Brokerage account – Sarah Long http://sarahlong.org/ Tue, 30 Nov 2021 14:09:25 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://sarahlong.org/wp-content/uploads/2021/10/icon-44-120x120.png Brokerage account – Sarah Long http://sarahlong.org/ 32 32 How a brokerage account can protect you from inflation https://sarahlong.org/how-a-brokerage-account-can-protect-you-from-inflation/ Sun, 28 Nov 2021 16:00:19 +0000 https://sarahlong.org/how-a-brokerage-account-can-protect-you-from-inflation/ Inflation has been in the news a lot lately, and for good reason. In October, consumer prices were up 6.2% from the previous year. And while this recent bout of inflation has been quite extreme, the reality is that inflation is a perennial threat to the purchasing power of consumers. There are some things you […]]]>

Inflation has been in the news a lot lately, and for good reason. In October, consumer prices were up 6.2% from the previous year. And while this recent bout of inflation has been quite extreme, the reality is that inflation is a perennial threat to the purchasing power of consumers.

There are some things you can do if inflation is making it difficult to keep track of your bills right now. First, you can try cutting back on non-essential expenses, like hobbies and entertainment (this is not an easy thing, but potentially necessary if sustaining those expenses means going into debt). You can also try to get additional help to increase your income and keep up with the rising cost of living.

But there is another important step you can take to protect yourself from inflation over the long term: invest in a brokerage account.

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When you put money in a brokerage account, you can invest that money so that it grows to a larger amount over time. If your investments are performing well, you could earn a high enough return on your brokerage account to exceed inflation. On the other hand, if you leave your money in a savings account, you may not be receiving enough interest to beat the rate of inflation.

Right now, even the best savings accounts pay somewhere in the range of 0.50% interest. Granted, rates are exceptionally low right now, but even if they climb to 1% or 2% in the next few years, annual inflation is usually around 3%. If you only earn 1-2% interest on a savings account each year, you won’t exceed inflation in the long run.

Now, let’s say you invest in stocks through your brokerage account and your portfolio generates an average annual return of 7% or 8%. It’s actually a little below the historical stock market average, and it represents years when the market is doing a lot better than its average return, but also a lot worse. If the general inflation rate over the next 20 years, say, stays at around 3%, but you earn more than double that return on your brokerage account, you will be doing well financially.

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Of course, investing in a brokerage account is not without risk. When you buy stocks, there is no guarantee that you will get the returns we just used in our example, or that you will not lose money. But if you load up on a diverse mix of stocks and hold them for many years, there’s a good chance you’ll get a decades-long financial lead.

Exchange one risk for another

Some people don’t invest in a brokerage account because they think it’s too risky. But it’s important to realize that if you don’t take this risk, you will assume another risk: losing purchasing power in the face of inflation. If you haven’t opened a brokerage account yet, you might want to start researching your options and investing your money to give yourself that edge.


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Hedge fund IsZo says Jefferies ‘hijacked’ his brokerage account https://sarahlong.org/hedge-fund-iszo-says-jefferies-hijacked-his-brokerage-account/ Thu, 18 Nov 2021 15:07:44 +0000 https://sarahlong.org/hedge-fund-iszo-says-jefferies-hijacked-his-brokerage-account/ Breadcrumb Links PMN company Author of the article: Bloomberg News Bob van voris Content of the article (Bloomberg) – Jefferies Group LLC overcharged and then “hijacked” the main brokerage account of its client IsZo Capital Management, the activist hedge fund claimed in an arbitration case. The investment bank withheld $ 5 million of IsZo’s money, […]]]>

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(Bloomberg) – Jefferies Group LLC overcharged and then “hijacked” the main brokerage account of its client IsZo Capital Management, the activist hedge fund claimed in an arbitration case.

The investment bank withheld $ 5 million of IsZo’s money, subsequently reduced to $ 2.5 million, to secure seven short positions in securities that are now worthless, IsZo said in a statement. request for arbitration filed this week with the Financial Industry Regulatory Authority, or Finra.

