So you’re thinking it’s time to open an IRA? That’s great news! An individual retirement account (IRA) is an excellent option. It will give you tax benefits as you save for retirement.
Opening an IRA can seem like an intimidating process. But it’s really pretty simple. Here, we’ll detail the six steps you need to follow to get it done.
How to Open Your First IRA
1. Make the Roth vs. Traditional Decision
Before you can open an IRA, you need to make one major decision: Roth or traditional.
A traditional IRA is one that lets you put in pre-tax dollars. You take a tax write-off in the year of contribution (assuming you’re eligible). You don’t pay taxes on the returns that accrue in your account. But you’ll pay income taxes on withdrawals during retirement.
With a Roth IRA, you contribute after-tax dollars to the account. But when you withdraw the money, you don’t pay any taxes.
Not everyone is eligible for a Roth IRA. So check out the eligibility requirements before you put a lot of time into this choice.
Deciding between these two options can take some time. You’ll need to do some math based on your current marginal tax bracket, state and local income taxes, and projected taxes during retirement. We won’t go into all the calculations here. If you’re not yet sure whether to go Roth or traditional, read this article for a primer on how to do the math.
2. Decide What You Want to Invest In
You can narrow down the list of potential IRAs by deciding ahead of time what you want to invest in. For instance, you could invest in a combination of individual stocks and bonds. Or you could invest in mutual funds or ETFs. Another option is to invest in certificates of deposit.
Here a Dough Roller, we often suggest investing in mutual funds or ETFs. These can give you access to a wide, balanced range of investment options. They may be less volatile than individual stocks. And they are often less expensive.
Need more information before you can decide? Check out these articles on different types of investments:
How to Invest in Index Funds
What are ETFs (and Are They a Strong Investment Option)?
Mutual Funds vs. ETFs–Does it Really Matter?
Stocks vs. Bonds
How to Build a Bond Ladder – Create a Regular Cash Flow
3. Decide How You Want to Manage Investments
The next decision you need to make is how you’ll manage your investments. Do you want to manage them all yourself as a hands-on investor? Do you want someone else to manage them for you? Perhaps you want something in between these extremes?
This decision is somewhat less crucial than your first choice. You can change your mind later if you decide differently.
Here are some of the main options to consider:
Self-Driven Investing: So you want to take charge of your investments on your own? In this case, you may need to open your account with a brokerage like TD Ameritrade or Ally Invest. These brokerages will give you access to a variety of investments, including stocks. You could also open an IRA with a mutual fund company like Fidelity. This option lets you drive your own investments through mutual funds, rather than individual stocks. E*TRADE offers it all–you can trade stocks, bonds, mutual funds, ETFs, options, and futures. You can also open an IRA account with no minimum.
Target-Date Investing: Want to take a more hands-off approach to investing? Consider opening an IRA at a brokerage that offers target-date investing. Basically, this automatically balances your portfolio based on your estimated retirement date. As you get closer to retirement, your investments will become more conservative and, likely, stable. Mutual fund companies often offer target-date funds.
Robo-Advisors: Robo advisors like Betterment help you manage your investments in ETFs. These options start you out with a questionnaire to determine your risk tolerance. They set up your portfolio based on your answers. Then you can track and manage your investments from their online interfaces.
4. Research Your Options
Once you’ve narrowed down your choices by answering questions two and three, you’re ready to choose where you’ll open your IRA. There are some great options available these days. Some of our favorites are TD Ameritrade, E*TRADE, and Betterment. Click the links to check out our reviews on each of those options.
What, exactly, should you look for when reviewing your investing options? Here are some questions to answer before you decide where to open your IRA:
How much will they charge? It is absolutely essential that you pay attention to fees when it comes to investing. Even a single percentage point can make a huge difference over the course of your investing life. Know that you’ll likely get hit with fees for maintaining an account and trading. You may face additional fees for managed accounts and for the particular investments you choose. Some fees are inevitable. The goal is to earn good returns while paying as little as possible in fees.
What’s the minimum to open an account? This will matter less if you have a few thousand dollars available when you open your IRA. But if you’re strapped for cash, check the minimum contribution to open an account.
What investments do they offer? Obviously since you spend time in the last two questions deciding how you wanted to invest, you need to answer this question. Different IRAs will let you access different investment types, from ETFs and real estate funds to individual stocks and bonds. Be sure your choice aligns with your investing goals.
How easy is the account to manage online? If you’re like most modern investors, you’ll want to manage your account online, and maybe even through an app. Most of our favorite companies have good-to-great online interfaces. Just be sure you understand how the interface works so you can manage your investments easily.
What do reviews have to say? Finally, check out solid reviews of the companies you’re considering. Some will have better customer service than others. Some will have an easier-to-use online interface. Checking out reviews will help you find the answers to questions like these.
5. Open and Fund an Account
Actually opening an account is pretty simple once you’ve worked through the decisions. With most IRA offerings, you can apply online. You’ll need to provide some personal information, such as your name, address, and Social Security number. If you’re choosing a robo advisor, you’ll also walk through a questionnaire to help the advisor set up your portfolio.
Then, you’ll most likely be able to link your funding account to your IRA. Oftentimes, you’ll need to wait for one or two micro-deposits to hit your funding account. Once you confirm these micro-deposits, the accounts will be linked. You can then fund your IRA and get started investing.
6. Keep Going and Growing
Now that you’ve opened your first IRA, you just need to keep funding it and keep tabs on it. You can contribute just a few bucks a month. Or you can contribute all the way up to the federal maximum limit for that year. (Check here for the latest federal limits.)
If you decided to start out in a managed account whether a target-date fund or a robo advisor account–do some more research. Learn more about investing. This way, you can at least be sure you’re happy with the choices the system is making for your investments. And if you aren’t happy, you’ll be empowered to make different choices for yourself.
A Note for the Self-Employed
This article has mainly focused on the simpler topic of traditional and Roth IRAs for those in traditional employment. If you’re self-employed, though, you have a wider variety of options available to you. Your steps will be similar to those above. But you’ll first need to decide what type of IRA to open.
You can get more information on self-employment retirement options in this article. Start there. Then come back here to complete the standard five steps for opening an IRA.
How to Manage Your IRA
Track and Analyze your Investments for Free: Managing investments can be a hassle. You may have multiple IRAs, multiple 401ks, as well as taxable accounts. And then there are bank accounts. The easiest way to track and analyze all your investments, regardless of where they are located, is with Empower’s free financial dashboard.
Empower enables you to connect all of your 401(k), 403(b), IRAs, and other investment accounts in one place. Once connected, you can see the performance of all of your investments and evaluate your asset allocation.
With Empower’s Retirement Fee Analyzer you can see just how much your 401k and other investments are costing you. I was shocked to learn that the fees in my 401(k) could cost me over $200,000!
Empower also offers a free Retirement Planner. This tool will show you if you are on track to retire on your terms.
Abby is a freelance journalist who writes on everything from personal finance to health and wellness. She spends her spare time bargain hunting and meal planning for her family of three. She has a B.A. in English Literature from Indiana University Purdue University Indianapolis, and lives with her husband and children in Indianapolis.
If you’re looking for comprehensive financial planning advice, but you don’t want to pay the high fees typically charged by financial advisors, Facet may be exactly the service you’re looking for. They provide all the services of traditional financial planners, but at much lower fees. And they’ll even include investment management in the package. This can be especially beneficial for those with portfolios under $500,000, since traditional financial planners often won’t work with smaller clients.
In this comprehensive Facet review, we’ll break down their comprehensive service offering, and help you decide whether this type of financial planning is right for you.
About Facet
Based in Baltimore, Facet was launched in 2016, to serve those who are looking for something of a hybrid between automated, online investment platforms (robo advisors) and full-service financial advisors. Instead of focusing only on investment management, they provide holistic financial management, covering all aspects of your financial life.
Also Read: Wealthfront Review – Low Cost Robo Investing and Financial Planning
But rather than charging annual fees based on a percentage of your assets under management, they instead charge a flat annual membership fee.
And unlike robo advisors, where your portfolio is invested on an automated basis with very little direct human contact, you’ll instead work directly with a dedicated Certified Financial Planner™ professional. The CFP® professional will work with you to establish your financial goals, and immediate and future needs, then come up with an action plan to help you get to where you want to go.
Investment management is available and it’s included as part of the basic annual membership fee. For that reason, it’s not possible to do a direct price comparison between Facet and robo advisors, most of whom don’t offer life financial planning advice.
Related: Personal Capital Review – A Free Wealth Management Tool
How Facet Works
When you sign up with Facet you’ll work directly with a dedicated CFP® professional. However, all contact is either by phone, video chat or email. There are no in person meetings, though due to technology that’s becoming increasingly unnecessary.
You don’t need a certain minimum amount of investable funds to work with Facet either. You can work with them even if you don’t have anything to invest. This is unlike traditional financial planning services, which typically require large minimum account balances to provide advice.
All information relating to your financial situation will appear on an intuitive dashboard, enabling you to get a 360° view of your financial life on the platform.
If you do choose the investment management option, one big advantage is that they do provide investment recommendations for employer-sponsored retirement plans, like 401(k)s. They can’t directly manage employer plans, but the advice they provide will help you better manage your plan going forward.
Financial Services Provided by Facet
As you’ll see, Facet goes well beyond simple investment management provided by robo advisors. They provide investment management, but also comprehensive financial planning services, including the following:
Retirement Planning: Your CFP® professional will put together an action plan to help you reach your retirement goals, as well as help you to understand the strategies behind it.
Education Planning: If you have children, they’ll present options to pay for their future education.
Life Planning: Your Facet advisor will help you to plan for what’s most important in your life.
Asset Management: This is the investment management part of the Facet program. It will include constructing a well-diversified portfolio to help you achieve your long-term goals.
Income Tax Planning: This service involves minimizing the impact of taxes while implementing your financial plan and investing activities.
Insurance Planning: If you don’t know a whole lot about insurance, your financial advisor can help. They’ll recommend the best types of plans to provide specific protections you need for yourself and your family.
Estate Planning: Facet will work with your personal attorney to create an estate plan to provide for your loved ones after your death.
Legacy Planning: This involves creating a plan to make provisions for either your family or a favorite charity. It will enable you to structure your finances in such a way that you will be able to provide for the people or organizations you care for most.
Retirement Income: Apart from retirement planning, it’s also important to successfully manage income in retirement. Your financial advisor will take into consideration your income from Social Security and pensions, in creating a distribution plan from your retirement savings.
A Facet CFP® professional can even help you choose your employee benefits and provide assistance in making the right decisions with your company’s stock option plan.
Also Read: Blooom Review – Finally, a Robo-Advisor for Your 401(k)
Facet Investment Strategy
If you sign up for Facet to take advantage of the financial planning services, you’ll also get investment management at no additional cost. Investment funds are managed through four major brokerages, including Fidelity, Charles Schwab, TD Ameritrade, and Apex. There is no minimum initial investment requirement.
