If you are interested in investing money, you may not realize how many different ways there are to invest. I’m just talking about investing in stocks, bonds, and mutual funds here, not anything fancy like real estate or alternative investments.
To get started investing, you need to open an account. This usually means finding the discount brokerage of your choice, and selecting an account type. This really matters! You can either open a standard brokerage account, or a retirement account. If you open a retirement account, you have another option of either a traditional IRA (Individual Retirement Account), or a Roth IRA.
Remember, if you choose to open a retirement account, you usually cannot access your money again until retirement. If you do, you usually must pay a penalty. I say usually because there are some qualifying circumstances, but in general, just don’t do it. If you plan on accessing your money, go with a standard brokerage.
The other choice you have is between a Traditional IRA and a Roth IRA. A traditional IRA allows you to invest pre-tax money, and pay taxes when you withdraw the funds. This can save you on taxes today. A Roth IRA allows you to invest after-tax money, and you pay no taxes when you withdraw. This can be a good option if you plan on being in a higher tax bracket when you retire.
Options at Work
Beyond opening your own account, you may be able to invest in a 401k or 403b plan at your work. If you do have that option, usually you just have to enroll through your HR, and your company will setup your account for you.
One of the great benefits of these programs is that your company will usually match your contributions to a percentage, which is basically giving you a raise or free money. And, the money in the account is still invested, so you can get returns like you would in the stock market.
Either way, there are many ways to invest your money, and you may already be doing it!