The dispute erupted in June, when IsZo, which manages more than $ 300 million, attempted to close its Jefferies account and transfer its cash and holdings to another prime broker. Jefferies told the hedge fund that illiquid positions cannot be transferred and should remain open, subject to minimum net equity requirements and collateral, according to IsZo.

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This is a problem that can arise when a short seller is too successful – betting against a company that goes bankrupt, while prime brokers continue to charge fees. In the cases cited by IsZo, the market for these companies’ securities has disappeared, leaving them unable to hedge their position. IsZo calls this “a little more than theft”.

“While these 7 legacy short positions ‘stay open’, Jefferies additionally charges IsZo Capital money on the foreclosed positions that do not exist and he claims he can borrow these funds for next to nothing,” the hedge fund said. .

During a Zoom call in August, Jefferies executives told IsZo that the funds were needed to protect the company “in case any of the stocks trade as ‘meme stocks'” – companies preferred by retail traders who have seen their stocks go wild this year. .

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“Even the bare minimum of due diligence would have revealed that there was no danger of any of the inherited 7 short positions ever becoming a meme stock,” IsZo said in the filing. “The securities – to the extent that they even exist – have no trading market.”

A representative for Jefferies declined to comment.

IsZo is seeking to recover his $ 2.5 million from a Finra arbitration panel. The hedge fund also claims to have been overcharged on the $ 28 million in fees and interest paid to Jefferies during the five years it has maintained his account with the company. He’s looking to recoup some or all of it, on top of the fees Jefferies continues to charge, according to IsZo founder Brian Sheehy.

IsZo says the seven positions include four short positions in stocks in companies that filed for bankruptcy years ago: Capital Corp. of the West, Franklin Credit Management Corp., CPI Corp. and Orleans Homebuilders Inc. Three others are distressed debt positions of Sears Holding. Corp., Massey Energy Co. and Offshore Group Investment Ltd.

The arbitration case is IsZo Capital LP v. Jefferies LLC, 21-02848, Finra Dispute Resolution Services.

© 2021 Bloomberg LP

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How often should you check your brokerage account balance? https://sarahlong.org/how-often-should-you-check-your-brokerage-account-balance/ Tue, 16 Nov 2021 11:32:43 +0000 https://sarahlong.org/how-often-should-you-check-your-brokerage-account-balance/ Online brokerage accounts have made it super easy to log in and check your account balance in seconds. But while it’s tempting to check your investments daily – or even more often – doing so isn’t necessarily the best idea. In fact, it’s a good idea to be strategic about how often you log into […]]]>

Online brokerage accounts have made it super easy to log in and check your account balance in seconds. But while it’s tempting to check your investments daily – or even more often – doing so isn’t necessarily the best idea.

In fact, it’s a good idea to be strategic about how often you log into your broker’s account to see how your investments are doing.

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Signing in too often – or not often enough – to your brokerage account could cost you money

So how many times should you check the performance of your account? For most investors, it is ideal to do this about once every few months.

Registering in your brokerage account once every few months allows you to:

  • Make sure your portfolio is balanced: Often times, some of your investments outperform others and your portfolio may end up focusing too heavily on those investments. This may put you at more risk than you should be exposed to. You’ll want to check your account balances every few months or so to determine if your portfolio needs to be rebalanced to be better diversified.
  • Confirm that you are exposed to the right level of risk: You need a mix of high risk investments that have the potential to produce better returns and lower risk and safer investments. The level of risk you can take will change. As you get closer to when you have to rely on investments to generate income, you become less able to wait for downturns. It is therefore important to check your portfolio about once a year to make sure it matches your current risk tolerance.
  • Reaffirm your commitment to your investments: You want to invest for the long term to maximize your chances of building up your assets. But that doesn’t mean you shouldn’t already sell assets. Checking every few months or so allows you to confirm that you are still confident that the companies you invest in have strong potential for the future.

However, you usually don’t want to check your account balance every day or even every few weeks. This creates an unnecessary risk that you overreact to fluctuations in the price of your investments which may occur naturally in the course of market fluctuations.

Selling assets due to short term market trends almost guarantees that you will end up with a losing investment strategy. It’s because you will almost always react in the end after your stocks have started to fall and could sell for a loss. Or you could be missing out on potential earnings by selling at the first sign of profit when there is a chance to make a lot more money.