Because those are among the largest investment firms in the industry, there’s a good chance you invest with one of them already. But if you don’t, and you want to take advantage of Facet investment management, you’ll need to transfer your current account to one of those four platforms.
Investments will be managed using primarily mutual funds and exchange traded funds (ETFs), though the company does indicate use of individual stocks and bonds are possible on a discretionary basis.
Portfolios are designed based on your personal investment risk tolerance, as well as your time horizon and investment goals. Your portfolio may be constructed based on the following risk levels:
Aggressive
Moderately Aggressive
Moderate
Conservative
Your portfolio will be fully managed by Facet, including periodic reviews, which will be conducted at least annually. More frequent reviews may take place based on a change in your personal investment objectives, as well as in response to investment market conditions, or upon request.
Other Facet Features and Benefits
Investment accounts that can be managed: Taxable brokerage accounts, and any self-directed retirement plans, including traditional, Roth, rollover, SEP and SIMPLE IRAs, as well as solo 401(k) plans. And though they can’t manage them directly, Facet will provide management assistance with employer-sponsored plans, like 401(k) and 403(b) plans.
Availability: All 50 states, plus the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.
Customer contact: One of the advantages of working with Facet is that you will have a direct line to your dedicated CFP® professional. When you call in, it won’t be to a call-in center. Contact is by phone, videoconference, or email, all of which are available mornings, evenings, and even on weekends.
Fees: Membership fees will vary by the services you need performed, and are not determined by the size of your portfolio.
Prices range from $2,400/year ($167/month) to $8,000/year ($667/month). Most members fall in the middle of that range.
There are no cancellation fees – but any annual fees already paid will not be returned.
How to Sign Up with Facet
To sign up with Facet you’ll start by scheduling a 30-minute introductory call with a dedicated CFP® professional. That person will work with you to determine your needs and goals, as well as your budget for the service.
When you schedule your introductory call, you’ll be required to provide basic information, as well as financial information, such as investment accounts, and to list important financial goals.
If a Facet membership feels right to you and you agree to sign up, you’ll go through Facet’s digital onboarding process which is a guided experience that consolidates all your key information in one place. The full process takes 30 – 45 minutes but you can leave and revisit the process at your convenience. Once the digital onboarding is complete, the first meeting with your planner will be scheduled. They will come to this meeting prepared after reviewing all the information you submitted during the digital onboarding process and can start discussing your financial priorities.
The CFP will create an individually designed financial plan, though the creation of that plan may require several direct sessions to complete. Once again, the fees you’ll pay for that plan will depend on the individual services you want.
The CFP will create an individually designed financial plan, though the creation of that plan may require several direct sessions to complete.
Facet Pros and Con
Flat fee structure — This will work very well for those with larger portfolios.
No minimum to begin investing — There are no upfront fees.
Full service financial planning — Facet takes a holistic view of your entire financial life, rather than focusing exclusively on investment management. Investment management is included in your complete financial planning package.
The company is a fiduciary — This legally requires them to represent your best interests, and not to promote their own products to generate additional income.
Works with major investment brokers — Facet works with four big investment platforms.
Can be pricey — The flat fee structure will be high for those with smaller portfolios.
No face-to-face meetings — All contact is by phone, email or video chat.
Difficult to estimate costs — Since fees are based on the level of service, actual costs can be difficult to determine upfront.
Alternatives to Facet
If you’re interested in what Facet has to offer, but you’d like to check out the competition, we recommend the following financial management services:
Probably the most popular investment platform among robo advisors with personal financial advice is Empower. The platform is free to use, if you’re looking for budgeting tools and limited investment advice. But with a minimum initial investment of $100,000, you can take advantage of Empower Wealth Management, that provides full investment management. And with at least $200,000, you can have regular access to financial advisors. Management fees start at 0.89% for a portfolio up to $1 million, but slide down to 0.49% for portfolios greater than $10 million.
Betterment’s Premium plan works similar to Personal Capital, but at a lower fee. They charge an annual management fee equal to 0.40% of your account balance, and there’s no upfront fee. That means you can have a $250,000 portfolio managed for $1,000 per year. The service provides automated portfolio management (robo advisor), with unlimited access to Betterment certified financial planners. Qualification requires a minimum account balance of $100,000.
But at an even lower fee structure is Vanguard Personal Advisor Services. The minimum required investment is $50,000, and the annual fee is just 0.30%, sliding all the way down to 0.05% for portfolios of $25 million or more. An investor with $250,000 can have his or her portfolio managed for just $750 per year. The service offers unlimited access to personal financial advisors, including a dedicated advisor if your portfolio is $500,000 or more.
Facet vs. Robo Advisor
Those considering Facet might find themselves debating between Facet and a robo advisor for managing their money. The truth is that both types of service have something to offer different customers.
A robo advisor is an algorithm that manages your investments based on a risk tolerance that is set upon signing up for the service. Robo advisors occasionally offer personalized advice, but this often comes with a fee. At best, you’ll have limited access to a financial planner. Fees are usually set based on a percentage of what you invest, plus set fees (although exact details depend on the robo advisor).
Whether or not you want a robo advisor depends on whether you want to take a hands-on or hands-off approach to managing your money. Robo advisors are automated investment strategies, and are therefore a very hands-off approach. Facet allows you more freedom to customize your plan, with real access to human advice, and a fee structure that isn’t only based on how much you invest.
Both types of investment have a lot to offer, so it will depend on the person to decide which is most suited to their personal risk tolerance and investing goals.
What Others are Saying – Facet Reviews
To get a better understanding of what people think about Facet, it helps to look at third-party reviews. Reviews are a great way to get a non-biased perspective of what others are saying about Facet. Prospective clients will be happy to learn that Facet reviews are mostly positive overall.
Better Business Bureau has Facet at an A+ rating. A+ is the highest rating available on BBB’s 100-point rating scale. The rating scale is based on an aggregate of factors, including the business’s complaint history, transparent business practices, time in business, advertising issues, licensing and government actions, and more. An A+ is an encouraging sign for prospective customers of Facet.
Business Insider has also given Facet a positive review. They state that Facet is “best for comprehensive financial advice and those with modest or sizable assets”. Business Insider had overall positive things to say about the service, but also said that those with modest assets or one-off questions may not benefit from Facet. Business Insider gave Facet a rating of 4.6/5.
Facet FAQs
What is a Certified Financial Planner™ professional, and why is having one so important?
CFP® professionals are required to be certified, and have experience in all aspects of financial planning. Not only can they provide the information you’ll need, but they can recommend third-party sources for additional advice when necessary. A dedicated CFP® professional is part coach, part advocate and all partner. Working with a CFP® professional means you never have to deal with financial concerns alone.
Why is it important that Facet is a Fiduciary?
A fiduciary is a financial professional with a legal and ethical relationship of trust to you as a client. They’re legally required to make financial recommendations in your best interest alone. All Facet CFP® professionals are fiduciaries.
Why do I need Facet when I can just use a robo advisor to manage my portfolio?
Because Facet will provide investment management services, comparable to a robo advisor, but they also work with you to better manage your entire financial life. For example, they can provide investment advice on how to better manage your employer-sponsored retirement plan. They can also work with you in other critical areas of your life, such as insurance, estate planning, and preparing for your children’s college educations.
How does Facet help me manage my employer sponsored retirement plan?
Facet doesn’t directly manage your retirement plan. But they can provide you with advice on portfolio allocation, as well as selecting from the best investment options in your plan. This may include certain funds that will create a more well-balanced portfolio, as well as include investments with lower fees.
How do I know a Facet CFP® professional will work in my best interest?
As fiduciaries, Facet CFP® professionals are legally required to work in the best interest of their clients. Additionally, because Facet charges flat fees, there are no worries associated with CFP® professional giving you bad advice to profit off commissions. Facet also boasts a rigorous recruitment process to vet every person they hire, putting a particular emphasis on kindness and honesty.
Related: How to Evaluate an Investment Portfolio
Is Facet the Right Choice for You?
If you’re looking for an investment advisor, but you also want comprehensive financial advice, schedule your introductory call is worth checking out. They provide professional level financial advice, including retirement planning, estate planning, education planning, and income tax planning for a fraction of what you’ll pay to an independent CFP® professional.
It’s also an excellent choice if you’re not simply looking for the type of automated investment management provided by robo advisors.
However, if you’re mainly interested in investment management, the value of the service may depend primarily on the size of your investment portfolio. For example, if you have a $1 million portfolio under management, and your total annual membership fee is $2,400, the fee will work out to be 0.24%, which is lower than most robo advisors.
But if your portfolio size is $100,000, and you pay the same $2,400 annual membership fee for Facet, it will be the equivalent of a 2.4% annual fee. That’s many times higher than what robo advisors will charge, and even higher than traditional human investment advisors.
However, you also have to consider the value of the financial planning advice being provided. If you’re looking for ongoing financial advice, the Facet fee will be well worth paying. But if you’re looking for one-time advice for very specific areas of financial planning, and mostly interested in ongoing investment management, it may be more cost-effective to invest through a robo advisor, and to get the needed financial planning advice from an independent CFP® professional.
At the end of the day, you need to consider your own financial goals, personal risk tolerance, and what you want from a financial services provider. Only with a proper understanding of these personal preferences can you make the choice that’s right for you.
One of the most powerful financial combinations is the ability to invest and bank through the same financial institution. But J.P. Morgan isn’t just any financial institution. It’s the largest bank in the U.S., and it also offers the ability to engage in self-directed trading–commission-free. There are many brokerage firms you can invest with, but this is the only one with the power of J.P. Morgan behind it!
If you’re already a J.P. Morgan customer or client–either with a deposit account or through one of their many top-of-the-line credit cards–you should know that you can also invest through the company. J.P. Morgan Self-Directed Investing offers commission-free trades for self-directed investors, as well as a low-cost managed portfolio option. You can open an account with no money, and handle all your trading and account monitoring through the mobile app. And if you’re not already a J.P. Morgan customer or client, you may be interested in investing through the largest banking organization in the U.S., with all the advantages and benefits that provides.
What is J. P. Morgan Self-Directed Investing?
J.P. Morgan is the largest bank in the United States and the sixth-largest bank in the world, with assets of nearly $2.7 trillion. Founded all the way back in 1799, the bank currently has more than 5,000 branches operating in 36 states. J.P. Morgan is also one of the leading providers of credit cards.
But while the company is best known as a bank, it’s also one of the largest asset managers in the world. J.P. Morgan’s asset management arm has nearly $3 trillion in assets under management (AUM), while its investment and corporate banking arm has more than $25 trillion in AUM.
