Best Investment Accounts
There are different types of investment accounts available to the average person. One can simply trade stocks, invest in mutual funds directly, open a retirement account, or invest passively through robo-advisors. The choice of investment account depends on your financial goals, your reason for investing, and your style of investing.
#1: Brokerage Accounts
If you are someone who likes taking control of your investments and doing the research yourself, then a brokerage account will work well for you.
There are full-service brokerages as well as online brokerages that offer a host of investment opportunities and services.
As long as you are willing to put in the time and effort to make and manage your investments, the brokerage option gives you total control over your investments.
Some of the top brokerage options are:
Ameritrade is one of the top online discount brokers. It allows you to open an account with no minimum balance requirements. Charges for each trade are $6.95.
There are plenty of learning tools like online courses and demos that teach you how to trade stocks. Ameritrade does not charge any commissions on trades.
Ameritrade offers investment opportunities in stocks, mutual funds, ETFs, futures, options, and even cryptocurrencies.
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If you want a full-service broker and willing to pay a bit more for a higher level of customer service, then Fidelity is one of the giants in the asset management industry.
Fidelity itself manages thousands of mutual funds and using its platform gives you the chance to easily invest in them. In spite of being a full-service broker, the per-trade charge is quite competitive at $4.95.
There are plenty of index funds that you can invest in as well if expense ratios matter to you. Certain funds, however, require a minimum purchase of $2500. Fidelity offers a good balance of DIY and professional support.
If trading at high frequency is what you want to do to generate wealth, then E-trade is one of the best options.
The trading fee on stocks is zero. The trading fee on options is also zero plus a $0.5 fee per contract. You cannot beat zero fees especially if you trade every day or multiple times in a day.
Besides options trading, E-trade also offers access to investment opportunities in 250 no-commission ETFs and 4000 no-transaction-fee mutual funds.
E-trade also offers checking and savings accounts for parking money which you make from your trading activity.
Ally Invest is a great low-cost brokerage option. It charges no inactivity fee or annual fee. Trading fees are $4.95 per trade. However, they drop to $3.95 if you trade 30 or more times in one quarter.
Ally Invest runs promotions where you can get $50 to $3500 for opening a new account and bringing in deposits. It is a good option for those who like to do their own investments be play an active role.
#2: Retirement Accounts
If you are planning to invest your hard-earned money for retirement planning, then you need to consider opening a retirement account. Once you stop working, your salary will also stop.
Therefore, you need to make provisions so that you get enough income to enjoy your “golden years”.
The benefit of opening an IRA account (retirement account) is that you get tax deductions when you make contributions from your paycheck or you can get tax-free withdrawals when you ultimately retire and start using the fund which you have created in your IRA.
A traditional IRA allows deductions while a Roth IRA allows tax-free withdrawals but no deductions. Retirement accounts allow the account holder to invest in a variety of asset classes such as stocks, bonds, and mutual funds.
Some of the top IRA account providers are:
TD Ameritrade is not just a famous online broker. It also offers traditional and Roth IRA accounts.
You can open an account with no minimum balance condition. Ameritrade also has offers running where it provides a few hundred dollars of credit to new customers.
Ameritrade offers plenty of online tools that users can use to research investments. There is also a tool that helps you figure out whether you should opt for a traditional IRA or a Roth IRA.
Retirement advisors are available on the phone to answer any questions. Users who like a hands-on approach to their IRA will appreciate Ameritrade for all the self-help tools that it offers.
Those who want a higher level of customer service, round-the-clock phone support, and in-person interaction can have a look at Charles Schwab. It has an online presence as well as physical branches. It is a well-known brand name throughout the US.
One needs a minimum balance of $1000 to open an IRA account at Charles Schwab. However, if you commit to a monthly contribution of at least $100, then the minimum requirement is waived.
Commission wise, Charles Schwab compares favorably to many of the other online brokerages and investment service providers. It charges $4.95 per trade as opposed to $6.95 and there are plenty of commission-free ETFs and mutual funds to choose from.
Being a large company, Charles Schwab also offers research reports, conducts workshops, and has robo-advisory products for passive investors. Charles Schwab is a full-service provider.
If you are a millennial or someone who is comfortable with technology, then Wealthfront has IRA options that work on a robo-advisory model. The algorithm-driven technology conducts asset allocation without much human intervention.
The fees are also low as a result (0.25%) and there is even a referral program. Depending upon the number of referrals that you bring in, you get extra credit to invest.
Wealthfront has a neat retirement planning tool that takes into account inflation, your social security, and multiple other parameters to give you a snapshot of what your retirement will look like financially.
Wealthfront is a great option for someone who finds finance to be too technical and simply wants a passive hands-off approach to retirement investing.
In the age of artificial intelligence and machine learning, the investing world has also been making use of technology in a big way.
There are now algorithms that decide investments and asset allocation. These algorithms use lots of historical data to backtest strategies and optimize themselves.
It is a great option for investors who want to follow an “invest and forget” approach and save on management fees and expenses.
Some of the top robo-advisors are:
Betterment is one of the leading robo-advisors. It uses highly optimized algorithms to strategize and manage investments based on your financial goals. Technology drives down costs and Betterment charges only 0.25% in yearly fees. No minimum balance is needed.
Cost-conscious customers can simply allow technology to do the work for them. The starting Digital Level plan offers investment services for balances as low as $10,000. The fee for such balances is 0.35% while for balances between $10,000 and $99,000, the annual fee is 0.25%.
For those who want some human touch, there are options to avail of the services of investment experts and certified financial planners. The premium plan, with such add-on features, requires $100,000 in minimum balance and charges a fee of 0.4% annually.
If you really are on a budget and cannot maintain balances of $10,000, then Wealthfront is the most economical robo-advisor.
Wealthfront charges no annual fee for the first $10,000. Once the balance goes above that level, a 0.25% fee kicks in. A minimum balance of $500 is needed to open a Wealthfront account.
You can even open IRA, Roth IRA, and SEP retirement accounts with Wealthfront.
This option is great for beginners who just want to figure things out and get their hands wet in a low-cost way. Students and parents can also start out on Wealthfront with a 529 college savings plan.
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