Create, Grow, and Protect Your Wealth: A Savvy Guide to Investing With Confidence

Adapted from articles by Stacy Francis, CFP®, CDFA®, and Manisha Thakor, MBA, CFA, CFP®.

Table of Contents:

Introduction: What Does It Really Mean to “Create Wealth”?

1. Getting Ready to Invest

2. Understanding Risk, Return, and Inflation

3. Asset Allocation and Diversification

4. Choosing Your Investment Vehicles

5. Putting It All Together: A Savvy Action Plan 

 

Introduction: What Does It Really Mean to “Create Wealth”?

The one question financial planners hear again and again is some version of: How do I create wealth? And once I have it, how do I make sure I never, ever lose it?

At its core, wealth is the gap between what you earn and what you spend. Whether your income comes from a salary, self-employment, a bonus, or an inheritance, you build wealth when you make money, you spend less than you earn and you invest the difference wisely.

Preserving wealth comes down to diversifying and spreading out risk, and keeping expenses (especially fixed expenses) as low as is reasonably possible

Simple in theory. Much harder in real life.

All day long, we’re bombarded with messages to spend, spend, spend—from ads, social media, and even well-meaning friends sharing “must-haves.” But many of those purchases move us further away from financial security.

On the income side, life doesn’t always cooperate either. A higher-paying promotion might require moving your kids to a new school. A seemingly stable company can suddenly go belly-up.

The good news: you can still create and preserve wealth by focusing on the things within your control: your spending, your savings habits, and your investment choices.

This guide focuses on that third pillar: making smart investment choices so your money can grow.

In short: wealth isn’t about how much you make—it’s about how intentionally you spend, save, and invest. Creating wealth means turning the gap between what you earn and what you spend into smart, diversified investments.

 

1. Getting Ready to Invest

Start with a Plan

Handling your money with confidence does not mean pouncing on every opportunity. It means making decisions that are quick and well thought-through, acting from a place of knowledge, not panic and having a plan you can lean on.

You can learn about investments on your own, attend workshops, read articles and newsletters, or you can work with a trusted advisor who keeps up with the markets for you. Either way, knowledge and a simple plan are what allow you to start investing confidently.

That plan starts with your everyday finances and cash flow:

• Work out a realistic budget
• Pay your bills on time
• Automate a monthly transfer into savings and investments

When those pieces are in place, you can enjoy your “fun money” without guilt, knowing the $200 you spent on a must-have dress is not jeopardizing your retirement or your child’s education.

Keep Fixed Expenses in Check

One of the biggest favors you can do for your future self is to stay as far away from unnecessary fixed expenses as you can. When you splurge, aim for one-time purchases you can afford upfront, and avoid long-term financing plans whenever possible. If you use a credit card, don’t spend more than you can pay off in full at the end of the month. That way, splurges stay treats, not anchors pulling you into long-term debt.

Should I Invest More or Pay Down Debt?

When a windfall comes your way—a bonus, tax refund, inheritance—a common question is: Should I invest this money, or use it to pay down debt?

The answer is mostly mathematical. It depends on:

• The interest rate on your debt
• The expected return on the investment you’re considering
• The risk that comes with that investment

Some types of debt, like credit cards, are very expensive. If you’re carrying high-interest credit card balances, using extra money to pay them off is almost always the smartest move. It may feel “boring” next to the idea of investing, but you’ll be glad later when finance charges stop eating half your paycheck.

READ: How to Pay Off Credit Card Debt

Other debt, like student loans or mortgages, usually comes with more reasonable rates and long payback periods. In those cases, you may be better off investing extra money instead of paying the loans off early.

For example, if your mortgage rate is 6% and you reasonably expect a long-term average return of 8% from a diversified portfolio, you might come out ahead by investing rather than prepaying the mortgage—assuming you understand and are comfortable with the investment risk.

The key: before you invest extra money, compare interest rates and potential returns. Use high-interest-debt payoff as the first step in your investing journey, not an afterthought.