Given the company’s experience in managing investments for individual and business clients, as well as its massive banking footprint across the U.S., it’s only natural that J.P. Morgan would eventually roll out a retail brokerage platform for individual investors. That platform is J.P. Morgan Self-Directed Investing. Originally launched as You Invest in 2018, J.P. Morgan Self-Directed Investing is already showing plenty of promise with innovative investment options.
J. P. Morgan Self-Directed Investing Product Features
J. P. Morgan Self-Directed Investing offers two different investment programs. Self-Directed Investing (SDI) is a self-directed investment platform, while SDI portfolios offers several fully managed investment plans for those who want to turn the investing job over to the professionals.
Self-Directed Investing
This is the trading account offered by J. P. Morgan. There is no minimum initial investment required to open an account. Available accounts include individual and joint taxable brokerage accounts, and traditional and Roth IRA accounts. There, you can trade individual stocks, exchange-traded funds (ETFs), options, fixed income securities, and mutual funds.
Self-Directed Investing offers commission-free trades in thousands of securities. You can manage your portfolio online or on the go from your mobile device.
The platform also has resource pages that can help with basic investing, investing strategies, planning, and market insights.
Portfolio Builder
This tool helps create an asset allocation based on your investment goals, time horizon, and risk tolerance. This tool requires a minimum account balance of $500. It can be used to select securities within the designated portfolio allocations, and even places trades for you.
Self-Directed Investing Portfolios
If you prefer to have your investment portfolio professionally managed–or if you want to add managed portfolios to your self-directed investing–you can take advantage of SDI Portfolios.
You’ll need a minimum of $500 to open an account, and the account will be managed for a single annual percentage fee, regardless of account size (see J.P. Morgan Self-Directed Investing Pricing & Fees below).
The specific mix in your portfolio will depend on your investor profile, which may be Conservative, Moderate, Growth, or Aggressive. A Conservative portfolio will be more heavily invested in fixed income and cash investments, while Growth and Aggressive will be slanted towards stocks. The Moderate portfolio will use an equal mix of both.
After you open an account, you’ll determine your asset allocation and your portfolio is put in place–it will be rebalanced as necessary. At that point, all you’ll need to do is fund your account, and all aspects of your portfolio will be fully managed for you.
If self-directed investing isn’t for you, you can work with a J.P. Morgan advisor, or schedule a check-up to see if you’re on track to meeting your investment goals.
Self-Directed Investing Portfolios Glide Path
Your portfolio allocation doesn’t remain static. SDI Portfolios employs a Glide Path, adjusting your portfolio as you age. Your portfolio will be gradually reallocated toward a more conservative mix as you approach retirement and have less time available to recover from losses that may occur in a down market.
J. P. Morgan Self-Directed Investing Pricing & Fees
Self-Directed Investing Trade
There are no fees to open and maintain a SDI Trade account. Trading commissions are as follows:
Stocks and ETFs: You’ll have unlimited commission-free trading online with stocks and ETFs. However, if you make representative-assisted trades there is a fee of $25 per trade.
Option: Also commission-free, but there is a charge of $0.65 per contract. And similarly, there will be a $25 commission for any representative-assisted trade.
Mutual funds: Commission-free for online trades, with a $20 per transaction commission if representative-assisted.
Fixed income/bonds: There are no commissions or fees charged for trades of U.S. Treasury bills, notes and bonds, or new issues of corporate bonds, municipal bonds, government agency bonds or brokered certificates of deposit.
However, trading of secondary market corporate bonds, municipal bonds, government agency bonds and brokered CDs have the following fees:
Online – $10 per trade, plus $1 per bond over 10 bonds, up to a maximum of $250.
Representative-assisted – $30 per trade, plus $1 per bond over 10 bonds, up to a maximum of $270.
Self-Directed Investing Portfolios
SDI Portfolios come with a low percentage annual advisory fee of 0.35% of your account balance, paid monthly. There are no other fees involved in the management of your account.
J. P. Morgan Self-Directed Investing Sign-up Bonus
J.P. Morgan is currently offering a bonus of between $50 and $700 if you open an account with at least $5,000. The bonus is structured as follows:
$700 when you fund with $250,000 or more
$325 when you fund with $100,000-$249,999
$150 when you fund with $25,000-$99,999
$50 when you fund with $5,000-$24,999
(All accounts must be funded at these levels in the first 45 days and remain in the account for at least 90 days)
Disclosure: INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
How to Sign Up with J. P. Morgan Self-Directed Investing
To open a SDI account you must be at least 18 years old, have a valid Social Security number, and a U.S. home address. You’ll be asked to provide a valid driver’s license or state-issued ID for identity verification purposes.
You can open the account from YouInvest.com. There you can choose a Self-Directed Investing Trade or Self-Directed Investing Portfolios option, either as a taxable brokerage account or an IRA. If you choose to open a SDI Portfolios account, you’ll need to complete a questionnaire that will help determine your investment goals, time horizon, and risk tolerance.
If you are an existing Chase account holder, much of your application information will be transferred over from in-house records.
When completing the application, you’ll first be asked if you are an existing Chase customer. If you are, you can simply enter your username and password, and your application will be populated from information already on file with Chase.
If you are not an existing Chase customer, you’ll need to complete the online application. You’ll then need to manually supply the following information:
Your full name
Country or citizenship
Date of birth
Social Security number
The type of ID (driver’s license or state-issued ID), as well as the ID number, expiration date, and the issuing state
Your home address
Your email and phone number
Funding your account
You can fund your account either through an existing Chase account or from an external financial institution. If you already have a Chase account, you can transfer funds into your Self-Directed Investing Account by choosing Pay & transfer, then Transfer money.
If you are linking an external account, you can simply choose “Add new external account”, then enter the routing number and personal account number from your institution. You can set up either a one-time transfer or recurring transfers.
J. P. Morgan Self-Directed Investing Security
All investment accounts are protected against broker failure by the Securities Investor Protection Corporation (SIPC). Your account is covered for up to $500,000 in cash and securities, including up to $250,000 in cash.
J. P. Morgan Self-Directed Investing Mobile App
You can invest with SDI using the Chase Mobile App, which is available at The App Store for iOS devices, 11.0 and later. The app is compatible with iPhone, iPad, and iPod touch. Its also available at Google Play for Android devices, 6.0 and up.
You can use the mobile app to manage all your accounts with J.P. Morgan including your Self-Directed Investment accounts. That includes trading securities and funds and taking advantage of all the tools and research information available on the platform.
J. P. Morgan Customer Service
Customer service is available by phone Monday through Friday, from 8:00 am to 7:00 pm, Eastern time. However, you can place online trades anytime between 6:00 am and 2:00 am Eastern time.
FAQ
Do I need to be an existing Chase account holder to open a Self-Directed Investing account?
No. There is no requirement for you to be a current Chase account to participate in the service, nor is there a requirement for you to open a Chase bank or credit card account as a condition of your SDI account.
Can I open a Self-Directed Investing account in the name of my business?
No. SDI accounts are only available to individuals and joint personal account holders. The platform is not designed for business customers.
I like that Self-Directed Investing offers commission-free trades on stocks, options, and ETFs. But why do they charge such high fees for representative-assisted trades?
The practice of charging fees for trading with live assistance is common in the brokerage industry, even now that most brokers have eliminated commissions for online trades. Self-Directed Investing representative-assisted trade fees are consistent with those charged by other brokerage firms. A major reason brokerage firms are able to offer commission-free trades is because they don’t require assistance from broker employees. Fewer assisted trades means lower payroll costs for the brokerage firm, enabling them to charge no fees for online trades.
If I use the Portfolio Builder, what kind of investments can I hold?
The Portfolio Builder tool enables you to invest through ETFs and stocks. This includes both U.S. and international equities, as well as core fixed income and commodities. However, the tool does not allow mutual funds in the portfolio.
Open to non-Chase customers — Self-Directed Investing is available to both Chase and non-Chase customers and investors.
Commission-free trades — This applies to stocks, ETFs, and options (though like most brokers, there is a per contract fee with options).
Generous sign-up bonus — These range from $50 to $700.
Both self-directed investing or professionally managed — Ability to choose either self-directed investing through Self-Directed Investing Trade or a professionally managed option through SDI Portfolios – or you can use a combination of both.
Tools to help create and manage a portfolio — The Portfolio Builder tool helps create and manage your portfolio, even as a self-directed investor.
Investment options are a bit limited — The platform doesn’t allow you to invest in real estate investment trusts (REITs) or penny stocks (stocks that either aren’t listed on a major exchange and have a price of less than $5).
Limited customer service hours — J.P. Morgan’s customer service live support is limited to business days until 7:00 pm. This is substantially less than the 24/7 customer support available with most major competitors.
High Advisory fee — The advisory fee of 0.35% on SDI Portfolios is higher than the industry average of 0.25% for robo-advisors.
Alternatives to J. P. Morgan Self-Directed Investing
The investment brokerage field is a crowded one, and some of the alternatives you may want to consider include the following:
E*TRADE
E*Trade operates similarly to J.P. Morgan Self-Directed Investing in that it has both commission-free self-directed trading, as well as managed portfolio options. But the platform offers a more comprehensive suite of investment tools, and also a wider range of investment options. For example, you can also trade futures and FOREX.
Ally Invest
Ally Invest, with both self-directed investing and a managed portfolio option. And just as is the case with J.P. Morgan Self-Directed Investing, you can also take advantage of the banking services and high-yield savings accounts and CDs offered through Ally Bank. Much like E*TRADE, Ally Invest also offers more diverse investment options than J.P. Morgan Self-Directed Investing.
TD Ameritrade
Tied in with TD Bank, TD Ameritrade also enables you to invest where you bank. They similarly offer no commission trading on stocks, ETFs, and options. And like most brokerage firms, they also offer managed portfolio options. Once again, TD Ameritrade offers something that J.P. Morgan Self-Directed Investing doesn’t, and that’s commission-free mutual fund trades. In fact, they offer more than 4,000 no transaction fee mutual funds to choose from.
Is J.P. Morgan Self-Directed Investing for You?
J.P. Morgan Self-Directed Investment will work best for existing customers and clients of J.P. Morgan. If you already have a banking relationship and/or a credit card through the company, investing with them will be a natural choice.
If you’re not an existing J.P. Morgan customer client, or even if you are, you should be aware that this is strictly for self-directed investors. It doesn’t have quite as many investment tools and resources as other major brokerage platforms. For that reason, it’s best suited to self-directed investors who have their own investment resources and tools.
However, the platform was launched less than two years ago and is still evolving. With J.P. Morgan behind it, we can expect better things to come.
If you’re not a self-directed investor, you can still invest through Automated Investing. This is a robo-advisor, and provides all the benefits that come with low-cost, professional investment management. However, the annual advisory fee of 0.35% is higher than the industry standard fee of 0.25%. Those are the fee levels you can expect from popular competitors, like Betterment and Wealthfront.
