Your step-by-step roadmap to opening an investment account
You’ve heard us say this enough times: the silver lining to the pandemic is the “buy low, sell high” investment opportunity. Compared to high stock prices when the economy was hot, now is a great time to “get into the market” and ride the wave up once the COVID clouds pass. You’ve also heard us say: it's not as hard as you might think!
To cover your bases because life comes at you fast, can you check these 3 boxes?
✅ Do you have enough liquid cash (liquid = easily accessible) to cover monthly bills? This means covering rent, groceries, insurance, transportation shouldn’t give you anxiety.
✅ Are you big-debt free? Student loans or credit card interest (if you’re behind on monthly credit card bills) always have hefty interest. Deploy extra money to pay that down first.
✅ Is that Emergency Fund saved up? Stash away money that equates to 6 months of your living expenses for really rainy days.
If you answered “YES” to all the above, you are good to go.
Robo Advisors: Their selling point is algorithms. You take a questionnaire about your money situation, risk appetite - basically a Buzzfeed personality quiz. The robo’s algo then decides on a “basket” of investments for you. A great option for beginners since you get plenty of diversification without making specific investment decisions.
Pros: Simple, inexpensive, easy
Cons: No choice in what you want to invest in
Options: Betterment, Ellevest, Wealthfront
Online Advisors: Consider it the “traditional” way of investing, but better user experience than what your parents had. Using the detailed info they have on their site (like this on Vanguard), you pick the funds/ETFs to invest in.
Pros: Tons of options, you take your pick of investments
Cons: Takes a little time to understand what you’re reading
Options: Vanguard, Charles Schwab, your own bank (look on your bank’s app)
Not a whole lot! You’ll need your personal info like name, address, and social. The only question you may not have the answer memorized for is what TYPE of account you would like to open. That’s what we’re here for.
ANSWER - The 2 types of accounts you should be considering:
IRA
Individual Retirement Account. Money invested here cannot be touched (without a penalty) until you turn 59. Since that’s not right around the corner for you, money invested here is for long-term investments.
Individual account
A general investment account that’s yours to access anytime. If you think you would need to touch your investments — maybe for a wedding or house — 5-10 years out, you want this type of account.
Step 1: Transfer that dollar into your shiny new investment account
This is just like when you set up Venmo. Look up (in your online banking profile) your bank account info (account number, routing number) so you can link your bank account to your investment account. Makes it easy to transfer money back and forth between the two.
Step 2: Pick your investments (if you’re NOT doing the Robo Advisor route)
Some people still think investing means stock-picking. No, you do not need to be a trader to start building wealth. Because most of us are NOT Warren Buffet, the way to invest for the long term is through Exchange Traded Funds (ETFs).
Pre-made baskets of stocks that invest in wide-ranging industries. Offers you an immediately diversified portfolio without being an expert. Diversification means unrelated sectors that shouldn’t move on the same rollercoaster tracks so reduces the volatility of your overall investments.
Making it real…
If you invest in the Vanguard Total World Stock ETF, you’ve automatically invested in THE WORLD - a basket of companies in both well-established (e.g. U.S.) and still-developing markets.
Don’t psych yourself out by thinking you have to set up an account and invest in it all in one day. Break it up. Making investment moves is easier than TikTok moves. And if you REALLY want to pick a few individual stocks to invest in, stay tuned -- we’ll talk you through what to look for.