 

2. Understanding Risk, Return, and Inflation

The Risk–Return Tradeoff

One of the most fundamental investing truths is this: the higher the return you seek, the more risk you need to be willing to take on.

For example: bonds from well-established companies may offer small yields, just enough to stay ahead of inflation, but the chance you’ll lose your money is very low. And bonds from newer or riskier companies could pay yields above 20% per year—but the company could also go bankrupt and never pay you back.

Your job is to decide where you feel comfortable on this risk–return curve and choose investments accordingly. That’s part math, part emotion, and part life stage.

Different Types of Investment Risk

There are almost as many types of financial risk as there are investments, including:

• Market risk: the risk your investments fall because the overall market is weak (often tied to the economy, interest rates, or global events).
• Company-specific risk: something goes wrong at a particular company.
• Industry risk: a whole sector (like energy or tech) runs into trouble.
• Country or political risk: instability, policy changes, or economic issues in specific countries.
• Inflation risk: your money’s purchasing power erodes over time.

Market risk can drag down the value of your portfolio in the short term. But from a long-term perspective, economies move in cycles: boom → decline → recession → rise → boom. The timing and speed vary, but over time markets have historically recovered.

Two key ways to manage risk:

1. Don’t invest money you’ll need tomorrow. If you can wait out the declines and recessions, you’re better positioned to benefit from the recoveries.
2. Diversify widely. Spread your investments among:
   • Different types of securities (stocks, bonds, cash equivalents)
   • Different industries
   • Different countries and regions

While turbulence can hit every market, it’s highly unlikely that all companies in all industries in all countries will fail at the same time.

Inflation Risk: Why “Playing It Safe” Isn’t Safe

Inflation is the general rise in prices over time. As the cost of goods and services increases, the value of each dollar falls because it buys less than it used to.

This is why keeping money in a mattress guarantees you lose purchasing power every year. Even keeping all your savings in ultra-low-yield accounts can mean barely keeping up with inflation or falling behind.

Banks often pay interest that is right around or slightly above the rate of inflation. In those cases, you’re mostly just treading water. That can be appropriate for your emergency savings, but not for money you want to grow over decades.

Many Americans “play it safe” by keeping most of their money in CDs, Treasury bills, and money market funds paying 0.5%–2.5% interest. With inflation often higher than that, you can actually end up losing money in real terms, even though the account balance looks steady.

A healthier balance:

• Keep 6–9 months of essential living expenses in cash, CDs, Treasury bills, or money market funds as your safety net.
• Invest the rest in a diversified portfolio that includes stock market exposure, so your money has a chance to grow faster than inflation over the long term.

 

The lesson: being “too safe” with all your money can be risky in another way—you may never reach your long-term goals.

 

3. Asset Allocation and Diversification

Asset Allocation: Why it Matters More Than Stock Picking

An investor’s group of investments, frequently called an investment portfolio, can be divided in numerous ways among different asset classes, like stocks, bonds and cash management options. 

Research has shown that asset allocation, meaning how you divide your money among major asset classes, accounts for roughly 90% of your long-term returns. The remaining 10% comes from: which specific investments you choose and when you buy and sell.

Diversification–is the practice of spreading your money across different types of investments–is fundamental to preserving wealth and managing risk. In other words, your overall mix matters far more than the one “perfect” stock or fund.

This is good news. You don’t need a crystal ball. You need a thoughtful plan.

Quick Definitions Asset allocation refers to the strategy of dividing your investments into different asset classes, like stocks, bonds and cash management options. Diversification refers to spreading investments within each asset class (for example, spreading your investment across different industries, geographies, etc).

 

Your Investment Profile: Goals, Risk & Time Horizon

What should you invest in? To answer this question you will first need to determine your investment profile. What investment profile you chose is based on three main factors – your investment goals, your appetite for risk, and your time horizon.

A. Investment Goals

Goals are specific things you want your money to do, such as: buying a home, funding a child’s education, retiring comfortably, starting a business, etc. Each goal will define how much you need, how long your money can stay invested, and how liquid it needs to be (how fast you may need access to it). Your investment choices should line up closely with each goal’s time frame and liquidity needs.