But if you’re looking to combine investing with banking, there’s no better place to do it than with J.P. Morgan. As the largest bank in the U.S., operating in 36 states–and determined to enter the remaining 14–they offer something for everyone.
Bottom Line
J.P. Morgan Self-Directed Investing is a solid investment platform for self-directed investors who have access to a reliable source of investment tools and research. The platform may expand those tools and resources going forward, but they’re not quite there yet. In the meantime, they offer commission-free trades, as well as a managed portfolio option if you’re not quite ready for self-directed trading.
Disclosure: INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
Betterment and Betterment are not only two of the most popular robo advisors in the industry, but they may very well be the most innovative in the field. Though they represent two of the first robo advisors, both have built out their platforms and now offer robust portfolio options and other services to their clients.
Though they each have their own nuances–and specializations–you really can’t go wrong with either platform. Each will take complete control of your portfolio, managing every aspect of it for a very low annual fee. When you sign up with either service, your only responsibility will be to fund your account on a regular basis.
But what if you’re either new to robo advisors or you’re considering a switch from another one? If you’re researching robo advisors, the information will inevitably lead to Betterment and Wealthfront. So let’s take a look at the two heavyweights in the robo advisor space and see which might be a better fit for your portfolio. Listen to the Podcast of this Article
About Betterment
Betterment is not only the original robo advisor, but its also the largest independent robo (along with Wealthfront), with $21 billion in assets under management. The company is based in New York City and began operations in 2008.
As a robo advisor, Betterment is an automated, online investment platform that handles all aspects of investment management for you. When you sign up for the service, you complete a questionnaire that will help determine your investment goals, time horizon, and investment risk tolerance. From that information, Betterment creates a portfolio of stocks and bonds to meet your investor profile.
They dont actually invest your money in individual securities, but instead through exchange-traded funds (ETFs), each representing a specific asset class. They can build an entire portfolio for you through about a dozen funds that will give you exposure to the entire global financial markets.
All this is done for a low annual management fee. Your only responsibility will be to fund that your account on a regular basis and let Betterment handle all the management details for you.
Better Business Bureau rates Betterment as A+, which is the highest rating in a range from A+ to F. The company also scores 4.8 stars out of 5 by more than 20,000 users on the App Store, and 4.5 stars out of 5 by more than 4,500 users on Google Play.
About Wealthfront
Wealthfront is, with Betterment, the largest independent robo advisor, and Betterment’s primary competitor. In fact, with over $24 billion in assets under management, its now slightly larger than Betterment. The company is based in Redwood City, California, and launched operations in 2011.
As a robo advisor, it works much the same as Betterment, creating a portfolio for you based on your answers to a questionnaire when you open your account. Wealthfront will also manage your account using a small number of ETFs spread across various asset classes. But on larger accounts, they’ll also add individual stocks to get greater benefit from tax-loss harvesting.
Like Betterment and virtually all robo advisors, Wealthfronts basic investment strategy is based on Modern Portfolio Theory (MPT), which emphasizes asset allocation over individual security selection.
Similar to Betterment, and really all robo advisors, your account will receive full investment management for a very low annual fee. Your only responsibility will be to fund your account on a regular basis.
Unfortunately, Wealthfront has a Better Business Bureau rating of F, due to unanswered complaints. However, the company gets 4.9 stars out of 5 from more than 9,000 users on the App Store, and 4.8 stars out of 5 by more than 2,700 users on Google Play.
Investment Strategies Betterment vs Wealthfront
Betterment Investment Strategy
Betterment offers two plan levels, Digital and Premium. Premium is available for minimum account balances of $100,000, while Digital is open to all account balances. Like many robo advisors, Betterment has evolved past building and managing a basic portfolio comprised of a mix of stocks and bonds.
For example, if you choose the Premium Plan, you’ll have access to live financial advisors. But there are many other services and plans to choose from.
Read More: Betterment Promotions
Basic portfolio mix
Your portfolio will be invested in as many as six stock asset classes/ETFs and eight bond asset classes/EFTs.
Stocks:
US Total Stock Market
US Value Stocks Large Cap
US Value Stocks Mid Cap
US Value Stocks Small Cap
International Developed Markets Stocks
International Emerging Markets Stocks
Bonds:
US High-quality Bonds
US Municipal Bonds
US Inflation-Protected Bonds
US High-Yield Corporate Bonds
US Short-term Treasury Bonds
US Short-term Investment-Grade Bonds
International Developed Markets Bonds
International Emerging Markets Bonds
Use of value stocks
Notice that three of the six stock asset classes involve value stocks. This is a specialization of Betterment and represents a time-honored stock market investment strategy. Value stocks are investments in companies with stock prices that are low in relation to their competitors by various standard measurements. But the companies are deemed to be fundamentally sound, and therefore likely to outperform the general market once the investment community realizes the true value of the stocks.
In this way, Betterment makes an attempt to outperform the general market, such as the S&P 500 or even some broader indices.
Smart Beta
This is another investment strategy Betterment uses with the potential to outperform the general market. This specific portfolio is managed by Goldman Sachs. Smart Beta is a form of active portfolio management, which seeks high-quality companies with low volatility, strong momentum, and good value.
Since its a higher risk/high reward type of investing, it requires a minimum portfolio of $100,000.
Socially responsible investing (SRI)
This is an investment option increasingly being offered by robo advisors. However, with Betterment only a portion of your portfolio will be invested in SRI. They replace the ETFs in the International Emerging Market Stocks and US Value Stocks Large Cap with ETFs that specialize in socially responsible investing in those sectors.
Learn More: The Pros and Cons of Socially Responsible Investing
Flexible Portfolios
If you want more control over your investment portfolio, you can choose this option. It allows you to adjust the individual asset class weights in your portfolio allocation. Its also designed for more advanced investors and gives you an opportunity to increase allocations in asset classes you believe are likely to outperform the market.
BlackRock Target Income
For investors looking for income and safety of principal, Betterment offers this portfolio, which consists of 100% of bonds. There is some risk of principal in this portfolio but it’s designed to be minimal. You can even choose the level of risk and return you want. It won’t provide the type of long-term gains you’ll get from a stock portfolio, but it will offer the kind of steady income that will work especially well for retirees.
Tax-loss Harvesting
Tax-loss harvesting is a year-end strategy in which asset classes with losses are sold (and later replaced with comparable ones) to offset gains in winning asset classes. The strategy helps to defer taxable capital gains on growing asset classes.
Betterment makes this strategy available on all account balances. However, it’s only offered on taxable accounts since it’s completely unnecessary for tax-sheltered retirement plans.
Betterment Everyday Cash Reserve
If you’re looking to add a cash option to your investment portfolio, you can do it through Betterment Cash Reserve. The account is eligible for FDIC insurance up to $1 million. The minimum deposit is $10, and offers unlimited transfers, both in and out of your account.
Betterment Checking
The Betterment Checking account gives you the flexibility to manage your money in a way that best fits your financial goals. You’ll get this account with a debit card and you can use it to pay in person or online. You’ll also get FDIC insurance on your money.
The Betterment Checking account is an innovative way to manage your money. It’s faster, more secure, and requires zero minimum balance requirements. You can now deposit checks using their streamlined mobile app. Just take a picture and deposit checks will be there for you on the other side.
Wealthfront Investment Strategy
Unlike Betterment, Wealthfront has a single plan for all investors, with an annual management fee of 0.25% on all account balances. And like Betterment, Wealthfront has expanded its investment options menu in many different directions.
Basic Portfolio Mix
Wealthfront uses 11 asset classes in the construction of its portfolios, including four stock funds, five bond funds, plus real estate and natural resources.
The allocation looks like this:
Stocks:
US Stocks
Foreign Stocks
Emerging Market Stocks
Dividend Stocks
Bonds:
Treasury Inflation-Protected Securities (TIPS)
Municipal Bonds (on taxable investment accounts only)
Corporate Bonds
U.S. Government Bonds
Emerging Market Bonds
Alternatives:
Real Estate
Natural Resources
Use of Alternative Investments
Wealthfront includes real estate and natural resources in its portfolio composition. The real estate sector invests in companies that provide exposure to commercial property, apartment complexes, and retail space. Natural resources are held in ETFs representing that sector.
The combination of the two offers a stronger diversification away from a portfolio comprised entirely of stocks and bonds, largely because they offer protection in an inflationary environment. It’s possible for these sectors to perform well when the general financial markets are not.
Smart Beta
The Smart Beta option attempts to outperform the general financial markets. The strategy deemphasizes market capitalization in the creation of a portfolio. For example, rather than using the capitalization allocations of certain companies within the S&P 500, the strategy might increase some allocations and decrease others. It’s more of an active investment strategy and requires a minimum investment portfolio of $500,000.
Wealthfront Risk Parity
This is another investment strategy for investors with larger accounts and a greater appetite for risk. Its been shown to provide higher long-term returns, but it may use leverage to increase those returns.
Stock-level Tax-loss Harvesting
Tax-loss harvesting is available on all taxable investment accounts. But Stock-level Tax-loss Harvesting is available to larger accounts to provide more aggressive tax deferral.
This is a fairly complex investment strategy, but it involves the use of individual stocks to take greater advantage of tax-loss harvesting. The use of individual stocks will make it easier to buy and sell securities to minimize capital gains taxes. Depending on the specific plan, the required minimum investment ranges between $100,000 and $500,000.
Wealthfront Path
This is a software-based financial advisory, providing you with financial planning tools. They can help you plan for retirement or saving for the down payment on a house or a college education for one or more of your children. The apps run what-if scenarios, that can make projections based on various savings levels for each of your specific goals.
Though it doesn’t offer live financial advice, the service is free to use.
Wealthfront Cash
You can open an interest-bearing cash account with Wealthfront Cash Account with just $1. There’s no market risk, no fees, unlimited free transfers, and your account is FDIC insured for up to $5 million. The account currently pays 4.30% APY and provides a safe, cash investment to go with your stock portfolios.
And now, Wealthfront Cash allows you to get your paycheck up to two days early when you set up a direct deposit. They’ve also implemented the ability for you to invest directly into the market within minutes, straight from your Wealthfront Cash account. That means you can get paid early and immediately invest – giving you about extra days of investing each year.
Read more: Wealthfront Cash Account review
Wealthfront Portfolio Line of Credit
Much like a home equity line of credit, the Wealthfront Portfolio Line of Credit is secured by your investment account. You can borrow up to 30% of the value of your account for any purpose. There’s no prequalification since the line of credit is completely secured by your investment account.
The line of credit is automatic if you have a non-retirement account balance of at least $25,000. You can request funds against the line on your smartphone and receive them in as little as one business day.
Current interest rates paid on the line range between 2.45% and 3.70% APR, depending on the size of your account.
