The simple guide to start investing today

Stashing cash in a high-yield savings account is the smart thing to do with your emergency fund. You want that cash “liquid” (i.e., not tied up in investments) so you have it right when you need it.

(This is Day 12 of the 31-day Wealth Challenge. You can start from the beginning by signing up for our daily email newsletters), or see the challenge here.)

But once you’ve built that emergency fund to 3 to 6 months of necessary expenses, you should consider investing. With very few exceptions, the stock market outperforms even the highest savings account interest rates. In other words, you make more money from your money if it’s invested versus saved.

Right now, America basically has two economies: the one for people whose money is making money, and the one for people who are paying to borrow money. 

The first category, the asset holders, have been having a great run. They refinanced mortgages or bought homes when rates were low, their investments have benefited from the stock market’s historic repeated highs, and their savings are raking in solid interest.  For the second, interest rates on debt keep climbing, rent keeps going up, and inflation has brought bills sky-high. 

You want to be in the asset holder category. Investing is how a lot of those people have gotten there.

If you’ve never invested before, or if your only investments are your retirement accounts, it might feel like lighting your money on fire. All investing comes with risk. That’s why you don’t invest your emergency fund — you might need it when the market is down.

But you don’t have to be an expert to make money on the stock market. There are things you can buy called index funds that aren’t all in one company’s stock. The risk and rewards are spread over many stocks.

You can start small. Even if all you can afford is $25 or $50 right now, it’s still worth establishing an account and getting that money in the market. You’ll be able to see how fast it grows, and you’ll have the account ready to go if you ever get a windfall and want to make the most of it.

Most investors are not day traders making stock picks. A “set it and forget it” approach is a good way to grow a nest egg without stressing about individual corporate shareholder earnings reports. If you want to get more involved with your investments, that’s great, and there’s a ton to learn — but this is just a guide to getting your first toehold in the market.

You don’t need a financial adviser to get started, either. Whichever platform you pick will undoubtedly try to sell you on one. Advisers pick stocks, so their funds might perform a bit better. Or worse. And the advisers typically charge a set percentage of your total investment value annually for their services, or a flat fee. If you are starting small with your investments, I’d skip an adviser for now.

This is your simple guide to a fast, easy start in investing.

Pick the business that will get your business. You’re selecting what’s known as a “brokerage”: The company that brokers (goes between buyer and seller) stock sales and purchases. 

Your bank might offer one (mine does, and that’s what I use). If you already have a 401(k) or IRA, it’s likely through one of the major financial players, and they will be more than happy to let you create another account for regular investing. That’s probably the fastest and simplest way to get going. But there are many other options on the Internet — NerdWallet has a good rundown of your options. 

Look at the fees and minimum investment amounts; plenty let you make your account with $0. If you’re starting with very little money in your account, find a brokerage that lets you buy what are called “fractional shares” — a fraction of the stock, if you can’t afford the price of a full share. Most brokerages allow this.

Even a small opening investment is a good start. In addition to your starting balance, figure out if there’s a dollar amount you can commit to contributing every paycheck or every month. Just like your savings, these things are built brick by brick, not overnight. If you’re ambitious, you can automate monthly or bimonthly transfers from your regular bank account to your investment account.

Broadly speaking, you should plan to leave your money in the market for a long time. Trying to pick stocks you think are about to explode is how lots of people have lost money investing. But you might choose different investments if you’re planning to use the money for something a few years from now, for instance, versus if this is money you don’t think you’ll touch until retirement.

Remember that when you sell your investments, you’re responsible for the tax bill.

If this is your first stock purchase ever, I’d go with a low-cost index fund. Index funds are made with a blend of stocks and other investments intended to mimic how the overall stock market is doing. Search for “low-cost index funds” – here’s NerdWallet’s overviews of the most popular ones – and pick one. You won’t go far wrong. There! You’re investing!

Some things to consider if you want to make more detailed picks: If you hope to sell some investments in the next few years to fund a big purchase like a house, you might want to pick stocks with a potentially higher rate of return. If you’re planning these investments as part of your retirement plan, there are what’s known as “target date funds” that are intended for you to pick the year you hope to stop working. 

Reach Jessica Roy: Jessica.Roy@sfchronicle.com