Quick Definitions Liquidity refers to how quickly an asset can be converted into cash. For example: a house is not a liquid asset because it could take months to sell it. However, a savings account is extremely liquid: you can access the cash quickly without penalties.

 

B. Your Risk Tolerance

Risk tolerance is both your emotional comfort level with ups and downs, and your financial capacity to handle losses or volatility. 

If thoughts about your mutual fund’s latest negative returns are keeping you up at night, this is a big sign that you should select saving and investment options with lower risk. On the other hand, not taking enough risk and being too conservative can create its own risk: your money may not grow enough to reach long-term goals like early retirement.

 

C. Your Time Horizon

Time is money, and it’s one of the most important resources for investors.

• Long time horizon (decades): A younger investor saving for retirement might choose investments with wider price swings, knowing there’s time for ups and downs to even out.
• Medium time horizon (5–15 years): A family saving for a child’s education or a home purchase may take a more moderate approach—seeking growth but protecting principal as the goal approaches.
• Short time horizon or retirement: Individuals nearing retirement or relying on investments for daily expenses may choose more stable investments that lock in gains and create predictable income.

 

In short: your goals, risk tolerance, and time horizon together form your investment profile and guide how you allocate your money.

 

Diversification in Practice

Diversification means you don’t put all your eggs in one basket—or even one country.

You can do several things to offset the impact of some types of risk. Diversifying your investment portfolio by selecting a variety of securities is one frequently used strategy. If you put all of your money in one place, your return will depend solely on the performance of that one investment. Alternatively, if you invest in several assets, your return will depend on an average of your various investment returns. 

Here are three basic ways to diversify your investments:

• Variety of Assets – By choosing securities from a variety of asset classes, e.g. a mix of stock, bonds, cash and real estate
• Variety of Securities – By choosing a variety of securities or funds within one asset class, e.g. stocks from large, medium, small and international companies in different industries or sectors.
• Variety of Maturity Dates – By choosing a variety of maturity dates for fixed-income (bond) investments.

Dollar-Cost Averaging

Another technique to help soften the impact of fluctuations in the investment market is dollar-cost averaging. You invest a set amount of money on a regular basis over a long period of time, regardless of the price per share of the investment. In doing so, you purchase more shares when the price per share is down and fewer shares when the market is high. As a result, you will acquire most of the shares at a below-average cost per share.

As most investors know, market timing (always buying low and selling high) is very hard to accomplish. Dollar-cost averaging takes much of the emotion and guesswork out of investing. Profits will accelerate when investment market prices rise. At the same time, losses will be limited during times of declining prices.

International Investments

The U.S. stock market is the largest in the world—but it represents only about half of the global stock market. Investing globally can open you up to growth in other economies and spread country-specific risk.

A common range for international exposure in a portfolio is roughly 10% to 35%, depending on your profile and comfort level. The easiest way to invest internationally is through mutual funds or ETFs, such as:

• International funds: invest in countries outside the U.S.
• Global funds: invest all over the world, including the U.S.
• Regional funds: focus on areas like Europe, Latin America, or Asia.
• Country funds: invest in a single country.
• Emerging markets funds: invest in younger, less-developed economies.

A note on international investing. Diversifying beyond the U.S. can help reduce the impact if any single country’s economy struggles. Just remember: foreign investments add currency risk: exchange rates can boost returns, but they can also reduce returns when converted back to dollars. And while faster-growing regions can offer higher potential upside, they may also come with higher volatility and political/regulatory risk.

When choosing international funds, look at fees (which often run higher than domestic funds), manager experience in that specific region, long-term performance, and how the fund fits into your overall portfolio.

4. Choosing Your Investment Vehicles

Before diving into mutual funds, ETFs, or individual stocks, let’s do a quick overview of all the different types of investment vehicles, meaning the tools you can use to grow your money. Each vehicle has its strengths, risks, and typical uses.