Retirement Planning Betterment vs. Wealthfront
One of the most common uses of robo advisors is the management of retirement accounts. Both Betterment and Wealthfront can manage all types of IRA accounts, similar to the way they do with taxable accounts. But each also offers some level of retirement planning.
Read More: Best Robo Advisors Find out which one matches your investment needs.
Betterment Retirement Planning
Betterment is strong in this category because in addition to their regular portfolios, they also offer income-specific investment options, like their BlackRock Target Income and Everyday Cash Reserve. The Target Income option in particular focuses on maximizing interest income, which is exactly what most people are looking for in retirement.
One of the advantages Betterment offers is that you can connect your 401(k) with your investment account. Betterment cant manage the 401(k) (unless chosen to do so by your employer through their 401(k) management plan), but they can coordinate your Betterment retirement account(s) with the activity in your employer plan.
And of course, if you have at least $100,000 in your Betterment account, you can enroll in the Premium plan and have access to live financial advisors.
But Betterment also offers its Retirement Savings Calculator to help you know if you’re on track for your retirement. By answering just four questions, they’ll be able to determine if your current retirement plan will provide the income you’ll need in retirement, taking your projected Social Security income into consideration. If it isn’t, it’ll let you know how much more you need to invest on a regular basis.
Wealthfront Retirement Planning
You can take advantage of Wealthfront Path to help you with retirement planning. You’ll start by linking your financial accounts so the program can get a better understanding of your finances. Recommendations to help you reach your goals are made based on the amount of regular contributions you’re making and the income you will need in retirement.
Path will analyze your spending patterns, your average annual savings rate, the interest you’re earning on those savings, as well as your investment and retirement contributions. It will also analyze the fees you’re paying on your investment and retirement accounts. Loan accounts are analyzed as well.
The information is assembled, and future projections are made. You’ll be given advice on any needed increases in savings for retirement contributions, as well as asset allocations. And perhaps best of all, since all your financial accounts are linked to the service, it will provide continuous updates on your progress toward your retirement goals.
Betterment Pros & Cons
No minimum initial investment or account balance requirement.
Reduced fee structure on larger account balances.
Use of value stocks seeks to outperform the general market.
Unlimited access to certified financial planners on account balances over $100,000.
Comprehensive retirement planning package.
Limited investment diversification, excluding alternative asset classes, like real estate and natural resources.
The annual management fee rises from 0.25% to 0.40% if you select the Premium plan.
The reduced fee structure on large account balances doesn’t kick in until you reach a minimum of $2 million.
Wealthfront Pros & Cons
Your account includes alternative investments, like real estate and natural resources. This offers greater diversification than a portfolio invested only in stocks and bonds.
The minimum initial investment is just $500. That’s not zero, but it’s an amount most small investors can comfortably start with.
Flat-rate fee of 0.25% on all account balances.
Larger accounts get the benefit of more efficient tax-loss harvesting strategies through Wealthfront Risk Parity.
The Wealthfront Portfolio Line of Credit lets you borrow up to 30% of the value of your non-retirement accounts at very low interest and with no credit check.
There’s no reduced management fee for larger account balances.
The retirement planning tool (Path) is an automated system and does not provide advice from live financial advisors.
Poor rating from the Better Business Bureau.
Bottom Line
We’ve covered a lot of territory and details in this side-by-side comparison of Betterment vs Wealthfront. The summary table below should help you to be able to compare the various services each offers with a quick glance.
Category
Betterment
Wealthfront
Minimum initial investment
Digital: $0 Premium: $100,000
$500
Promotions
Up To 1 Year Free
First $5,000 Managed Free
Management fees
Digital: 0.25% up to $2 million, then 0.15% above Premium: 0.40% to $2 million, then 0.30%
0.25%
Available accounts
Individual and joint taxable accounts; traditional, Roth, rollover and SEP IRAs; trusts and nonprofit accounts
Individual and joint taxable accounts; traditional, Roth, rollover and SEP IRAs; trusts and 529 accounts
Rebalancing
Yes
Yes
Dividend reinvestment
Yes
Yes
Tax-loss harvesting – on taxable accounts only
Yes
Yes
Socially-responsible investing
Yes
Available through Smart Beta ($500,000 minimum) and Stock-level Tax-Loss Harvesting ($100,000 minimum)
Smart Beta investing
Yes
Yes, minimum $500,000
Interest bearing cash account
Yes
Yes
Line of credit
No
Yes
Financial advice
Yes, on Premium Plan only
Automated only
Mobile app
Yes
Yes
Customer service
Phone and email, Monday through Friday, 9:00 am to 6:00 pm Eastern time
Phone and email, Monday through Friday, 10:00 am to 8:00 pm Eastern time
You’ve probably already guessed were not declaring a winner between these two popular roboadvisors. Both are first rate and you can’t go wrong with either. More than anything, your decision will likely come down to specific details–what features and benefits one offers that better suits your own personal preferences and investment style.
But one advantage that’s undeniable with both Betterment and Wealthfront is that not only is each a first-rate service, but they provide enough investment options and related services that they can accommodate your growing financial capabilities and needs well into the future.
For example, while you may start out with a basic managed portfolio, you’ll eventually want to get into higher risk/higher reward options as your wealth grows. As well, you’ll like the flexibility of having high-interest cash investment options, as well as low-cost or free financial or retirement advice.
We like both these services and are certain you can’t go wrong with whichever one you choose.
Betterment Cash Reserve Disclosure – Betterment Cash Reserve (“Cash Reserve”) is offered by Betterment LLC. Clients of Betterment LLC participate in Cash Reserve through their brokerage account held at Betterment Securities. Neither Betterment LLC nor any of its affiliates is a bank. Through Cash Reserve, clients’ funds are deposited into one or more banks (“Program Banks“) where the funds earn a variable interest rate and are eligible for FDIC insurance. Cash Reserve provides Betterment clients with the opportunity to earn interest on cash intended to purchase securities through Betterment LLC and Betterment Securities. Cash Reserve should not be viewed as a long-term investment option.
Funds held in your brokerage accounts are not FDIC‐insured but are protected by SIPC. Funds in transit to or from Program Banks are generally not FDIC‐insured but are protected by SIPC, except when those funds are held in a sweep account following a deposit or prior to a withdrawal, at which time funds are eligible for FDIC insurance but are not protected by SIPC. See Betterment Client Agreements for further details. Funds deposited into Cash Reserve are eligible for up to $1,000,000.00 (or $2,000,000.00 for joint accounts) of FDIC insurance once the funds reach one or more Program Banks (up to $250,000 for each insurable capacity—e.g., individual or joint—at up to four Program Banks). Even if there are more than four Program Banks, clients will not necessarily have deposits allocated in a manner that will provide FDIC insurance above $1,000,000.00 (or $2,000,000.00 for joint accounts). The FDIC calculates the insurance limits based on all accounts held in the same insurable capacity at a bank, not just cash in Cash Reserve. If clients elect to exclude one or more Program Banks from receiving deposits the amount of FDIC insurance available through Cash Reserve may be lower. Clients are responsible for monitoring their total assets at each Program Bank, including existing deposits held at Program Banks outside of Cash Reserve, to ensure FDIC insurance limits are not exceeded, which could result in some funds being uninsured. For more information on FDIC insurance please visit www.FDIC.gov. Deposits held in Program Banks are not protected by SIPC. For more information see the full terms and conditions and Betterment LLC’s Form ADV Part II.
DoughRoller receives cash compensation from Wealthfront Advisers LLC (“Wealthfront Advisers”) for each new client that applies for a Wealthfront Automated Investing Account through our links. This creates an incentive that results in a material conflict of interest. DoughRoller is not a Wealthfront Advisers client, and this is a paid endorsement. More information is available via our links to Wealthfront Advisers.
If you’re new to investing, the idea of getting started can be daunting. After all, you probably don’t have tens of thousands of dollars lying around to build a portfolio and feel like you can’t make much of a difference with the disposable cash you do have.
Luckily, though, you can start your investment journey for a lot less–even if you only have $100 to begin.
The most important part of investing is getting started as early as possible. Rather than waiting until you have a large sum of money saved up, you can get started today and begin growing your savings. Before you know it, you’ll be well on your way to building a healthy portfolio that earns you interest and sets you up for financial success for as little as $100.
Let’s look at a few fun (and low-cost) ways that anyone can start building an investment portfolio today.
Overview: Where and How to Invest $100
Investment Type
Best For
High-yield savings accounts
Emergency funds and money that needs to be accessible
Certificates of deposit (CDs)
Those who don’t need to touch their funds right away
Company retirement accounts
Easy contributions, company matching, and investment diversification
Investment apps
On-the-go recommendations that are easy to access and often free
Robo-advisors
A hands-off approach with a diversified portfolio
Peer-to-peer lending
High risks but also high rewards
1. Start with High-Interest Savings Accounts
The easiest and most flexible way to begin your investment adventure is actually to start saving your money in a high-yield savings account. While your returns will be more limited than they would be on the stock market, it will also be a safer investment–and you can withdraw your funds at any time without penalty.
If you don’t already have a sufficient emergency savings account established (ideally, six months’ worth of expenses), this is a must. Even if you do have some money saved away, a savings account can be a great way to keep a smaller amount of funds safe and secure, yet accessible.
The savings accounts of today won’t earn you as much as they would have ten or twenty years ago. However, there are some online banks offering as much as 1.80% on high-yield savings accounts right now, and the interest rate climbs all the time. This makes them a great introduction to the world of interest-bearing funds.
Some of our favorite banks for high-yield savings accounts include CIT Bank, Ally Bank, and Capital One 360. All three are online banks, charge no fees for savings accounts, and offer some of the highest interest rates on the market today.
Want to see even more of the best interest rates and the banks offering them? Check out our list here.
2. Earn With A CD
If you want your money to grow a bit more than it would with a high-yield savings account but still need the funds to be secure against market drops, then you can look into a certificate of deposit, or CD. These savings vehicles offer a guaranteed rate of return on your investment in exchange for locking your money away for a specified period of time.
As long as you leave the funds alone until the end of the CD term, you will receive your full investment amount plus the agreed-upon interest. It’s a safe, easy way to earn extra cash on your savings!
CDs come in a number of different flavors. For instance, there are CDs ranging in term from as little as three months to as many as five or six years. The longer the term, the higher interest rate you’ll be offered. Plus, many of them have low minimum deposit requirements, meaning that you can get started even if you only have $100 to tuck away.
As long as you know for certain that you won’t need to withdraw your funds early (which usually involves a painful early-withdrawal penalty), putting cash into a CD is a safe and easy way to invest.
3. Invest in Your Retirement Through Work
Interested in tax-advantaged retirement funds that will help you invest in your future? Then look into starting (and fully funding) an IRA in addition to your 401(k), through your employer.