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Now, if you know that you can be disciplined enough to avoid making decisions based on short-term price movements and find it fun to check your portfolio, then it’s not necessarily the worst thing in the world to check. more often.

But watch for signs that you are becoming too obsessed with daily performance tracking; are tempted to react to daily movements; or confuse losses and gains on paper with permanent changes in your wealth. If these things start to happen, take a step back and avoid logging into your brokerage account as often as you have.


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How to choose the wrong brokerage account could cost you money https://sarahlong.org/how-to-choose-the-wrong-brokerage-account-could-cost-you-money/ Mon, 15 Nov 2021 14:00:14 +0000 https://sarahlong.org/how-to-choose-the-wrong-brokerage-account-could-cost-you-money/ If you want to invest, you will need a brokerage account. But there are many types of brokerage accounts that you can open, and choosing the right one is crucial. If you make the wrong choice, you could end up costing you hundreds or even thousands of dollars over your lifetime as an investor. Here’s […]]]>

If you want to invest, you will need a brokerage account. But there are many types of brokerage accounts that you can open, and choosing the right one is crucial. If you make the wrong choice, you could end up costing you hundreds or even thousands of dollars over your lifetime as an investor.

Here’s why.

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Choosing the wrong account could be a costly mistake

Choosing the wrong brokerage account could end up costing you money, as some accounts offer tax benefits, but others don’t.

If you’re investing for retirement, for example, you’ll probably want to put your money in one of the tax-efficient accounts rather than a taxable brokerage account. In doing so, you could either receive a deduction for the money you contribute or withdraw money from your account tax-free as a retiree. Your money can also grow over time without you having to pay capital gains on investments every time you sell one at a profit.

The tax savings offered by these retirement accounts can be substantial. Suppose, for example, that you opt for a traditional IRA that allows you to make deductible contributions. In 2021, you can deduct up to $ 6,000 in contributions you make, or $ 7,000 if you are eligible for catch-up contributions if you are over 50. Since you can deduct this amount from your taxable income, provided you meet the qualifications, you will not owe a share of it to the IRS.

If you are in the 22% tax bracket and avoid having to pay taxes on $ 6,000, you reduce your tax bill to as much as $ 1,320. If you haven’t invested in an IRA and instead put money for retirement in a taxable brokerage account, you could end up missing out on this deduction. The $ 1,320 in savings means that your contribution to your retirement account will actually cost you only $ 4,680 due to government funding for the investment.

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It is much easier to invest when you benefit from this tax savings and there is no reason to miss it if you know you are going to use the money you save for your later years. But if you choose the wrong type of brokerage account, that is exactly what could happen.

On the other hand, if you need the money you are investing for any purpose other As retirement, you wouldn’t want to choose a tax-advantaged account like an IRA that has limits on your withdrawals because you would likely be hit with a 10% penalty if you withdraw the money before retirement age. In this case, a taxable brokerage account would be a better bet.

You will also have to choose between traditional accounts which offer initial tax relief and Roth accounts which do not provide tax deductible contributions but allow you to withdraw money tax free as a retiree. If you expect your tax bracket to be lower as a senior, choosing a traditional IRA could provide you with significant tax savings, although the specific amount will depend on the difference in your income. tax rate.

Research each type of account carefully, learn the rules for investing, taxing, and withdrawing, and make sure you choose the account that best suits your needs. This is the best way to make sure that the brokerage account you have chosen is right for you.


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Make these 3 brokerage account movements before the end of the year https://sarahlong.org/make-these-3-brokerage-account-movements-before-the-end-of-the-year/ https://sarahlong.org/make-these-3-brokerage-account-movements-before-the-end-of-the-year/#respond Mon, 08 Nov 2021 13:00:22 +0000 https://sarahlong.org/make-these-3-brokerage-account-movements-before-the-end-of-the-year/ Investing in a brokerage account is a great way to turn the money you don’t use right away into more. These days, many brokerage accounts offer a range of investment options, from stocks to mutual funds to cryptocurrency. If you have money in a brokerage account, it is important to check it several times a […]]]>

Investing in a brokerage account is a great way to turn the money you don’t use right away into more. These days, many brokerage accounts offer a range of investment options, from stocks to mutual funds to cryptocurrency.