Types of Investment Vehicles

• Stocks. Buying a stock means purchasing a small piece of a company. Stocks offer higher long-term growth potential but come with more short-term ups and downs.
• Bonds. A bond is essentially a loan you give to a company or government in exchange for interest payments. Generally less volatile than stocks, bonds provide income and stability.
• Mutual Funds. Professionally managed collections of stocks, bonds, or other assets. Investors buy shares in the fund, gaining instant diversification. Priced once per day.
• Exchange-Traded Funds (ETFs). Similar to mutual funds but trade on an exchange throughout the day like stocks. Often used by investors who want low costs and more control over trading.
• Index Funds. A type of mutual fund or ETF designed to track a specific market index (like the S&P 500). Typically low-cost and ideal for long-term, passive investing.
• Target-Date Funds. All-in-one funds that automatically adjust their mix of stocks and bonds based on a specific retirement year. Become more conservative as the target date approaches.
• Certificates of Deposit (CDs). Bank products that pay a fixed interest rate for a set period. Very low risk but usually offer lower returns. Good for short- to mid-term savings needs.
• Money Market Funds / Accounts. Low-risk vehicles that keep your money very liquid while paying modest interest. Mainly used for emergency funds or cash waiting to be invested.
• Real Estate Investments. Can include buying property directly or investing via REITs (real estate investment trusts). Offers income potential and diversification but comes with its own risks.
• Alternative Investments. A broad category that includes commodities, hedge funds, private equity, infrastructure, and more. Typically for more advanced investors and often less liquid.
• Employer Retirement Plans: 401(k), 403(b). Workplace accounts offering tax advantages and sometimes employer matching. Often include a curated selection of mutual funds or target-date funds.
• IRAs (Traditional and Roth). Individual retirement accounts with tax benefits. Your IRA can hold a variety of investment vehicles—stocks, mutual funds, bonds, ETFs, etc.

READ: How to Make Investment Selections in Your Retirement Plan by Margery K. Schiller, CFP®

The key: for most long and medium-term investors, mutual funds, ETFs, and individual stocks are the most relevant investment vehicles. Below is some practical guidance for choosing among them.

 

Mutual Funds and ETFs

Mutual funds and exchange-traded funds (ETFs) are mixes of various investments (stocks, bonds, etc.) created and managed by professionals.

Think of them as financial smoothies: instead of buying each fruit and vegetable separately, you buy a serving of a smoothie. In investing, that “serving” is a share of a mutual fund or ETF.

Key benefits:

• Diversification: one investment gives you exposure to many underlying assets.
• Professional management: someone else does the research, buying, and selling.

Both mutual funds and ETFs can be active (trying to beat the market) or passive/index-based (designed to match it). Below are some practical differences:

	Mutual funds	ETFs
Pricing & trading	Priced once per day, after the market closes.	Trade throughout the day like individual stocks, and you can use limit orders (buy/sell only at a specific price).
How you invest	Easy to invest a fixed dollar amount on a regular schedule (e.g., $200 from every paycheck).	Can be used for more active trading or tactical strategies.
Fees & taxes	Low fees.	Similar low fees, and generally allow more control over when you realize taxable gains (usually when you sell).

 

Which is “better”? It depends on your strategy and preferences. For many long-term investors, a simple mix of low-cost mutual funds or ETFs can be an excellent, fuss-free foundation.

How to Choose a Mutual Fund

With so many types of mutual funds (by sector, region, style), it’s easy for your head to start spinning. The answer is not to chase the latest “hot” fund featured in a magazine.

If you don’t yet own any funds, start with broad, foundational funds that can deliver long-term growth and help limit volatility through diversification. A good starting point could be a well-established equity fund (stock-focused), and/or a balanced fund (mix of stocks and bonds).

When evaluating funds, look at:

• Fees: lower is usually better, especially over decades.
• Manager track record and tenure: has the fund been managed consistently over time?
• Fit with your overall strategy: does this fund fill a needed role, or duplicate what you already have?