If your employer offers to match contributions toward your 401(k), you should always take advantage of this. Even if you only contribute enough to collect the full employer match, that’s fine; failing to do so is essentially leaving free money on the table, though. Plus, your 401(k) contributions are tax-deductible and will grow over time, providing you with a healthy retirement nest egg for your future.
IRAs are also excellent long-term investment vehicles, primarily for the tax benefits. If you open a traditional IRA, your contributions will be tax-deductible up to the annual maximum. If you qualify for a Roth IRA, your contributions won’t be tax-deductible now, but your withdrawals will be when the time comes to utilize those funds.
Saving for retirement is the second-most-important priority (behind establishing a healthy emergency savings account). Before worrying about building a stock market investment portfolio, be sure that you are setting your older self up for success.
4. Utilize an Investment App
Ready to dabble in the stock market, but don’t quite know where to start? Or maybe you don’t think that you have enough investable funds to warrant a stock brokerage? Well, then an investment app might be the perfect introduction for you and your money.
There are a number of intro-to-investing apps on the market today, but one of our favorites is called Stash. After answering a few questions to determine your investment style (do you want to be super conservative with your money or risk more in order to potentially make more?), Stash will curate the perfect recommendations for you.
To start using Stash, you only need $5, making it one of the most flexible and affordable investment options around. Plus, if your account balance is below $5,000, your monthly service fee for using the app is a single dollar.
Yep, for only $3, you can get curated investment options as well as a wealth of advice and resources. This makes Stash truly ideal for beginner investors who don’t really know where to start or aren’t ready for a financial advisor just yet.
Sign up for Stash and get a $5 bonus after funding your account with $5.
To read our complete review of Stash and learn more about the app, see our write-up here.
Alternatively, Acorns uses your spare change to make thoughtful investments across a diverse portfolio. It starts the process by siphoning off the change from your spending. If you buy a drink for $4.75, the app pays the vendor the correct amount and puts the remaining $0.25 in an account ready for investing.
The app is essentially a robo-advisor that automatically invests money you wouldn’t otherwise miss. Your portfolio can easily be spread across thousands of individual securities using just a small amount of funds. Read more in our Acorns Review.
Related: The Best Investment Apps
Another app we love is Public. Public is unique because it makes the stock market social. You can follow your friends and other investors and have conversations about companies and trends to build your financial literacy over time. There are even a few famous faces on the app, like Girlboss founder Sophia Amoruso, Adobe Chief Product Officer Scott Belsky, and NBA legend, Shaq.
In addition to the social piece, Public offers fractional shares for thousands of public companies and even popular ETFs from Fidelity and BlackRock. This makes it possible to build a portfolio with just $100, because you can invest with dollar amounts (e.g. $1 worth of Amazon stock, if you like).
Public also has a fun Themes tab where you can discover and learn about companies based on your values and interests. The Growing Diversity theme spotlights companies with high marks for diversity and inclusion. Infinity and Beyond curates companies involved in space travel. Made in the USA spotlights companies who support job creation domestically.
You won’t pay any commissions for standard stock and ETF trades with Public. It’s also one of the first free trading apps to announce that it will no longer participate in payment for order flow (PFOF). This decision removes any conflict of interest from its business model. Public also added an optional Tipping feature on trades and hopes that community support will help to offset the revenue it will lose by forgoing the PFOF model.
Read our review of Public
Related: How to Invest in the Stock Market: A Guide
If you’re looking to diversify your portfolio, you could try Masterworks. Masterworks enables you to buy shares in blue-chip artwork pieces by household names like Van Gogh and Andy Warhol. While the value of art is inherently subjective and therefore a high-risk investment blue-chip works like these have historically outperformed the stock market by a significant margin.
Masterworks looks to buy a new work every 1-2 months, and pieces typically sell after 5-10 years, making it a long-term play. Works can only be sold when all owners agree to do so with no owner permitted a greater than 20 percent share, so as not to give them undue influence. As such, it is an illiquid asset, but long-term value investing is no bad strategy.
Aside from shared ownership of blue-chip art, Masterworks big innovation is using blockchain to both reliably value the art, and maintain accurate ownership records of all pieces. Plus, they’re planning to open a free-to-access gallery where you can visit your investment.
Read our full review of Masterworks or visit Masterworks.
SEE IMPORTANT INFORMATION HERE.
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5. Robo-Advisors Might Be the Answer
There is a growing number of robo-advisors on the market today, most of which offer you automated investment options for an affordable price tag. This makes them a great option for beginners or hands-off investors who want their money to grow without constant oversight.
Companies like Betterment offer easy-to-use platforms that make investing as simple as using a savings account. Simply add the money you want to invest (as much or as little as you can afford each month) to your account and watch Betterment work its magic by investing your funds in ETFs (exchange traded funds).
Robo-advisors will help you rebalance your portfolio over time, can reinvest your dividends, and will even help you with tax-loss harvesting. The fees are a bit higher than you would find if you invested your funds directly with a company, but the added expense may be well worth it to you for the convenience of a hands-off approach.
You can also opt for a robo-advisor such as Ally Invest or M1. Ally’s trading platform is free for stocks and ETF’s, and charges less than $10 per trade for mutual funds. With M1, there are no fees to worry about as long as you meet low investment minimums on the platform.
6. Check Out Peer-to-Peer Lending
Looking for a quick return on your funds, whether you’re investing $25 or $2,500? Then look into peer-to-peer lending.
Platforms like Lending Club and Prosper allow approved investors to put up funds in denominations as low as $25. You’ll be able to choose the peer loans that you’re most interested in, lending money directly to borrowers and enjoying return rates ranging from 5% to as high as 33% in some cases.
Peer-to-peer (P2P) lending comes with additional risks, but with great risk comes great rewards namely in the form of interest rates higher than you’re guaranteed to find elsewhere.
FAQs
Curious how you can grow your investments if you’re starting out with only $100? Here are a few common questions from others who are just as curious.
How much interest will I earn on $100?
It’s impossible to say how much interest you can earn from $100 because there are a few key variables in play. First, it’ll depend on where you put that money — are you investing it in the stock market or letting it sit in a savings account? Then, it’ll depend on the timeframe — are you interested in how much that money will grow in a year or where it’ll stand come retirement? Just for perspective, though: if you had bought $100 worth of Amazon shares in 1997, you’d have enjoyed more than a $120,000 growth in value by 2018. On the other hand, if you put that $100 in a high-yield savings account today, you could earn a few extra bucks by year’s end.
How should I invest $100 to make $10k?
Again, where are you investing and how much risk are you willing to take on? The riskier the investment, the faster and more aggressive the growth. Short of perfectly timing a surprise stock or buying a winning lottery ticket, turning $100 into $10,000 will take some time. If you’re determined to grow a $100 investment to $10,000, though, you may want to consider high-risk stocks or something like peer-to-peer lending.
How can I invest $100 wisely?
The wisest investment is the one you can best live with. If you don’t really have $100 to spare in the first place, investing it in a mutual fund probably isn’t wise. If you can’t afford to lose that money, using a p2p platform to offer loans with it also isn’t wise. If you can comfortably take on that risk, though, go for it. Otherwise, wise investments include savings accounts and CDs, and you’ll want to be sure to calculate how long you realistically want to invest those funds.
What’s the best way to invest $100 short term?
If you need your money available sooner rather than later, you’ll be trading off growth for convenience. With that said, short-term investments may be the best choice for those who just want to earn a little extra money and then have their funds available when they need them. This means putting it away in a CD with a smaller time frame or letting it grow in a savings account.
Bottom Line
Investing doesn’t only mean spending tens of thousands of dollars on stocks and building a Wall Street portfolio. It simply means making your money work for you, and you can get started for as little as a few bucks.
There are plenty of options to begin building your first portfolio, letting your money earn interest and grow over time. Whether you choose a high-yield savings account or go the high-risk/high-return route of the stock market, the important thing is to start early.
Also read: What to Do with Your Money When Interest Rates Are Low
Be sure to also watch your progress over time, too, and revisit whether you are making efforts in the right places. No, you don’t need to watch your investments daily or obsess over normal market fluctuations. However, using a platform like Empower to track not only your investments and savings accounts but overall net worth can be invaluable along the way.
Brokerages often have promotions for new account sign ups. Most also have commission free trades and a full spectrum of investment options.
Depending on how much you have to invest you could get a bonus up to $10,000.
Best Brokerage Promotions
M1 Finance – Earn Up to $10,000
M1 Finance will give you up to $10,000 for opening an investment account. Your bonus amount depends on the amount you deposit.
A deposit of $50,000 – $249,999 will get you a bonus of $250
A deposit of $250,000 – $499,999 will get you a bonus of $1,000
A deposit of $500,000 – $999,999 will get you a bonus of $2,000
A deposit of $1,000,000 – $1,999,999 will get you a bonus of $4,000
A deposit of $2,000,000+ will get you a bonus of $10,000
Unlike a lot of brokers on this list, retirement accounts are not included in this promotion.
M1 Finance uses preset portfolios known as “pies.” You can choose premade pies or you can set up your own. Each investment of the pie is set a percentage of your portfolio and as investments are made to the account they are distributed based on asset allocation. So, if one of your “slices” is less than the preset your new investment will buy more of that slice to bring it up to its appropriate percentage allocation.
Offer ends 3/31/2023
Get started with M1 Finance here. Or read our full review of M1 Finance.
E*trade – Earn Up to $3,500
With E*Trade new customers can earn up to $3,500 depending on how much you have to deposit. To qualify, you must make the deposit within 60 days of opening the account and use promo code BONUS23.
A deposit of $5,000 – $19,999 will get you a bonus of $50
A deposit of $20,000 – $49,999 will get you a bonus of $100
A deposit of $50,000 – $99,999 will get you a bonus of $200
A deposit of $100,000 – $199,999 will get you a bonus of $300
A deposit of $200,000 – $499,999 will get you a bonus of $600
A deposit of $500,000 – $999,999 will get you a bonus of $1,200
A deposit of $1,000,000 – $1,499,999 will get you a bonus of $2,500
A deposit of $1,500,000+ will get you a bonus of $3,500
Existing customers can also get in on the action.
A deposit of $500,000 – $999,999 will get you a bonus of $600
E*Trade doesn’t have any account minimums to open or account maintenance fees. They also have $0 commissions for online domestic stocks, ETFs, and mutual funds. There is a fee for options that is between 50 and 65 cents depending on your trading volume. Bonds are $1 and futures are $1.50.
Offer ends 4/18/2023
Get started with E*Trade here. Or read our full review of E*Trade.
Charles Schwab – Earn Up to $1,000
Charles Schwab will give you up to $1,000 for opening a new investing account. The catch is that you’ll need to be referred to Schwab by a current client. If you know someone who is already using Schwab they will need to send you a link you can use that will qualify you for the bonus.
Also, how big your bonus will be depends on how much you deposit into the account.
