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Investing Basics

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Investing Principles

Schwab believes there are seven investing principles that can help you reach your long-term goals. Understand these, and you'll be off to a great start.

  1. Establish a financial plan based on your goals.

    • Be realistic about your goals.
    • Review your plan at least annually.
    • Make changes as your life circumstances change.
  2. Start saving and investing today.

    • Maximize what you can afford to invest.
    • Start early—length of time in the market is key.
    • Don't try to time the markets—it's nearly impossible.
  3. Build a diversified portfolio based on your risk tolerance.

    • Know your comfort level with temporary losses.
    • Understand that asset classes behave differently.
    • Don't chase past performance.
  4. Minimize fees and taxes.

    • Markets are uncertain; fees are certain.
    • Pay attention to net returns.
    • Minimize taxes to maximize returns.
  5. Build in protection against significant losses.

    • Modest temporary losses are okay, but recovery from significant losses can take years.
    • Use cash investments and bonds for diversification.
  6. Rebalance your portfolio regularly.

    • Be disciplined about your tolerance for risk.
    • Stay engaged with your investments.
    • Understand that asset classes behave differently.
  7. Ignore the noise.

    • The press makes noise to sell advertising.
    • Markets fluctuate.
    • Stay focused on your plan.

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