Where to Invest Your Money

December 4, 2013

invest your moneyWhere to open an investment account is a commonly asked question of new investors and it’s easy to see why you’d be overwhelmed when trying to decide.

There are a number of options out there, and what you decide should be based on your investing goals, as well as what makes sense for your present finances. Here are some of the most popular options for investing your money, along with a brief overview of the pros and cons of each:

Tax-Advantaged Retirement Accounts

Most people are at least vaguely familiar with the concept of investing in tax-advantaged retirement plans. If you have a “regular” job, chances are that you are investing in a company plan – most likely a 401(k).

The main advantage of investing in a company retirement plan is that often you are able to receive a match from your employer. This is free money that goes directly toward building up your retirement plan. And, of course, you have a tax advantage, either a tax deduction now, or the ability to avoid paying taxes on distributions from your account later.

The biggest problem with company plans is that you might be limited in your plan options. Be careful of putting too much of your money in the company’s stock. That can be a recipe for disaster if your company runs into trouble. Additionally, with a company plan, you might not have access to the Roth option you want, or the fund you prefer is not available in the fund.

You can look at some of these 401(k) investment alternatives in order to get the flexibility and options you want. However, if your employer offers a match, you should at least get that before you invest elsewhere. Other tax-advantaged retirement plans can be used once you have your maximum employer match taken care of.

Mutual Fund Companies

Many mutual fund companies make it easy for you to invest your money. Big companies like Vanguard and Fidelity put together a wide variety of fund types so you can achieve the desired asset allocation of your portfolio mostly in one account.  The great thing about funds is that they can provide you with a way to add diversity to your portfolio without trying to pick individual stocks. Many mutual fund companies even offer ETFs now.

Of course, if you do put all your money in the hands of one mutual fund company then your investing options are limited to the funds offered by that company. Although the many different fund companies and fund options can make it a challenge to compare performance and costs across a lot of funds, it pays to do your research and find the mix that best fits your investing goals.

Something else to be aware of: Choosing actively managed funds can erode your returns due to the fees you’ll pay. Most mutual fund companies also offer low-cost index funds and ETFs that can provide you with the chance to invest for less. Realize, though, that you may not be able to trade individual stocks without opening a specific brokerage account with the company.

Online Brokers

If you are looking for a wider range of investment opportunities, online brokers can probably give you more options than a mutual fund company or your company retirement plan. You can usually get access to mutual/index funds, individual stocks, ETFs, and options with the help of an online broker.

In addition many online brokers have IRA options, so you can open a retirement account with the broker.  The nice thing about this approach is that it typically gives you access to more types of investments for your retirement money.

Here are some of the things to consider when you’re looking at choosing an online broker:

  • Commissions & Fees
  • Investment Products & Mutual Funds
  • Customer Service
  • Trading Tools
  • Banking Services
  • Research

Several major personal finance magazines like SmartMoney and Kiplingers publish annual broker reviews where they test out each brokerage and rank them on these and other factors. Whether you’re looking for cheap online trades, the ability to consult with a professional over the phone, or some periodic face to face time – one of these surveys will probably give you some guidance to help evaluate the discount brokers and which would be best for you.

Where to Invest?

What you choose depends on your investing needs and your comfort level with evaluating and choosing investments. Of course you’re not limited to just one of the above options, many people have money in retirement accounts at work, mutual fund companies, and with an online broker.

For example, if you’ve already maxed out your retirement accounts, and you are looking for a way to trade individual stocks, an online broker can be a great option. A mutual fund or online broker can also be a great supplement to your company plan – especially if you aren’t particularly impressed with the offerings.

Whatever mix you choose, it’s worth the time it will take you to write down what you’re looking for in an investment account and then compare your options. Doing your research can result in lower fees and more investment choices so be sure to put in the time when choosing the best investing account for your money.

Where else can people invest their money? Where do you invest yours? Leave a comment!

This article was originally published June 18, 2011.


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Miranda writes about personal finance almost every day. An experienced freelance writer, she's covered your money online and in print from every angle and is always looking for new ones.

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10 Responses to Where to Invest Your Money

  • Debt BLAG

    Mine solely go to tax-advantaged vehicles. When you count the 401(k), IRA, 529, and HSA, I’m pretty sure I won’t be bumping up against the max any time soon

  • Christina Thomas

    what about endowment policies? When done carefully, they can leave you with alot more money than you invested. Is’nt that the goal of all investment vehicles

  • Keith Springer

    Things are getting pretty bad out there and the government isn’t even coming close to addressing the core problem. Without government stimulus, the economy will continue shrinking. The issue is clear – when the Fed stops printing money it is the exact same as implementing a monetary tightening program! But none of that solves the main issue.

    The normal demographic cycle of our rapidly aging population, which naturally spends less as people get older coupled with a massively over-leveraged population, is going to continue to be a drag on the economy. Given what is going on right now, investors need to understand where we are and where we’re going so they can not only protect their money, but also profit from it.

    Keith Springer, Author
    Facing Goliath – How to Triumph in the Dangerous Market Ahead

  • Bret @ Hope to Prosper

    Well written Miranda.

    I just wanted to add that most investors should consider investing in both a retirement and a non-retirement investment, based on your goals. For example, you may want to save in a taxable investment for a house. That way, you won’t get hit with penalties when you need the money for a down-payment.

  • Sun

    I like the Idea of a broad index fund. The reduction in administrative fees mean you get to keep more of your money. When the google engineers received their stock options, they were advised to go index funds.


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