A deposit of $25,000– $49,999 will get you a bonus of $100
A deposit of $50,000 – $99,999 will get you a bonus of $300
A deposit of $100,000 – $499,999 will get you a bonus of $500
A deposit of $500,000+ will get you a bonus of $1,000
To receive the offer you will need to make the deposit to the account within 45 days of account opening.
Charles Schwab has $0 commission online trades for stocks and ETFs. Options are 65 cents per contract. There are no account minimums to open but you’ll need to deposit at least $25,000 to receive a bonus.
Get started with Charles Schwab here. Or read our full review of Charles Schwab.
JP Morgan Self-Directed Investing – Earn Up to $700
You can get up to $700 by opening a self-directed brokerage account with JP Morgan. How much you’ll receive depends on how much you deposit into the account:
A deposit of $10,000 – $24,999 will get you a bonus of $50
A deposit of $25,000 – $99,999 will get you a bonus of $150
A deposit of $100,000 – $249,999 will get you a bonus of $325
A deposit of $250,000+ will get you a bonus of $700
You will have to fund the account within 45 days of opening and keep the account funded for 90 days to qualify. The money needs to be “new” to JP Morgan and Chase to qualify.
You can open a taxable investment account or either a Traditional or Roth IRA.
JP Morgan offers commission-free online trades and a wide variety of investments including stocks, ETFs, mutual funds. They also offer options which are charged 65 cents per contract.
Offer ends 4/13/2023
INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
Get started with JP Morgan here.
Merrill Edge – Earn Up to $600
At Merrill Edge you can get up to $600 by opening a new self-directed brokerage account or IRA. The amount of your bonus depends on how much you deposit into the account.
A deposit of $20,000 – $49,999 will get you a bonus of $100
A deposit of $50,000 – $99,999 will get you a bonus of $150
A deposit of $100,000 – $199,999 will get you a bonus of $250
A deposit of $200,000+ will get you a bonus of $600
To receive your bonus, you’ll need to make your deposit within 45 days of account opening and then maintain that balance for at least 90 days. The money you deposit has to be “new” money to Merrill Edge which includes money that is currently with Bank of America or a 401(k) that is currently managed by Merrill Edge.
Merrill Edge has $0 stock and ETF trades. Options are 65 cents per contract.
Also, funds in your Merrill Edge account go towards your status as a Bank of America Preferred Rewards member, which gives you preferred pricing on many of their products. You can learn more about the Preferred Rewards program here.
Get started with Merrill Edge here. Or read our full review of Merrill Edge.
Fidelity Investments – Earn $100
With the Fidelity you can earn $100 just by depositing $50 within 15 days of opening the account. Use code FIDELITY100 when signing up to qualify.
There are five account options included in this promotion.
The Fidelity Account
The Fidelity Account is Fidelity’s brokerage account. There are $0 commissions for online US stock, ETF, and option trades.
Investment choices include both domestic and international stocks, ETFs, options, over 3,700 mutual funds, bonds, CDs, and precious metals. It even allows margin borrowing and extended trading hours.
The vast majority of Fidelity’s mutual funds do not have any transaction fees and they even offer a few funds that have no fees at all, not even management fees. These fee-free funds are called Fidelity ZERO funds.
You can also buy fractional shares in your brokerage account. This is a great feature for those who want to own a piece of a company but don’t have the funds to buy a whole share.
Fidelity Cash Management Account
The Fidelity Cash Management Account works similar to a checking account but it keeps the funds in your Fidelity account for easy access when you are ready to invest.
Your funds are FDIC insured and you can access them all the ways you would normally use your money in checking account, including debit card, online bill pay, paper checks, and online transfers.
Your balance also earns a competitive interest rate so it will work as a savings account as well.
Fidelity Starter Pack
The Fidelity Starter Pack comes with both The Fidelity Account and the Fidelity Cash Management Account.
Neither account has fees or minimum balances to open, keep in mind to get the $100 bonus you’ll need to deposit $50 within the first 15 days.
In the brokerage account there are $0 commission for online US stock, ETF, and option trades. The cash management account is similar to a checking account, the cash is available for easy investing but it is also available for easy spending and is FDIC insured.
Traditional and Roth IRAs
Both Traditional and Roth IRA’s also qualify for the $100 promotion. These are both retirement accounts, but they are taxed slightly differently. When you make contributions to a Roth you contribute after tax money, meaning you don’t get a tax break when you contribute, but you can make tax free withdrawals. So, your money grows tax free.
With a Traditional IRA you make pre-tax contributions but are taxed on all the money when you withdraw in retirement.
Within these accounts you will have access to the full suite of investments offered through Fidelity.
Here’s more information about how IRAs work.
Get started with Fidelity here. Or read our full review of Fidelity here.
Webull – Earn Up to 12 Free Fractional Shares
You can earn two free fractional shares just by opening a Webull brokerage account. Then deposit any amount of money into the account for an additional ten free fractional shares.
Which shares you get will be determined at random, but all companies are listed on the NYSE or NASDAQ and have at least $20 billion capitalization and have share prices between $3 and $3,000. You will most likely receive between $3 and $30 worth of stock. Once the shares are issued you have 30 days to claim them.
Webull offers commission-free trades and no minimum deposit is required to open an account – although you will need to make a deposit to qualify for your bonus. They offer fractional shares, crypto, ETFs, options, OTC, and paper trading.
Offer ends 3/31/2023.
Get started with Webull here. Or read our full Webull review.
Robinhood – Earn Up to $200 in Free Stock (But Probably $5)
With Robinhood you can earn a free stock by opening an investment account and linking your bank account.
Once you are set up you will receive a “specified amount” that you can use to choose a fractional share of from a list of 20 S&P 500 companies. Your bonus amount will range between $5 and $200 — but most likely between $5 and $10.
New Robinhood customers are eligible, but existing customers can also claim the bonus if they refer a new customer to Robinhood. You can sell the free stock after three days but you can’t withdraw the cash for 30 days. You can use it to reinvest in something else if you’d like.
Robinhood’s key feature is no fees. They don’t even have fees on options which most brokerages charge for. Robinhood offers stocks, ETFs, crypto, and trading on margin.
Get started with Robinhood here. Or read our full review of Robinhood.
Betterment – Up to One Year Free
Betterment is a popular robo advisor offering up to one year free depending on how much you deposit into your new account.
A deposit of $15,000 – $99,000 will get you 1 month free
A deposit of $100,000 – $249,999 will get you a bonus of 6 months free
A deposit of $250,000 will get you a bonus of 1 year free
You must deposit the funds within one month of account opening; does not apply to crypto.
So, in order to get the full year free, you have to deposit at least $250,000 to your account. However, that’s a substantial savings when you consider even the 0.25% annual management fee.
Get started with Betterment here. Or read our full review of Betterment.
What is a Brokerage Account?
A brokerage account is a type of investment account that allows individuals to buy and sell various securities, such as stocks, bonds, mutual funds, exchange-traded funds (ETFs), options, and more. The account is managed by a brokerage firm or financial institution, which acts as an intermediary between the investor and the securities markets.
When an investor opens a brokerage account, they deposit funds into the account, which they can then use to buy securities. The brokerage firm will typically charge fees for each transaction made in the account, which can include commissions, fees for account maintenance, and other charges.
Brokerage accounts can offer a range of features and benefits depending on the firm or institution that manages them. For example, some accounts may provide access to research and analysis tools to help investors make informed investment decisions, while others may offer margin trading, which allows investors to borrow funds to make larger trades.
How to Choose a Brokerage Firm
Choosing a brokerage firm or platform that meets your needs can be an important decision when it comes to managing your investments. Here are some factors to consider when choosing a brokerage firm or platform:
Fees: Look for a firm that charges competitive fees for trades, account maintenance, and other services. Some firms may offer commission-free trades, which can be an attractive option for frequent traders.
Investment products: Consider the range of investment products offered by the firm, including stocks, bonds, ETFs, mutual funds, and other securities. Make sure the firm offers the products you want to invest in.
Research and tools: Look for a firm that provides access to research and analysis tools to help you make informed investment decisions. These tools may include market data, stock analysis, financial news, and more.
Trading platform: Consider the trading platform provided by the firm, including its ease of use, features, and functionality. Some platforms may offer advanced tools and customization options, while others may be more streamlined and user-friendly.
Customer support: Look for a firm that provides responsive and helpful customer support, whether it’s through phone, email, or live chat. Make sure the firm has a good reputation for resolving issues quickly and efficiently.
Security: Consider the security measures taken by the firm to protect your account and personal information, such as two-factor authentication, encryption, and other security features.
All the platforms in this article are reputable, safe, and have low fees.
What is the Minimum Deposit to Open a Brokerage Account?
The minimum deposit required to open a brokerage account can vary depending on the brokerage firm or platform you choose. Some firms may not require a minimum deposit at all, while others may require several thousand dollars or more.
In general, discount brokers and online platforms tend to have lower minimum deposit requirements than full-service brokers.
Also, keep in mind that to receive the brokerage account bonus, you will have to meet the minimum deposit requirements. While there may not a minimum deposit required to open the account, there will be one to qualify for the bonus.
Are Brokerage Account Bonuses Taxable?
Yes, brokerage account bonuses are generally considered taxable income and must be reported on your tax return. Make sure to consult with a tax professional to understand the tax implications of any brokerage account bonuses you receive.
Final Thoughts
Choosing a place to invest your money is going to depend on a variety of factors including how much money you have to invest, how much investing experience you have and the type of investments you are looking for. You want to make sure your choice is the best fit for your financial situation so be sure to check out our list of Best Online Discount Brokers for 2023 for additional options.
Robo-advisors have barely been around for 10 years, but in the past couple of years several have been steadily expanding their investment menus, and even offering valuable add-on services. One of the leaders in this regard is Wealthfront. The robo-advisor has been growing its investment capability in every direction but is now even offering financial planning. The platform now bills itself as offering High-Interest Cash, Financial Planning & Robo-Investing for Millennials. If you’re looking for more than just investing, Wealthfront has it. And as has become their trademark, it’s all available at a low cost.
What is Wealthfront?
Based in Palo Alto, California, and founded in 2011, Wealthfront has about $25 billion in assets under management. It’s the second-largest independent robo-advisor, after Betterment. And while dozens of robo-advisors have arrived in recent years, Wealthfront stands out as one of the very best. There isn’t any one thing Wealthfront does especially well, but many. And they’re adding to their menu of services all the time.
Their primary business of course is automated online investing. You can open an account with as little as $500, and the platform will design a portfolio for you, then manage it continuously. Your money will be invested in a globally diversified portfolio of ETFs–just like most other robo-advisors. But Wealthfront takes it a step further, and also adds real estate and natural resources.
