drunkenbeagle
Gang Member
Lots of topics here about investment advice, and the guidance from @ATN_Pilot and the chief beagle probably sounds like a broken record. That stated for the record, I realized that it would be good to explain how one would actually do this, as it is more complicated in practice than it should be.
1. What type of account?
In nearly all cases, if you want to put away money outside of a 401k and you make less than 60k/year, you want a ROTH IRA. If you make more than that, you probably still want a Roth IRA, but an ordinary brokerage account is fine too. In any case, open both types of account. They are handy to have.
2. Where to open the account?
Anyplace with low fees. In the modern era, there is no reason to pay a dime in commissions or fees for any of this. Fidelity, Schwab, ETrade and TD are all generally good, but you need to look at the fees carefully. Any retail bank you have a checking account with is probably a ripoff, as is anyplace with an investment advisor (Edward Jones, Chase, etc, even worse)
3) What to buy.
We say index equity ETFs without explaining that much. These are like mutual funds, but they trade on the stock market like stocks. They are also better for taxes for other reasons, and we are really only concerned with a few of them. When you read S&P 500 index, this isn't actually something you can buy. The SPY and SPX are the most well known ETFs that track the S&P500, but not generally the best choice to own directly. Every major investment house has some clone of the SPY. Blackrock calls theirs the IVV, Vanguard calls theirs something else. You need to find the one that has zero commissions, and use a brokerage account that offers that.
4) How to buy.
No one working for a bank will ever tell you the right way to buy these things. There are a few order types on Wall Street. The only one to ever use is called a limit order. This means that you specify a price and quantity of something you want to buy. When they find it at that price, they try to fill the order. Say the SPY is at 2112 and you enter a limit order for 2 shares at 2090, good til cancelled. The order will sit there until it trades in that range. A market order (the default), would probably fill at 2114. Because they will cross the spread and fill your order at a higher price.
Always always always buy and sell with limit orders. My buy orders normally sit for a few weeks waiting for the market to swing lower. This alone will boost your returns by a percent or two, which is huge.
(The market is rarely always going up, it is usually flat and you are not missing out buying this way. This is also the opposite of how 401ks work)
1. What type of account?
In nearly all cases, if you want to put away money outside of a 401k and you make less than 60k/year, you want a ROTH IRA. If you make more than that, you probably still want a Roth IRA, but an ordinary brokerage account is fine too. In any case, open both types of account. They are handy to have.
2. Where to open the account?
Anyplace with low fees. In the modern era, there is no reason to pay a dime in commissions or fees for any of this. Fidelity, Schwab, ETrade and TD are all generally good, but you need to look at the fees carefully. Any retail bank you have a checking account with is probably a ripoff, as is anyplace with an investment advisor (Edward Jones, Chase, etc, even worse)
3) What to buy.
We say index equity ETFs without explaining that much. These are like mutual funds, but they trade on the stock market like stocks. They are also better for taxes for other reasons, and we are really only concerned with a few of them. When you read S&P 500 index, this isn't actually something you can buy. The SPY and SPX are the most well known ETFs that track the S&P500, but not generally the best choice to own directly. Every major investment house has some clone of the SPY. Blackrock calls theirs the IVV, Vanguard calls theirs something else. You need to find the one that has zero commissions, and use a brokerage account that offers that.
4) How to buy.
No one working for a bank will ever tell you the right way to buy these things. There are a few order types on Wall Street. The only one to ever use is called a limit order. This means that you specify a price and quantity of something you want to buy. When they find it at that price, they try to fill the order. Say the SPY is at 2112 and you enter a limit order for 2 shares at 2090, good til cancelled. The order will sit there until it trades in that range. A market order (the default), would probably fill at 2114. Because they will cross the spread and fill your order at a higher price.
Always always always buy and sell with limit orders. My buy orders normally sit for a few weeks waiting for the market to swing lower. This alone will boost your returns by a percent or two, which is huge.
(The market is rarely always going up, it is usually flat and you are not missing out buying this way. This is also the opposite of how 401ks work)
Last edited:
. (Not a joke - awesome people, highly recommend going)
