Beginner’s guide: how deposits differ from stocks and how to start investing

For many people, investing still seems complicated. When deciding to start investing, the first important step is to have a financial reserve equal to about three to six months of essential expenses, according to experts interviewed by LRT.lt. It’s better to start not by chasing the highest returns, but by choosing the simplest investment method that helps avoid mistakes.

Investing is often seen as “advanced math” — full of numbers, risks, and rules that need to be understood.

According to Miglė Grybinienė, a representative of the crowdfunding platform “Profitus,” investment tools mainly differ in three aspects: type (asset class), level of risk, and expected return.

Main asset classes

The main asset classes are:

deposits / savings accounts
bonds and stocks
ETFs
crowdfunding / peer-to-peer (P2P) lending

A deposit or savings account means you lend money to a bank and receive fixed interest in return.

Bonds are also essentially loans, but in this case you lend money to a government or a company. Interest can be fixed or variable.

If a person buys stocks, they become a partial owner of a company. Returns then come from dividends and changes in the stock price (including possible losses).

ETFs are a “basket” of assets — stocks and/or bonds — allowing you to invest in many companies with a single purchase.

With crowdfunding or P2P lending, investments are usually made through platforms. Investors fund specific real estate projects (crowdfunding) or lend money to individuals (P2P). Returns are typically predetermined, while risk depends on the quality of the project or loan and the collateral.

Risk levels

As mentioned, risk is an essential aspect of investing. As Grybinienė puts it, risk is what remains after you think you’ve considered everything.

“People often think risk means losing the entire investment. But in reality, there are several layers of risk.”

For example, price fluctuation risk is typical for stocks and ETFs: today their value might be down 10%, but in a year it could be up 20% — or vice versa.

There is also credit (default) risk, relevant for loans, crowdfunding, and bonds.
“The borrower may delay payments or fail to repay entirely, triggering a recovery process,” she notes.

Liquidity risk is also important — the ability to access your invested money when needed.
Deposits usually have fixed terms, and crowdfunding investments are typically locked until the project ends (often up to two years).

Stocks and ETFs can usually be sold at any time, though not always at a favorable moment.

Finally, there is platform or intermediary risk — where your money is held, how it is accounted for, and what protections are in place.

Calculating returns

It’s also important to understand how returns are calculated — whether they are fixed or depend on market performance.

“With fixed returns, such as deposits or crowdfunding projects, it’s important to understand how often interest is paid (monthly, quarterly, or at maturity) and whether reinvestment is possible.

Market returns (stocks/ETFs) are not fixed. Time and discipline matter most — results usually depend on how long you hold investments and whether you invest regularly,” Grybinienė explains.

So, investors can choose from several main tools: bank deposits or savings accounts, stocks and ETFs (via a broker or bank), as well as crowdfunding or P2P platforms.

Where to start?

According to SEB bank’s savings and investment services manager Kristina Ruseckienė, the first step is to build a financial safety cushion — about three to six months of essential expenses.

It’s useful to divide money into “three pockets”:

liquid savings (easily accessible, e.g., deposits)
pension savings (second and third pillar funds)
long-term investments for capital growth

For beginners, Grybinienė recommends starting not with the goal of maximum returns, but with the simplest method to minimize mistakes.

“Investing often involves emotions and fear of having no one to consult. It’s worth choosing a platform where you can easily contact support and get answers even to simple questions,” she says.

Possible beginner strategies:

If safety and simplicity matter most — choose a bank deposit
If you want long-term growth and can tolerate fluctuations — choose ETFs rather than individual stocks
If you prefer clear terms and fixed returns — consider crowdfunding or P2P lending

However, Ruseckienė emphasizes that saving in a deposit is not the same as investing. Deposits are for preserving savings and maintaining liquidity, while investing is for long-term capital growth with some level of risk.

“There is no other way to increase purchasing power in the long run than through consistent long-term investing with an acceptable level of risk,” she says.

She adds that ETFs are often the easiest starting point for beginners. With thousands available, investors can use tools to select them — some allow starting from as little as €10.

“This way, you can build a diversified portfolio (stocks, bonds, commodities) at low cost, often tracking a market index such as the S&P 500.”

Passive vs. active investing

In recent years, the difference between active and passive investing has become more widely discussed. According to Ruseckienė, research shows that passive investing often wins in the long term.

“Trying to beat the market requires a lot of time and knowledge. The optimal approach is to invest regularly over the long term,” she explains.

Retail investors often make the biggest mistakes when driven by emotions and market sentiment.

“When people see their portfolio decline, they panic, sell at a loss, and hesitate to return. That’s why it’s crucial to have a long-term strategy and understand that short-term fluctuations are just temporary noise,” she says.

Consider your age

Age is also an important factor in portfolio allocation. Younger investors can take more risk because they have more time, so stocks can dominate their portfolio. Older investors should gradually reduce stock exposure and increase bonds.

Other important factors include financial situation, savings, emotional tolerance (can you sleep when markets fall?), experience, knowledge, and motivation.

“Always consider who you are and what you do. Copying a wealthy neighbor’s strategy can be risky because your situations may differ completely,” she notes.

Risk and return relationship

The Lithuanian Investment and Pension Funds Association (LIPFA) emphasizes that although many investments grow over time, all investing involves risk.

“A key principle is that higher potential returns usually come with higher risk.”

For example:

Stocks may yield around 7–8% annually over the long term, but with significant short-term fluctuations
Government bonds may yield 2–3%, but with much lower volatility

Pension funds are designed to provide long-term financial security. The key rule: investing is a long-term process, not a quick way to make money.

Discipline and consistency matter most — short-term market fluctuations are irrelevant in the long run.