Pros & cons of where to start an investment account

When we discussed how it's not hard to get started with investing — even as a student or newbie — your mind went to where and how. We said step 1 is to open an investment account; you asked us to break down the options.

Q: How do I choose a place to try investing?

There are apps, but they’re not the only option. There are also companies that are “robo-advisors”, using algorithms to auto buy your investment portfolio in and out of companies and positions. Then there are also the traditional brokers (though don’t snooze at the word “traditional” because they’re innovating tool!)

3 MAIN PLACES TO INVEST:

Is it really this simple? Is anything?(Though we think MoneyGirls is the best in the biz at simplifying) Investing companies blur the lines between these categories, so it’s not perfect lines we’re drawing above! For example...

Robinhood is known for commission-free trading, but traditional companies like Schwab now offer it, too.

Jargon Alert:
Commission-free trading = fancy talk for “you’ll pay $0 to buy/sell stocks or ETFs.” (Brush up on more investing jargon here).

Different apps have different selling points. Robinhood’s is $0 trades. Acorns’ rounds up your purchases by a few dimes to invest the difference, so no one gets rich here but it’s a mindless way to put a little $ to work to earn you extra $.

Most investment companies now have apps — even stodgy ones. Our “apps” category is shorthand for “So easy you can do it with one thumb.” But robo-advisors are fairly easy, too, and traditional brokerages are constantly simplifying so they can attract new investors like you (read: young; future higher earners!).

Q: So how do I choose a company to invest my money with?

Figure out which features you care about, then look for the company that aligns with what’s most important to you and ignore the rest. Some features we care about:

Fees: Compare management fees (a small % of your invested money that they take to allow you to invest, fairly standard with minor amount differences) and commissions (fees charged when you buy/sell).

Account types: Do they have IRA accounts (not taxed today), or only taxable investment accounts (to house your ETF or Peloton and Disney stocks).

Account minimums: With some companies like Robinhood, you could theoretically start with $1. But others require a minimum ($100 or $500) to start.

Investment types: Do you want stocks? ETFs? Bonds? Online brokers offer all of these, but apps are more limited.

Q: That’s a lot. What if I have questions?

Ask us! We are JUST GETTING YOU STARTED. If you only absorb 10% of this, you’re doing better than yesterday!