If you have money in a brokerage account, it is important to check it several times a year. In fact, now is a great time to take a closer look at your brokerage account. Here are three movements to focus on in particular.

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1. Check your investment mix

It is important to maintain a diverse mix of investments in your brokerage account. If you are too invested in a single segment of the market and that segment takes a hit, you could end up losing money if you have to sell. Having a diversified portfolio can also facilitate wealth growth over time, as you venture into different industries, each of which has the potential to gain value.

But sometimes you can start with a diverse mix of investments and end up with a less diverse one. How? ‘Or’ What? Since the value of stocks fluctuates over time, it is possible that the stocks in your portfolio will gain or lose in value to the point that your investments are less balanced.

Here is an example. Suppose you started with a portfolio of 20% tech stocks. If these tech stocks gain a lot of value in any given year, they could end up making up 50% of your portfolio on time.

Now you might think that’s not a bad thing as it means this segment has seen huge growth. But it also means that your portfolio is now heavily invested in a single segment, which can be risky. In this case, you would want to move some investments for a more even mixture. It’s a good thing to have in your wallet before the end of the year.

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2. Check if the stocks you hold are underperforming

When the stock market as a whole is going through a rough patch, it is possible that all of your stocks will lose value. If the stock market is doing well and only one stock in your portfolio is losing money, that could be a red flag that it’s time to get rid of that specific investment. If you are planning to sell a stock at a loss, it is best to do so before the end of 2021.

Why? Investment losses in a brokerage account can help offset investment gains. If you sell a stock and incur a loss of $ 1,000, but you also sell a stock and make a profit of $ 1,000, you would normally have to pay IRS taxes on that profit. But since that $ 1,000 loss may offset your gain, you don’t owe the IRS anything.

In addition, if you have no gain in your brokerage account, you can use up to $ 3,000 in investment losses each year to offset regular income. If you sell your investment losing this year, you will be able to offset some of that year’s income. Wait until 2022 to incur this loss, and you will have to wait to take advantage of this tax break.

3. See if there is a better account for you.

If your brokerage account has expensive fees, such as fees to complete transactions or inactivity fees for not transacting, maybe it’s time to move your money somewhere else. There are plenty of brokerage options out there that don’t impose these nagging fees, so take some time to do your research if the fees are costing you money.

The end of the year is a great time to take stock, and that includes digging into your brokerage account. It pays to take these steps in the coming weeks so that you can start 2022 on a high note.


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Dave Ramsey says this is how to decide which brokerage account is right for you https://sarahlong.org/dave-ramsey-says-this-is-how-to-decide-which-brokerage-account-is-right-for-you/ https://sarahlong.org/dave-ramsey-says-this-is-how-to-decide-which-brokerage-account-is-right-for-you/#respond Tue, 02 Nov 2021 13:00:34 +0000 https://sarahlong.org/dave-ramsey-says-this-is-how-to-decide-which-brokerage-account-is-right-for-you/ When you open a brokerage account to save for your retirement, you need to decide what type of account to open. For most people, that means a Traditional IRA or a Roth IRA. Making a choice can be complicated, but personal finance expert Dave Ramsey believes there is a key factor that can guide you […]]]>

When you open a brokerage account to save for your retirement, you need to decide what type of account to open. For most people, that means a Traditional IRA or a Roth IRA.

Making a choice can be complicated, but personal finance expert Dave Ramsey believes there is a key factor that can guide you to the brokerage account that’s best for your situation.

Here is that factor.

This is the key to choosing the best brokerage account, according to Dave Ramsey

In “Dave Ramsey’s Guide to Investing,” the personal finance guru provided a clear measure for choosing between traditional IRA accounts and Roth IRA accounts. Ramsey says to take your income and your tax bracket into account when deciding what type of brokerage account is right for you.

The reason? Assess whether your tax rate is likely to increase or decrease.

