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How To Find The Investment Account That’s Right For You In 3 Stress-Free Steps

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How To Find The Investment Account That's Right For You

When you first decide that you’re finally going to start investing, choosing a brokerage account can be a scary decision.

There’s tons of different options you can choose: From convenient apps, to services that provide a more human experience with face-to-face contact, and everything in between, it’s tough to choose what’s right for you.

And while there may be support in helping you understand how to invest once you choose a service, no one ever shows you exactly how to choose, fund, and ultimately pick a standard investment account.

Chances are though, you already have the skills to choose a standard investment account and you don’t even know it.

Think of it this way: Choosing a brokerage account, opening one, and funding it can be similar to choosing and funding a vacation. 

First, you do some research on destinations and activities, next you might choose a travel agent, or decide to book on your own. Then, you’ll book the vacation and wait in anticipation for the date you set to go on your getaway!

That’s right! The steps are pretty much the same. And while no one is an expert in something the first time they try it, this guide should get you on the right path of choosing and funding the perfect investment account that’s right for you.

We’ll walk you through how to:

  • Research accounts
  • Manage the one that’s best for you
  • Fund it

So, without further ado, here’s how to pick the perfect investment account for you in just three easy steps!

Research

When you embark on your journey to open a standard investment account (or brokerage account), you’ll need to find a method that’s right for you. Be prepared to answer these questions:

  • What is your purpose for this account? 

This is like choosing the side of the world you’d like to see on your vacation. Do you want a relaxing, long vacation with no itinerary? Or do you specifically want to see several areas of Rome and sitesee at every possible moment?

With standard investment accounts, your earnings will be taxable upon withdrawal (unlike qualified withdrawals with retirement or education accounts). So typically these accounts are used as “cushion accounts” not for retirement or education.

They can be long term or short term accounts, and the risk level of your investments should match up with your timeline. So, what’s your goal? Do you have a specific home renovation you’d like to fund in 10 years? Or do you just want to try to beat the market with a short term, hands-on approach to your account?

  • How will you fund the account? 

Next, you’ll choose how much you want to put in the account. Do you want to set aside a portion of your paycheck every pay period? Or contribute to your account in one lump sum and watch it grow over time?

This step will feel similar to deciding on a budget for your vacation. How much are you willing to pay for a little rest and relaxation? Do you want to spend the bare minimum and penny pinch to find the best deals or go big and splurge?

Investing in any amount is generally a great financial practice, but not at the expense of losing your ability to pay your mortgage, or continue paying off small debts. Consider your monthly budget as you plan for your account.

  • How much risk are you comfortable with?

This also has to do with the “goal” of your account. For short term investments, a safer bet might be to buy into more cash investments that hold their value over time.

But if you feel comfortable losing most or even all of your account balance in the pursuit of massive, but short-term growth, you could go with a more volatile option (and most would say that you have a high risk tolerance in this scenario!) For an account built for the long term, again look at the options you’re comfortable with.

If your account were to experience exponential growth in the next 20 years, would that be worth the risk of losing the entire balance? There is always the option of landing somewhere in the middle, and investing in some cash investments as well as higher risk stocks and bonds. This step can be likened to creating an itinerary for your trip.

Is your spouse more interested in parasailing and you really want to just lounge on the beach with a book? One is certainly filled with risk and adventure, and one is more subdued. Choose an investment option that fits with your current risk tolerance.

Account Management

Next on your list of “things to choose” is who will manage your account. This step is like choosing a travel agent, or deciding to book your trip online by yourself.

Obviously, you have the option of managing your account yourself, and closely monitoring your investments. But, for a more “hands off” approach, you can choose whether you are more comfortable with: 

An advisor or a robo-advisor.

Like I said before, you don’t technically have to use either one of these, but if you want a buffer between you and your decision to withdraw all your funds in a panic if the market downsides, a real, personal Advisor might be the best route for you.

If, however, you trust your ability to ride the market highs and lows and make level headed decisions regardless of market climates, a robo-advisor might be a better option. A robo-advisor isn’t an actual robot, or even another way to say you have “no” advisor, it’s a computer algorithm that will provide you with investment suggestions. The pull here is that the fees are low, and the convenience is high.

Whichever option you chose, make sure to take a look at the fees and other expenses involved with your account management strategy. In addition, if there are certain features you’d like to see on your statements or account dashboard, call or chat with your advisor or robo-advisor to see if these options are available.

Check out several different options before you take the plunge to go with your account manager.

Funding

After all your initial research and account management strategies have been sought out, it’s time to fund your account (or book the vacation)!

First, you’ll apply to open the account and provide some personal information to prevent fraud. This information will differ according to the platform you chose to use to hold your account. If you’re making monthly contributions, you can set up a direct deposit from your bank account into your investment account.

If you choose to invest in a lump sum, just go ahead and contribute the total now. At this point, your choice of investment will be called upon and you’ll select in which funds or portfolios you’d like to put your hard earned money.

Monitor & Maintenance

Now that your account is open, funded, and invested, you can sit back, relax, and watch it grow! Again, depending on your risk tolerance, it might be best to leave the account “alone” for long periods of time without being a micromanager.

However, it might be fun to watch the account grow if you can handle the emotional ups and downs! Make sure if any of your personal information changes, you pass this along to your account so you can accurately receive information and statements.

This final step can be much like enjoying your vacation. You reap the benefits of your research and planning, sit back and relax!

Contributor’s opinions are their own. Always do your own due diligence before investing.

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