are several different kinds of retirement investment accounts. You might be able to start one through your job. This is known as a 401k at a for profit company or a 403b at a nonprofit. And there's a tax benefit to these. You don't have to pay taxes on your contributions or on your earnings until you start withdrawing the money generally when you retire, which could be great if you expect your tax rate to be lower at that point. Also your employer might offer you a match, meaning if you put in say 3% of your salary, they will also put the equivalent amount of money into your account. That's free money. So take advantage of it. You can also start an individual retirement account or ira. Often folks will have these if they're self employed or if they want to roll over money from a company that they've left, Then there's an option called a Roth. And these can be individual retirement accounts or. Or they can be employer sponsored. The main difference is in how you pay taxes. With a Roth, you can invest money that's already been taxed, and then you don't have to pay any taxes on the gains at any point. And you can withdraw your contributions at any time, even before retirement, without paying a penalty, which is not true for traditional retirement accounts. One thing I've heard is that it can help if you have the ability to invest in Both a Roth IRA and a traditional IRA or 401k or 403b because the tax benefits are different. And so you're sort of hedging your bets there.

[Mary Childs]

Yeah.

[Mariel Segarra]

Okay, so let's say that your company does offer a retirement plan. Step one would be to tell your company to withhold a certain amount from your paychecks right before you pay taxes and put it in that retirement account. But. But after you do that, you have to choose the stocks and funds to invest in, Right?

[Mary Childs]

Mm.

[Mariel Segarra]

Okay. Does that ever get done automatically?

[Mary Childs]

It actually can. The, like, automatic stuff is generally because it's really important that people do invest in these, that employees do get their retirements up and running to some degree. And employers know that and have set up a bunch of nudges to make that happen. Cause this decision can be really hard and it's really overwhelming. And you're like, why do I know if the Vanguard Index fund is better or worse than the BlackRock Target Date Fund? Like, how am I, how am I supposed to. Like, this is just a list of gibberish.

[Mariel Segarra]

Yeah. I think this is where a lot of people get tripped up, because there are so many options, different fund names with different acronyms, completely. Let's walk through some common terms that you might see when you're starting to invest in funds. What is an index fund?

[Mary Childs]

Yeah, so an index fund is just a basket of whatever thing you have chosen, stocks or bonds that aims to track an index like the s and P500. An index fund simply tracks that index and doesn't necessarily make any decisions about, like, oh, you know, I no longer like the look of Microsoft or Facebook, and I shall sell them. No, the decisions are made automatically based on what the index has and what proportion of each stock is in that index.

[Mariel Segarra]

Now here's the Russian Doll question within the question. What is the s and P500?

[Mary Childs]

I love that it's just the 500 biggest or most important companies that are listed on a stock exchange in the United States. So it's just the broad market. It's kind of used as the benchmark that we all look to as to say, okay, how are stocks, broadly speaking, doing today or doing over time?

[Mariel Segarra]

Okay. In comparison to an index fund, there are also funds that are actively managed by somebody, right?

[Mary Childs]

That's exactly right. So there are funds that have a person at the helm who is making buying and selling choices daily because they made some judgment, they exercised some discretion, they. They made a choice. And that will not happen in a passively managed fund.

[Mariel Segarra]

Okay. Another set of terms that people might see are mutual fund and etf, or exchange traded fund. Can you explain the difference between those?

[Mary Childs]

A mutual fund is like a pooled investment vehicle. You know, if I go out to buy a slice of an index or I go out to buy a slice of a company, a piece of stock, I. I don't have that much money. But if you and I pool our money and we pull in all of our friends, suddenly we have a lot more purchasing power. Right. We can buy more. A mutual fund is just a pooled investment vehicle for a lot of different investors to be able to kind of buy into this same portfolio that they each get a little slice of.

[Mariel Segarra]

Okay. And then what's an etf?

[Mary Childs]

So an etf, that stands for exchange traded fund. The product itself is traded on an exchange, like, just like a stock. And the reason people really like it is that they are tax advant advantage. They have a lot of tax benefits that make them a lot more attractive than say, a mutual fund or other types of products that you might be able to buy.