If you plan to win Following income as a senior than what you earn now, you probably expect your tax bracket to be higher in the future. (People who earn more are taxed at higher rates.) On the other hand, if you plan to earn less With retirement income that you don’t currently earn, you can probably expect to fall into a reduced tax bracket, again due to the progressive nature of the US tax system.

This is not a guarantee, since the government could increase taxes on everyone in the future – even low incomes. This could happen if the national debt gets out of hand or if the government funds programs with higher taxes. Nonetheless, an assessment of future income can give a good idea of ​​the likelihood that your tax bracket will be lower or higher.

Changing your tax bracket is important in choosing a brokerage account for one simple reason: some brokerage accounts offer initial tax relief, while others carry over your tax savings.

If you expect to be taxed at a higher rate today than in the future, you want your tax deduction when you work and invest for your retirement. A traditional or 401 (k) IRA allows you to do this, since you invest with pre-tax funds and then pay taxes when you withdraw the money in retirement. If you downgrade, paying that lower rate in the future would be cheaper.

If the reverse is true and you expect your income and your tax bracket to be higher in retirement, you might want to invest in a Roth. You are now investing with after-tax dollars. You don’t get any tax savings in the present, when you pay a lower rate, but you can make tax-free withdrawals as a retiree – without worrying about paying taxes at your higher rate.

Taking Ramsey’s advice is a good idea in this situation, as considering your current and future tax bracket can help you make the most of your tax savings opportunities. Take some time to think about this question and open the brokerage account that’s right for you.


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Why you should review your brokerage account every 3 months https://sarahlong.org/why-you-should-review-your-brokerage-account-every-3-months/ https://sarahlong.org/why-you-should-review-your-brokerage-account-every-3-months/#respond Sun, 31 Oct 2021 10:32:39 +0000 https://sarahlong.org/why-you-should-review-your-brokerage-account-every-3-months/ One of the smartest ways to grow your wealth is by investing the money you don’t need to pay your bills or fund emergency funds. In fact, it’s a good idea to open a brokerage account and start buying stocks, mutual funds, and any other investment that matches your financial goals and appetite for risk. […]]]>

One of the smartest ways to grow your wealth is by investing the money you don’t need to pay your bills or fund emergency funds. In fact, it’s a good idea to open a brokerage account and start buying stocks, mutual funds, and any other investment that matches your financial goals and appetite for risk.

But building a portfolio of investments in a brokerage account is not the only important step to take. Make sure to check your investments throughout the year. In fact, a good bet is to do a quarterly review every three months. Here’s why.

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It’s all about performance and balance

A great approach to investing is to stock up on stocks and other quality assets and hold them for a long time. This could increase your chances of developing a lot of wealth (whereas if you invest and cash out quickly, you could actually lose money rather than earn it).

If you take this long-term investment approach, you may not feel pressured to check your holdings too often. Suppose your portfolio loses some value from month to month. If you’re investing over a 30-year period, that’s really okay.

At the same time, however, there may be a few investments in your portfolio that are underperforming. And a good way to find out is to do a quarterly review.

It could be that one of the stocks you own will continue to lose value month after month. If this is part of a general stock market downturn, there is probably no need to take action. But if every other stock in your portfolio is gaining in value month after month, you’ll probably want to get rid of the stock that does the opposite. And checking every three months could alert you to a downtrend.

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Another reason why it’s important to check your portfolio every three months is that over time the value of different investments can fluctuate. It is a good idea to maintain a diverse mix of investments. If you have too many investments in the same market segment and that specific segment takes a hit, the value of your portfolio could go down.

For example, let’s say you start with a portfolio made up of 30% tech stocks, but over time those stocks gain so much value that they now represent 50% of your portfolio. This situation likely calls for rebalancing by loading stocks from different market segments or other assets. And doing this quarterly recording could help you avoid a scenario where you are suddenly overloaded in a market segment to a risky degree.

Pay attention to your brokerage account

An investment portfolio is not something you just have to define and forget. Instead, make an effort to review your brokerage account every few months.

Having said that, one thing you not want to do is check your investments every day. The stock market can fluctuate wildly from day to day, and you could stress yourself out by checking your portfolio too often. Plus, seeing your balance drop overnight could lead you to make rash decisions, like offloading inventory before they’ve had a chance to recover from a drop. As such, it makes sense to check in quarterly, but not much more often than that.