Once that foundation is in place, you can consider specialty funds (like specific sectors or themes) if they truly serve your goals.

Know what you own (don’t rely on the name). Mutual fund and ETF names don’t always tell the full story. Before you buy, look “under the hood” using the fund’s fact sheet or prospectus to confirm what it actually holds—its mix of stocks vs. bonds, regions/countries, sectors, and major holdings. This helps you avoid accidental overlap (owning the same stocks in multiple funds) and keeps your portfolio aligned with your intended asset allocation. 

Should You Pick Individual Stocks?

People often ask, “Should I buy this stock I heard about?” The honest answer is usually: it depends. Whether an individual stock makes sense hinges on how diversified your portfolio already is, how much money you have invested, your goals, and your time horizon. In many years, the overall market may rise while most individual stocks still fall—as we saw in the late 1990s and again in 2008. That’s why mutual funds and ETFs remain the foundation for many investors: they hold far more stocks than most individuals ever could, making diversification easier and reducing the impact of any one “wrong” pick.

If you do choose to invest in individual stocks, it’s important to understand what you’re buying. For many investors, this level of analysis requires time, expertise, or professional guidance. If you’re not prepared to dig into balance sheets, cash flows, and valuation—or you simply don’t enjoy it—it may be wiser to rely on diversified funds and professional managers.

To learn more about picking individual stocks, the different types of analysis that go into it, and considerations to keep in mind when looking for investment opportunities read How to Think About Picking Individual Stocks by Stacy Francis, CFP®, CDFA®.

Working With an Advisor

You don’t have to navigate all of this alone. Many competent professionals would love to help you clarify your goals and risk profile, build a diversified portfolio, understand your options for taxes and retirement accounts, and stay calm and on track during market turbulence.

A good advisor listens to your goals and values, explains things in plain language, helps you avoid emotional decisions at market highs and lows and acts as a partner in your financial life—not the boss of it.

If you have any questions about investing or any other financial topics, our Volunteer Financial Advisors are here to help with judgment-free, expert advice. Submit your question today on the Savvy Ladies Free Financial Helpline.

5. Putting It All Together: A Savvy Action Plan 

Here’s a step-by-step checklist to put these ideas into action and get started on investing.

1. Get clear on your cash flow and debt.
   • Build a realistic budget.
   • Pay bills on time.
   • Tackle high-interest debt (especially credit cards) as a top priority.
2. Build your safety net.
   • Save 3–6 months of essential living expenses in cash, CDs, Treasury bills, or money market funds. This becomes your emergency cushion.
3. Set your goals, risk tolerance, and time horizon.
   • Name your goals: home, retirement, college, travel, etc.
   • Decide how much risk you’re willing and able to take.
   • Match your investments to how long you can leave the money invested.
4. Choose your asset allocation and diversify.
   • Decide what percentage of your money should be in stocks, bonds, and cash.
   • Diversify across sectors and geographies.
5. Pick practical investment vehicles.
   • Start with broad, low-cost mutual funds or ETFs that fit your allocation.
   • Avoid chasing “hot” funds or stocks.
   • Use individual stocks sparingly, if at all, and only when they fit your plan.
   • Consider ethical or values-based funds that match your beliefs.
   • Work with an advisor if you want more detailed screening.
6. Review and adjust—without panicking.
   • Markets move in cycles; expect ups and downs.
   • Check in on your portfolio at least once a year or when life changes (marriage, divorce, new job, new baby, nearing retirement).
   • Rebalance as needed to stay close to your target allocation.

You Can Handle Your Money With Confidence

Wealth isn’t about chasing the “perfect” stock or trying to time the market. It’s about creating a healthy gap between what you earn and what you spend, putting that gap to work through thoughtful investing, protecting yourself from unnecessary risks and aligning your money with what matters most to you.

You don’t have to do everything at once. Start with one small step—paying off a card, setting up an automatic transfer, reading your first fund fact sheet—and build from there.

With knowledge, a simple plan, and support when you need it, you can handle your money with confidence and create a more secure financial future for yourself and those you love.