[Mariel Segarra]

Do ETFs also tend to have lower fees?

[Mary Childs]

Yes. Because of that tax advantage, ETFs are able to charge less money for their execution. And they are able to charge less because they're generally passively managed. They are mostly index funds. Mutual funds are almost always actively managed, managed by a person making decisions, a person who needs to be paid a salary. There are actively managed ETFs, but the general idea that we're talking about is probably going to be an index fund. No one's there making decisions. It's just an automatic thing. It can be executed basically automatically. And that can get pretty cheap.

[Mariel Segarra]

All right, takeaway two. Here are some common terms you might see when you're starting to invest. An index fund is a type of Investment fund that goes up and down in value according to the performance of a prediction particular market index like the S&P 500 or the NASDAQ. And a market index is basically a collection of companies. The S&P 500, for instance, includes 500 large US companies. Index funds are passively managed, so there's nobody at the helm making decisions about what stocks to buy and sell every day. The fund just follows the index, however that's doing. And then there are funds that are actively managed. Somebody's deciding what to buy and sell based on conditions in the economy and the world. Mutual funds are generally actively managed and they have higher fees because of that. But they don't necessarily perform better than index funds. ETF or exchange traded funds are typically passively managed and have lower fees. And you do want to minimize the fees you pay because those can really add up over time. So I know there are a lot of funds out there and you could probably make a case for any individual one. But which of these tend to perform better over time?

[Mary Childs]

I think the general consensus is that for individual investors, people like you and me, who are not spending all of our time researching companies and getting an edge on our competition and finding out what companies are going to outperform in the future, people like us are often best situated by just buying an index fund. Like, we're not going to beat the market. We don't have an edge. No offense to us. It's okay. We're doing other things.

[Mariel Segarra]

Is it a reasonable choice to just put all of your money in your retirement account in one index fund that tracks the S&P 500?

[Mary Childs]

I would maybe put some in bonds. You know, just try to jazz it up a little bit so that all my eggs are not in one literal basket, but that's probably fine.

[Mariel Segarra]

Okay, so I mean, let's talk about what it means to have a diversified portfolio. Like why do, why do people say that you should diversify? And what does that actually mean?

[Mary Childs]

The idea of a diversified portfolio is just the idea that a basket of things with different risks, those risks can balance each other out. So like, the stock market might have a really terrible day one day, but bonds often go up in price when stocks go down. So if you're all in on the stock market, you're going to lose money. If you're balanced between the stock market and the bond market, you're going to lose a little less money than you would have in the initial scenario. Just as a simple example.

[Mariel Segarra]

Okay, well, let's talk about bonds, because this is A common way that people try to not put all their eggs in one basket, as you said.

[Mary Childs]

Yes.

[Mariel Segarra]

What are bonds and why do people invest in them as part of a retirement plan?

[Mary Childs]

Yeah. So when a company borrows money, they are issuing a bond, and that's just a promise that they will pay back that money they borrowed plus periodic interest payments for a given amount of time. And you as the investor, you are lending out your money and in return you get those interest payments. And that's the kind of compensation you get for taking the risk of lending to the company. And the riskier the perception of the company, the higher that yield will be, the higher that compensation. And bonds are safer because they are higher in a company's list of corporate promises than stocks. So ostensibly, unless the company goes bankrupt, you're going to get that money back plus interest. And that's kind of the comforting promise of bonds versus the risk of stocks that, you know, your money can just kind of totally evaporate.

[Mariel Segarra]

How do bonds tend to perform compared to, say, a high yield savings account?

[Mary Childs]

Oh, great question. So a high yield savings account, when interest rates are high, they yield more. Right. So they track how much, where the Fed is setting interest rates. And as a result, you as an investor can get money just for saving, which is amazing. And bonds are supposed to perform better than that. So because you're taking the risk of lending to a company, a company which is going to then go and do business that you aren't managing, right, that is a risk and you're being compensated for that risk with the interest payments. And so the interest you're getting on your savings is literally just the bank saying, thank you so much for your business, I appreciate having this cash so that I can lend it out. Versus when you buy a bond, you're making the choice to lend to that company and take on that risk. So it's just sort of a question of who's managing it and what risk you're getting paid for.