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What’s the best way to save for college https://sarahlong.org/whats-the-best-way-to-save-for-college/ https://sarahlong.org/whats-the-best-way-to-save-for-college/#respond Wed, 27 Oct 2021 15:20:17 +0000 https://sarahlong.org/whats-the-best-way-to-save-for-college/ Select’s editorial team works independently to review financial products and write articles that our readers will find useful. We may receive a commission when you click on product links from our affiliate partners. With the cost of college education increasing year by year, many parents plan to pay for part of their child’s college education […]]]>

Select’s editorial team works independently to review financial products and write articles that our readers will find useful. We may receive a commission when you click on product links from our affiliate partners.

With the cost of college education increasing year by year, many parents plan to pay for part of their child’s college education with the money they saved, and then fund the rest with student loans, grants, or grants. scholarships.

Yet most parents end up saving less than they plan on. According to the Education Data Initiative, on average, parents expect to pay about 30% of their child’s college expenses, but end up paying only 10%. If you want to avoid this common pitfall, it is essential to start investing early and choosing the right investment vehicle.

Select spoke with Mark Kantrowitz, higher education expert and author of How to Appeal for More College Financial Aid, about whether parents should opt for a 529 plan, brokerage account, or Roth IRA when saving for the ‘university.

The pros and cons of a 529 account

A 529 Savings Plan, which takes its name from the tax code, is the perfect option to invest for college because of the tax benefits it offers. These state-sponsored investment accounts give people the option to invest in different stock or bond funds, and you won’t pay tax on your investment earnings or when you cash in to pay out. qualified education expenses such as tuition, board and lodging, supplies.

Some states even consider 529 dues to be tax deductible and some give parents a head start in investing for college – New York, for example, gives all public school students $ 100 that is invested. in a savings account 529.

While 529 savings plans have a wide range of benefits, there are a few drawbacks. The money you invest in a 529 should be used for education costs. If not, you will have to pay a penalty of 10% plus income tax on your withdrawals.

There are exceptions to this. You won’t have to pay the penalty fee if your child receives a scholarship or attends a U.S. military academy, says Kantrowitz. So if your child gets a scholarship, you can access the money you saved without having to pay a penalty.

The Pros and Cons of a Roth IRA

Another investment vehicle to consider is a Roth IRA. According to Kantrowitz, a 529 savings plan and a Roth have a lot in common: You won’t be taxed on your investment earnings, and you will be able to make qualifying withdrawals tax-free.

A Roth IRA is typically used as a retirement account, so there are limits on how and when you can use the money. When you withdraw the investment gains from your Roth IRA before you are 59 and a half, you must pay a 10% penalty. If, however, you’ve had a Roth IRA for more than five years and you use the withdrawal for qualifying education expenses, such as tuition, fees, books, and supplies, you won’t have to. pay penalty or income tax.

And if your kid isn’t going to college, you can still use the money for other things, like your own retirement, or even save it so your kid has a good head start on their own savings. -retirement.

The pros and cons of a brokerage account

Brokerage accounts also offer flexibility that 529 savings plans do not. While the money you withdraw from a 529 or Roth IRA plan is to be used for qualifying expenses, you can really do whatever you want with the money you invest in a brokerage.

You might also be tempted to use a brokerage account as it gives you more investment options. You can invest your money in individual stocks, bonds as well as index funds. With 529 savings plans, individuals can usually only choose between a few different equity and bond funds.

There is one major downside to investing your college savings in a brokerage account: the long-term capital gains tax. You could pay up to 20% depending on your tax bracket, says Kantrowitz. That $ 100,000 that you put in for college in a brokerage account might end up being just $ 85,000 after paying taxes on it.

Why a 529 Savings Plan is Better than a Brokerage Account or a Roth IRA (Most of the Time)

Whichever investment vehicle you choose, it’s important to understand the impact your college savings could have on your FAFSA application and your expected family contribution (CEF).

Your CFE is a number used by colleges to determine the amount of financial aid you are eligible for.

