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Deciding whether to invest your hard-earned money can be tough. You don't want to lose it, and navigating the market can feel intimidating.

In fact, millions of Americans have money they could invest, but don't. A recent survey from YouGov found that 45% of respondents with savings of at least $1,000 weren't willing to invest any of it in the next year. Even among those with over $20,000 saved, reluctance was widespread: only 1 in 5 of them would put more than a quarter of their money to work.

When asked why they avoided investing, the reason people gave most was simply not having the money to spare, the survey showed. And that's a practical tradeoff for anyone who wouldn't otherwise have a solid savings buffer for unexpected expenses.

But others said they were holding off because they're scared of losing money, don't trust financial providers or markets, or aren't sure they know enough about investing.

The thing is, there are real downsides to not investing your money, too. When you keep too much of it in cash, you may significantly limit your potential to build wealth.

So what can you do if you want to invest but feel hesitant? Getting clarity on these three questions can be a great place to start.

How can you manage the risk?

It's completely normal to worry about losing money in the markets. Unlike a savings account, investments can lose value and aren't federally insured. But that doesn't mean you have to take wild gambles. To help manage your risk, consider:

•   Defining your timeline: The longer you can keep your money invested, the more time you have to potentially ride out volatile periods in the market.

•   Diversifying your investments: Putting all your eggs in one basket — buying a single stock, for instance — can be viewed as riskier than spreading your exposure out across a broad set of investments. And this can include multiple asset types (e.g. stocks, bonds, commodities) as well as multiple assets. Some investors put money into an index fund that reflects a “basket” of stocks or bonds representing a specific market or area of the economy.

•   Identifying your comfort level: Everyone has their own tolerance for risk. If the idea of losing money keeps you up at night, consider a more conservative portfolio with lower-volatility assets like U.S. Treasuries or money market funds.

What is the cost of waiting?

With investing, time can be a powerful ally. The longer you're invested, the longer you have to weather what are hopefully temporary declines in your investments. The S&P 500 Index, for instance, has had huge year-to-year swings, but historically, the average annualized return over time is around 10% before inflation and 7% after.

Plus, the longer you're invested, the more compound growth can potentially work in your favor.

Compound growth is an important concept. Some would say it's like a snowball that gets bigger and bigger as it rolls down a hill.

As an example, let's say you start investing with $1,000 and it earns 10% — $100 — your first year. Now you have $1,100, and your extra $100 can grow along with your original $1,000. If your investment continues to earn 10%, by year two you'd have $1,210, and after 10 years, your account would have more than doubled to almost $2,600. (Keep in mind that actual investment returns vary and can be negative.)

By giving your investments more time to potentially grow, starting earlier may also make it easier to reach your goals. The Securities and Exchange Commission uses this example (assuming a hypothetical 7% annual return): If you want to have $500,000 by the time you retire at 65, you only need to devote $209 a month if you start investing at 25. But if you start at 35, you need to invest more than double that ($441 a month), and if you start at 45, over $1,000 a month.

There's also the inflation factor: As prices rise over time, they erode the value of our dollars, and in turn, our purchasing power. With cash savings, if inflation outpaces any interest earned, the same dollars may buy less over time.

Where might you begin?

If making the first move makes you nervous, start small and stick to verified channels. An employer that offers a 401(k) could be a great place to start, especially if they match contributions.

Then, if and when you're ready, consider opening a brokerage account. You can always use the SEC's Investor.gov or FINRA's BrokerCheck to look up certifications and licenses, and whether a platform or investment professional has any past violations.

Related Reading

Common Questions About Investing — Answered (SoFi)

Ten Things to Consider Before You Make Investing Decisions (Securities and Exchange Commission)

6 Steps to Investing Wisely (California Department of Financial Protection & Innovation)

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