Investment Tip 4: Opening a Brokerage or IRA Account

In the first three Investment Tips, I argued that investing in the markets is critical to wealth-building, and laid out how stocks and bonds work. I received a bunch of questions about accessing the markets so I’ve decided to lay out how to open an investment account.

There are two investment account options: Brokerage and IRA. Both accounts will allow you to invest in the markets; however, the IRA (or Roth IRA) will allow you to invest in retirement, while the Brokerage account is not for retirement and therefore has no tax benefits. The IRA is taxed at retirement (making it tax exempt at the time that funds are added to the account) and the Roth IRA is taxed at the time that funds are added to the account (and is tax exempt at retirement). Both IRA and Roth IRAs has a maximum contribution amount of $5,500 annually.

Researching investment accounts for trading is similar to researching financial institutions for checking accounts: the big companies offer similar products and services. It is important to note that there are a number of start ups in the investment management space today as well. Below I have laid out some traditional as well as new investment management companies.

At present, I have had an eTrade account for 5 years and I recently (two days ago) opened Acorns and Stash Invest accounts; I personally stayed away from the holistic financial planners (Betterment, Wealthfront, and LearnVest) because I do my own financial planning and I have the luxury of obtaining investment opportunities/benefits through my employer.

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There are a number of options that sell the automatic, or “set it and forget it” mantra. I urge you to be an informed investor because it’s your money and, ultimately, only you can be responsible for your finances.

Reach out if you have any questions at TheLucesco@gmail.com.