You can think of it like this: Colleges decide on a cost of attendance (this usually includes tuition, room and board, as well as books and supplies), then subtract the CFE from the cost of the course. attendance to determine how much financial aid your child is. have the required qualifications for. So if your family has a higher CFE, your child will be eligible for lower aid based on state and federal and institutional needs.

There are a number of factors that go into determining your CEF, but the most important factors are student income and parent income. A parent’s property and a student’s property, on the other hand, are not weighed as heavily. The accounts are also weighted differently depending on whether the child or the parent is considered the owner.

In other words, using certain types of investment accounts to save for college can increase your CEF and decrease the amount of help a child receives because some investment accounts are reported as assets. while others are reported as income.

A 529 savings plan is considered a parent asset, so the amount saved in it only reduces eligibility for assistance by up to 5.64%. For example, if you invested $ 100,000 in a 529 plan, your eligibility for assistance will be reduced to $ 5,640.

While this may seem like a lot of money, consider that a distribution from your Roth IRA could reduce your eligibility for need-based assistance to half the amount of the distribution, as it is reported as income and not as an asset, explains Kantrowitz.

So if you decide to plunder your retirement savings and use $ 100,000 from your Roth IRA to fund your child’s education, you could end up reducing your eligibility for assistance down to $ 50,000, because the Money withdrawn from a Roth IRA is considered parental income. (The value of your IRAs or 401 (k) s is not calculated in your EFC if you do not withdraw money from them.)

For a taxable brokerage account, the reduction in eligibility for assistance depends on the name of the account. If the brokerage account is in the child’s name, it is considered a student asset and will reduce eligibility using 20% ​​of the equity in the account. If the brokerage account is in the parent’s name, it will reduce eligibility for assistance by up to 5.64% of the account value, as it is considered an asset of the parent, Kantrowitz explains.

Overall, a 529 savings plan is the best option for investing for college, but there are still a few exceptions.

“A family may not want to save in a 529 plan if there are serious doubts about whether the child will go to college, whether the parents want a wider range of investment options, or whether the family expects to have to spend money on non-qualifying expenses, ”says Kantrowitz.

If you’re looking to get a 529 brokerage account and savings plan, check out the options offered by Wealthfront, which offers individual retirement accounts, robo-advisers, and 529 savings plans.

If you’re just looking for an IRA, consider a Schwab IRA, Fidelity Investments IRA, or Vanguard IRA (see our full list of the best Roth IRAs). And if you’d rather take Route 529, check out Select’s roundup of the best 529 plans.

Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.


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4 ways to get the most from your brokerage account https://sarahlong.org/4-ways-to-get-the-most-from-your-brokerage-account/ https://sarahlong.org/4-ways-to-get-the-most-from-your-brokerage-account/#respond Sat, 23 Oct 2021 13:00:23 +0000 https://sarahlong.org/4-ways-to-get-the-most-from-your-brokerage-account/ Investing in a brokerage account is a great way to grow wealth over the long term. If you have money that you don’t need to cover your bills and have an emergency fund, you might want to set up a brokerage account to buy stocks, mutual funds and other assets. But it’s important to get […]]]>

Investing in a brokerage account is a great way to grow wealth over the long term. If you have money that you don’t need to cover your bills and have an emergency fund, you might want to set up a brokerage account to buy stocks, mutual funds and other assets.

But it’s important to get the most out of your brokerage account. Here are a few ways to do it.

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1. Buy fractional shares

The option to buy fractional shares was previously more difficult to find. But nowadays, a growing number of brokerage houses are offering investors fractional purchases of shares.

When you buy fractional shares, you own part of a share, as opposed to a full share. Why would you want to do this?

Suppose there is a company that you want to invest in that is trading at $ 500 a share. If you only have $ 250 on hand, you can’t afford a full share. But if your brokerage account allows you to buy fractional shares, you can still get a part of the company that you hope to add to your portfolio.

Fractions of shares can help assemble a more diverse mix of investments. And this is important, because the more diversified your portfolio, the easier it can be to grow your wealth over time. In addition, a diversified portfolio could protect you in the event that a segment of the market is seriously affected.