[Mariel Segarra]

If I wanted to diversify my portfolio or not put all my eggs in one basket, however we want to say it, what percentage of my money should be in bonds? Like, what do people recommend?

[Mary Childs]

The traditional recommendation, the generic recommendation, which doesn't take into account who you are as an investor, that is for a 6040 allocation portfolio. So that's for 60% stocks, 40% bonds, and that means you're taking some risk, you're a little bit tilted toward risk, but you are not risking it all.

[Mariel Segarra]

Takeaway 3. In general, it's a good idea to diversify your retirement portfolio and to not just hold stocks. A common way to do this is to buy bonds. They often perform well when stocks go down. So if you have these in the mix, the market downturns won't hit you as hard. That said, bonds don't pay the same high returns that you can get from stock funds. So if you want the opportunity to make the most money possible and you have a long time horizon, you might choose to not have bonds or to have a very small amount. Does that change if you're 22 years old or 30 years old or, you know, you don't necessarily need to have these really safe investments if you have the benefit of lots and lots of time?

[Mary Childs]

Yes. One thing that I think cannot be underscored enough is the benefit of time. So if you're younger, you can afford to lose money. Basically, you can still generate more money by working. You're going to be able to recover and to kind of fill in any holes if the stock market is to go down. And also if you stay invested and you don't sell, which we know you're not supposed to sell, the stock market generally comes back. That means that your portfolio will bounce back. Just don't look at your portfolio, don't open the website, because it's going to look really ugly. You're going to be tempted to sell, and that's a mistake. And then as you get older, you want to make re evaluations. You want to kind of take a step back and say, okay, what do I need to save and what do I need to have for sure in order to have a comfortable retirement, in order to be able to make my rent or mortgage payments and afford food and afford whatever my lifestyle is. And that means that your priorities turn from generating money to protecting your money. And so that means you want to go from a riskier something or other like stocks, to a safer something or other like bonds.

[Mariel Segarra]

We'll have more Investing basics with Mary Childs of Planet Money after the break.

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[Mariel Segarra]

What if you don't want to invest in funds that support certain industries, like for Ethical reasons? Are you sacrificing performance?

[Mary Childs]

Ugh, this is such a good question. It is a hard one. You can slice it every which way and you can find a study that will support whatever your biases, whatever thesis you have might be. But studies have shown that ethical investing or environmental, social and governance funds, funds that focus on doing better by those metrics, have performed at least as well as traditional portfolios. There is a case to be made for investing in funds that will engage with management and say, hey, we as your shareholders, I own this much percent and I'm concerned about your use of this, or the number of worker injuries or fatalities in production. All of these different metrics that you as an investor can actually say, hey, we care about this thing. Can you do better? Can you fix it? And the company has to listen because you are a part owner of that company.

[Mariel Segarra]

These funds would generally, they would have to be actively managed, right?

[Mary Childs]

Yes and no. It again, depends on what you want. There are plenty of products that are passively managed that are their own kind of indices that are like, okay, we are the s and P500, but minus fossil fuels. Or there are a bunch of different options that are like that.

[Mariel Segarra]

Okay, that's good to know. We've been talking about retirement investments mainly, but there are other ways to invest for the shorter term, and a big one is to put money in a brokerage account. Can you just explain what is a brokerage account and how is it different from like, let's say a 401k?

[Mary Childs]

Yeah, so a brokerage account is just a little place for you to put your own money that is not pooled with someone else's money. And you can just invest directly in the market that way. So you would open, you know, a Schwab account or something like that, and you would have your own little pile of money and you would buy a fraction of a share or a share of a smaller company and participate directly in the stock market or bond market that way. And you can still buy into ETFs and mutual funds that way as well, but there's less of a tax benefit and there's. You're obviously not getting your beautiful employee match.

