Where To Invest Money?

So we've answered when to start saving, but here is where to start. First, you must be adequately familiar with the types of accounts you can open for retirement. These are covered in my writings for Individual Retirement Accounts. There are a set of criteria one can use to evaluate whether or not a particular brokerage is right for you.

  1. Low-cost, commission-free funds — Keeping your transaction costs low will allow for a greater return on your investment.
  2. No hidden fees — Account inactivity fees are a real possibility when you’re investing with a 40 year timeline, so it is important your brokerage be very transparent in any costs you incur.
  3. Comprehensive assistance — If at some point you decide to make the switch from index funds to other investment options it is important to know if your brokerage can support you if you have any questions.

At the time of writing, there are a few brokerages that stand above the rest in terms of their ability to help you along the path to financial success.

Scottrade has over 3,000 transaction-free mutual funds. This gives the average investor huge variety in the choices they can make when investing. ETrade has a customer service line that is on 24 hours a day, 7 days a week. There is no account minimum from either brokerage, so you can start investing with as little as $10. These are all great qualities to have and look for when opening up your first retirement account. Remember to ask yourself a few questions.

Is there a fund or set of funds that I can invest in with low cost?
Can someone guide me through opening and managing my account?

I recommend a firm called Vanguard which offers index funds for individual investors. The account minimum for mutual funds is $3,000 and $1,000 for retirement investments such as index funds but the cost is much, much lower when compared to other brokerages. The expense ratio for the average Vanguard fund is around 0.17%, definitely the cheapest option among other brokerages. For investors with a long investment timeline, Vanguard offers great choices for their low-cost stock and bond index funds.

For the investor that wants to automatically deposit a portion of his/her paycheck into a retirement fund, Vanguard is a safe bet. For the slightly more experienced investors who want to dabble in mutual funds, there are a number of other brokerages to look in to.

These brokerages offer a variety of assistance in the form of customer service, research tools, and diverse investments. Regardless of which financial institution you choose to open an IRA with, it’s just important to recognize what factors will affect you throughout the life of your investment.

Keep an eye on the expense ratio, because that’s your cost.

Make sure the fund is diversified, because that’s your risk.

Finally, make sure to always keep contributing, because that’s your future.