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See the selections

2. Borrow money to trade

Some brokerage accounts allow you to trade on margin, which means you borrow money to trade. To be clear, margin trading can be a dangerous prospect, and it’s an option best reserved for seasoned investors who understand the risks. But if you know what you’re doing, borrowing money to trade could help you take advantage of investment opportunities when you’re strapped for cash.

3. Put your investments on autopilot

When life is busy, it’s easy to forget to go to your brokerage account and buy stocks for the stocks you want. You can set up recurring investments with many brokerage firms, so that you can effectively put the process on autopilot and reduce your chances of missing out on opportunities.

4. Take advantage of educational resources

Whether you are new to investing or just want to learn more, many brokerage accounts come with educational resources that can teach you more about buying stocks and other assets. Reading investment guides can make buying stocks less intimidating. And in some cases, it could prevent you from making choices that result in losses.

There is a lot to be gained by investing in a brokerage account, but the key is to make sure you get the most out of your account. It’s worth exploring the benefits of your account, whether you’ve opened it recently or have had it for many years.


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Should you open a brokerage account if you don’t have a lot of money? https://sarahlong.org/should-you-open-a-brokerage-account-if-you-dont-have-a-lot-of-money/ https://sarahlong.org/should-you-open-a-brokerage-account-if-you-dont-have-a-lot-of-money/#respond Fri, 22 Oct 2021 11:00:25 +0000 https://sarahlong.org/should-you-open-a-brokerage-account-if-you-dont-have-a-lot-of-money/ If you want to invest in stocks, exchange traded funds (ETFs), or many other types of assets, you will need a brokerage account. There are many discount brokerage firms online, so you will have a wide variety of choices. But if you don’t have a lot of money, you might be wondering if opening a […]]]>

If you want to invest in stocks, exchange traded funds (ETFs), or many other types of assets, you will need a brokerage account. There are many discount brokerage firms online, so you will have a wide variety of choices.

But if you don’t have a lot of money, you might be wondering if opening a brokerage account is worth it. The answer is that it depends on whether you have money that you can afford to lose and whether you have reached certain financial milestones.

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Take care of the basics before opening a brokerage account

Investing in ETFs and building a diversified portfolio of stocks, bonds and mutual funds can offer the potential to generate generous returns. And if you are smart about the way you invest and put your money in solid long-term assets, the risk of major and permanent losses is minimal.

However, investing inherently involves some risk, so you shouldn’t invest money that you can’t afford to lose. As a rule of thumb, you also shouldn’t invest the money you might need over the next two to five years. This is because the stock market goes through cycles and stock declines are inevitable. If you are investing funds that you will need soon, you are too likely to have to sell at a loss at an inopportune time.

For that reason, here’s what to do before opening a brokerage account:

  • Set up an emergency fund with three to six months of expenses
  • Pay off very high interest debt (like payday loans)
  • Have some extra cash that you can use to try and build a more secure future

You don’t need a lot of money to get started

The good news, however, is that you can open a brokerage account and even get started with a very small amount of extra money. You don’t need thousands – or even hundreds – of dollars to get started.

The Ascent’s Picks for Top Online Stock Brokers

Find the best stock broker for you from these top picks. Whether you’re looking for a special sign-up offer, exceptional customer support, $ 0 commissions, intuitive mobile apps, or more, you’ll find a broker who will meet your trading needs.

See the selections

There is an abundance of brokerage firms that have no minimum investment requirements and charge no monthly fees. Most have eliminated commissions on transactions, so you can buy stocks and ETFs without paying a fee. And many allow you to buy fractional shares, which means you can buy partial shares if you can’t afford full shares.

With these brokerage account features, it might be a good idea to open an account once you have as little as $ 5 or $ 10 to invest. You can transfer small amounts of money to your account whenever you have cash available, and you can buy almost any asset you want. You’re not limited to high-risk penny stocks – and if you buy fractional stocks, you’ll earn the same percentage return as any investor, no matter how many stocks they have. possess.

While it might seem silly to open a brokerage account to invest small amounts, the reality is that you can bet that amount and put your money to work for you. Over time, a bunch of small investments can end up being a lot, so it can be beneficial to start once you have some cash to spend. It can be the first step towards a better future.


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