3 Reasons You Shouldn't Be Scared to Start Investing in a Brokerage Account

Worried about investing? Here's why you shouldn't be so nervous.

If you have a pile of money set aside for emergencies -- things like surprise medical bills, home and car repairs, or a period of unemployment -- then it's important to keep that cash tucked away in a savings account. But if you have money you don't expect to need for many years, then it pays to open a brokerage account and invest it.

When you invest money, you have the potential to grow it into a much larger sum (whereas if you leave all of your cash in a savings account, you may get stuck earning minimal interest for years on end). But there are risks involved in investing -- such as losing money if you choose stocks or other assets that end up declining in value.

If you're new to investing, you may be scared to start buying stocks and opening yourself up to potential losses. But here's why you shouldn't be nervous.

1. You can start slowly and build up over time

If you've never invested before, it's understandable that you wouldn't necessarily want to throw $20,000 into a brokerage account and start buying stocks. But you don't have to do that. Even if you have the money, if the idea of investing a large sum at once makes you nervous, don't do it. Instead, invest $1,000 and see how it goes. Once you're comfortable there, you can add another $1,000 to your account, and then another, until you've worked your way up.

2. You can minimize your risks by diversifying

No matter how you invest your money, there's some degree of inherent risk. But you can minimize that risk by assembling a diverse mix of investments. If you buy stocks across a range of market sectors (for example, some tech stocks, energy stocks, healthcare stocks, and bank stocks) and one or two specific sectors tank, your portfolio value might dip -- but not necessarily to a frightening degree.

3. You can choose exchange-traded funds if you're nervous about hand-picking stocks

If you're new to investing, the idea of having to choose stocks could be daunting. However, a lot of brokerage accounts now offer educational resources that teach you how to buy stocks and vet companies. But if the idea of that still doesn't sit well with you, you can start out by investing in ETFs, or exchange-traded funds, instead.

When you buy shares of an ETF, you're effectively buying a whole bucket of companies at once. There are different types of ETFs you can add to your portfolio, but if you're a nervous newbie, you may want to look at S&P 500 ETFs. The S&P 500 is an index that consists of the 500 largest publicly traded companies, so buying shares of an ETF that tracks that index means effectively buying a piece of 500 different major companies -- without having to research any of those companies individually.

Investing for the first time can be intimidating -- but it doesn't have to be. And the sooner you open a brokerage account, the sooner you can begin growing long-term wealth.