[Mariel Segarra]

The thing is that if you're putting money in a brokerage account, it's not as long of a horizon.

[Mary Childs]

Exactly. So this is money you can access at any time. You don't have to wait until you're retiring as you would in your 401k or 403b account.

[Mariel Segarra]

So given that, like, if you know, all right, like I've had this money in a brokerage account for a few years. It's been growing. I want to buy a house in one year. Do you shift your investments in that account to a fund that seems less risky, or do you up the percentage that you have invested in bonds?

[Mary Childs]

Everything is relative. So you're, you know, you have to look at the landscape around us and what the market's been doing and what other people expect and how they feel. And this is, of course, where it gets really hard because no one has a crystal ball. But the idea is like, okay, if you think that we're in an AI bubble and there's a crash coming in the next three to six months, don't put your money in the stock market. You're gonna then go put your money in a bond fund or real estate or something else that separates you from the AI crash that you think is necessarily coming. And then you may not make 10% off what you invested in, but you're not gonna lose the 30% that you think is coming.

[Announcer]

Right?

[Mariel Segarra]

Right.

[Mary Childs]

So it's that kind of relative value judgment that, you know, anytime you say something is cheap, there's an implied compared to what? Anytime something's expensive compared to what?

[Mariel Segarra]

Okay, takeaway four. In this episode, we've mostly talked about retirement accounts. But there are also ways to invest for the shorter term. One way is to open up a brokerage account, and you might have a different strategy for the investments in this account than in your retirement plan because you're looking at a shorter time horizon. I think it's helpful to remember that there isn't one right way to go about this.

[Mary Childs]

There's no one right answer.

[Mariel Segarra]

Yeah, and nobody knows, but we have some general guidelines that have seen success over time.

[Mary Childs]

Yes, there are things that we can learn from research and from history and that can help insulate us from mistakes.

[Mariel Segarra]

One other note here. Don't hold your emergency savings in a brokerage account. You want to put those in an FDIC insured high yield savings account where they won't fluctuate with the stock market. Okay, time for a recap takeaway. One, There are several different kinds of retirement investment accounts with varying tax benefits. 401ks, 403bs IRAs, and there are Roth versions of all of these. Also, if your employer offers a retirement plan match, take advantage of that. Takeaway 2. An index fund is a type of passively managed investment fund that goes up and down in value according to the performance of a particular market index like the S&P 500 or the NASDAQ. And then there are funds that are actively managed, meaning somebody's deciding what to buy and sell. The based on conditions in the economy and in the world. Mutual funds are generally actively managed and have higher fees because of it, but they don't necessarily perform better than index funds. ETFs or exchange traded funds are typically passively managed and have lower fees, and you do want to minimize the fees you pay. Takeaway 3 A common way to diversify is to buy bonds. They often perform well when stocks go down, so if you have them in the mix, market downturns won't hit you as hard. But bonds don't pay the same high returns that you could get from stock funds. So if you want to give yourself the opportunity to make the most money possible and you have a long time horizon, you might choose not to hold bonds at all or to hold a very small amount and Takeaway four Once you have your emergency savings in an FDIC insured bank account, consider a brokerage account to grow money that you'll want to access before retirement. By the way, you may have a different strategy for the investments in this account than the ones in your retirement plan because you're looking at a shorter time horizon. All right, and that's our show. But before we go, do you have a friend that you're always talking about personal finance with? Think they'd like this episode? Why not share it? Spread the word about Life Kit this episode of Life Kit was produced by Margaret Serino. Our visuals editor is Beck Harlan and our digital editor is Malika Garib. Megan Kane is our Senior Supervising Editor and Beth Donovan is our Executive Producer Producer. Our production team also includes Andy Taegle, Claire Marie Schneider, and Sylvie Douglas. Engineering support comes from Kwesi Lee. Fact Checking by Tyler Jones I'm Mariel Segarra. Thank you for listening.

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