Like other robo-advisors, Wealthfront uses Modern Portfolio Theory (MPT) in the creation of portfolios. They first determine your investment goals, time horizon, and risk tolerance, then build a portfolio designed to work within those parameters. MPT emphasizes proper asset allocation to both maximize returns, and minimize losses.
But in a major departure from other robo-advisors, Wealthfront now offers the ability to customize your portfolio and get access to a variety of investment methodologies and portfolios, including Smart Beta, Risk Parity and Stock-Level Tax-Loss Harvesting. And more recently, they’ve also stepped into the financial planning arena. They now offer several financial planning packages, customized to very specific needs, including retirement planning and college planning.
If you haven’t checked out Wealthfront in the past year or so, you definitely need to give it a second look. This is a robo-advisor platform where things are happening–fast!
How Wealthfront Works
When you sign up with Wealthfront, they first have you complete a questionnaire. Your answers will determine your investment goals, time horizon, and risk tolerance. A portfolio invested in multiple asset classes will be constructed, with an exchange-traded fund (ETF) representing each.
The advantage of ETFs is that they are low-cost, and enable the platform to expose your portfolio to literally hundreds of different companies in each asset class. With your portfolio invested in multiple asset classes, it will literally contain the stocks and bonds of thousands of companies and institutions, both here in the U.S. and abroad.
Wealthfront offers tax-loss harvesting on all portfolio levels. But they’ve also added portfolio options for larger investors, that include stocks as well as ETFs. The inclusion of stocks gives Wealthfront the ability to be more precise and aggressive with tax-loss harvesting.
Each portfolio also comes with periodic rebalancing, to maintain target asset allocations, as well as automatic dividend reinvestment. As is typical with robo-advisors, all you need to do is fund your account–Wealthfront handles 100% of the investment management for you.
More recently, Wealthfront has also added external account support. The platform can now incorporate investment accounts that are not directly managed by the robo-advisor. This will provide a high-altitude view of your entire financial situation, helping you explore what’s possible and providing guidance to optimize your finances.
And much like many large investment brokers, Wealthfront now offers a portfolio line of credit. It’s available only to investors with $25,000 or more in a taxable account, but if you qualify you can borrow money against your investment account and set your own repayment terms in the process
Wealthfront Features and Benefits
Minimum initial investment: $500
Account types offered: Individual and joint taxable accounts; traditional, Roth, rollover and SEP IRAs; trusts and 529 college accounts
Account access: Available in web and mobile apps. Compatible with Android devices (5.0 and up), and available for download at Google Play. Also compatible with iOS (11.0 and later) devices at The App Store. Compatible with iPhone, iPad and iPod touch devices.
Account custodian: Account funds are held in a brokerage account in your name through Wealthfront Brokerage Corporation, which has partnered with RBC Correspondent Services for clearing functions, such as trade settlement. IRA accounts are held with Forge Trust.
Customer service: Available by phone and email, Monday through Friday, from 7:00 AM to 5:00 PM, Pacific time.
Wealthfront security: Your funds invested with Wealthfront are covered by SIPC, which insures your account against broker failure for up to $500,000 in cash and securities, including up to $250,000 in cash.
Wealthfront uses third-party providers to maintain secure, read-only links to your account. The providers specialize in tracking financial data, as well as employ robust, bank-grade security, and in general, they follow data protection best practices. In addition, Wealthfront does not store your account password.
Wealthfront Investment Methodology
For regular investment accounts, Wealthfront constructs portfolios from a combination of 10 different specific asset classes. This includes four stock funds, four bond funds, a real estate fund, and a natural resources fund.
Each portfolio will contain various allocations of each asset class, based on your investor profile as determined by your answers to the questionnaire. The one exception is municipal bonds. That allocation will appear only in taxable accounts. IRAs don’t include them since the accounts are already tax-sheltered.
Notice in the table below that most asset classes have two ETFs listed. This is part of Wealthfront’s tax-loss harvesting strategy. In each case, the two ETFs are very similar. To facilitate tax-loss harvesting, one fund position will be sold, then the second will be purchased at least 30 days later, to restore the asset class. (We’ll cover tax-loss harvesting in a bit more detail a little further down.)
The ETFs used for each asset class are as follows, as of December 29, 2018:
Specific Asset ClassGeneral Asset ClassPrimary ETFSecondary ETF
US Stocks
Stocks
Vanguard CRSP US Total Market Index (VTI)
Schwab DJ Broad US Market (SCHB)
Foreign Stocks
Stocks
Vanguard FTSE Developed All Cap ex-US Index (VEA)
Schwab FTSE Dev ex-US (SCHF)
Emerging Markets
Stocks
Vanguard FTSE Emerging Markets All Cap China A Inclusion Index (VWO)
iShares MSCI EM (IEMG)
Real Estate
Real Estate
Vanguard MSCI US REIT (VNQ)
Schwab DJ REIT (SCHH)
Natural Resources
Natural Resources
State Street S&P Energy Select Sector Index (XLE)
Vanguard MSCI Energy (VDE)
US Government Bonds
Bonds
Vanguard Barclays Aggregate Bonds (BND)
Vanguard Barclays 5-10 Gov/Credit (BIV)
TIPS
Bonds
Schwab Barclays Capital US TIPS (SCHP)
Vanguard Barclays Capital US TIPS 0-5 Years (VTIP)
Municipal Bonds (taxable accounts only)
Bonds
Vanguard S&P National Municipal (VTEB)
State Street Barclays Capital Municipal (TFI)
Dividend Stocks
Bonds
Vanguard Dividend Achievers Select (VIG)
Schwab Dow Jones US Dividend 100 (SCHD)
Wealthfront’s historical returns are as follows (through 1/31/2019). But keep in mind these numbers are general. Since the portfolios designed for each investor are unique, your returns will vary.
Specialized Wealthfront Portfolios
As mentioned in the introduction, Wealthfront has rolled out several different investment options, in addition to its regular robo-advisor portfolios. Each represents a specific, and generally more specialized investment strategy, and is typically available to those with larger investment accounts.
Smart Beta: You’ll need at least $500,000 to be eligible for this portfolio. Smart beta departs from traditional index-based investing, which relies on market capitalization. For example, since Apple is one of the most highly capitalized S&P 500 stocks, it has a disproportionate weight in strict S&P 500 index funds. In a smart beta portfolio, the position in Apple will be reduced based on other factors.
In general, under smart beta, the weighing of stocks in the fund uses a variety of factors that are less dependent on market capitalization. There’s some evidence this investment methodology produces higher returns. This portfolio is available at no additional fee.
Wealthfront Risk Parity Fund: This is actually a mutual fund–the first offered by Wealthfront. It involves the use of leverage with some positions within the portfolio. It attempts to achieve higher long-term returns by equalizing the risk contributions of each asset class. It’s based on the Bridgewater Hedge Fund, and requires a minimum of $100,000, with an additional annual fee of 0.25% (0.50% total). This is the only Wealthfront portfolio that charges a fee over and above the regular advisory fee.
Socially responsible investing (SRI): Wealthfront just recently began to offer a specific SRI portfolio option. Once you sign up, you’ll be able to customize your portfolio and add socially responsible ETFs.
Sector-specific ETFs: If you want to invest in a particular portion of the market, such as technology or healthcare, Wealthfront gives you the option to build a portfolio that focuses on certain industries to portions of the stock market.
Customized Wealthfront Portfolios:
Wealthfront also lets investors build their own portfolios, which is somewhat uncommon among robo-advisors.
Most robo-advisors will build your portfolio automatically based on your risk tolerance and goals. If you like that service, Wealthfront can do it. However, more hands-on investors are free to make tweaks to the automatically designed portfolio by adding or removing ETFs.
You can also build a portfolio entirely from scratch if you’d rather. You can choose which ETFs to invest in and how much you want to invest in them. You can then let Wealthfront handle things like rebalancing and tax-loss harvesting while maintaining the portfolio you desire.
Wealthfront Tax-loss Harvesting
If there’s one investment category where Wealthfront stands above other robo-advisors, it’s tax-loss harvesting. Not only do they offer it on all regular taxable accounts (but not IRAs, since they’re already tax-sheltered), but they also offer specialized portfolios that take it to an even higher degree.
Wealthfront starts with a tax location strategy. That involves holding interest and dividend-earning asset classes in IRA accounts, where the predictable returns will be sheltered from income tax. Capital appreciation assets, like stocks, are held in taxable accounts, where they can get the benefit of lower long-term capital gains tax rates.
But for larger portfolios, Wealthfront offers Stock-level Tax-Loss Harvesting. Three specialized portfolios are available, using a mix of both ETFs and individual stocks. The purpose of the stocks is to provide more specific tax-loss harvesting opportunities. For example, it may be more advantageous to sell a handful of stocks to generate tax losses, than to close out an entire ETF.
Given that Wealthfront puts such heavy emphasis on tax-loss harvesting, it’s not surprising they’ve published one of the most respected white papers on the subject on the internet. If you want to know more about this topic, it’s well worth a read. The paper concludes that tax-loss harvesting can significantly increase the return on investment of a typical portfolio.
US Direct Indexing
US Direct Indexing is an enhanced level of tax-loss harvesting that Wealthfront offers to people with account balances exceeding $100,000.
Instead of building a portfolio of ETFs, Wealthfront will use your money to directly purchase shares in 100, 500, or 1,000 US companies. By buying shares in so many companies, Wealthfront can emulate an index fund in your portfolio while owning individual shares in the businesses.
Owning individual shares in hundreds of companies makes tax-loss harvesting easier as it lets Wealthfront’s algorithm trade based on movements in individual stocks rather than in funds. This can increase the number of tax losses that Wealthfront harvests each year, reducing your income tax bill.
Other Wealthfront Features
Wealthfront Cash Account
Wealthfront offers acash account where you can safely and securely store your money for anything–emergencies, a down payment for a home, or to later invest. By working with what they call Program Banks, Wealthfront has quadrupled the normal FDIC insurance on this account, so you’re protected for up to $5 million.
There’s also no market risk since it’s not an investment account and the money isn’t being invested anywhere. You can make as many transfers in and out of the account as you’d like, and it only takes $1 to start.
So what’s the catch?
There really isn’t one. Wealthfront will skim a little off the top to make some money before giving you an industry-leading 4.30% APY, but other than that, you’re just giving them more financial data. Since we’re doing this all the time with technology anyway, it shouldn’t make that big of a difference.
I see no downside, especially if you’re already a client of Wealthfront.
They’re really making a play to be your all-in-one financial services provider, too.
A new feature, just launched, is the ability to use your cash account as a checking account. This includes the ability to access your paycheck up to two days early when you set up a direct deposit. Additionally, you can invest in the market within minutes using your Wealthfront Cash account. Put the two together and you give yourself the ability to invest more than 100 days more in the market. The account also allows you to auto-pay bills and use apps like Venmo and PayPal to send money to friends or family. Account-holders also get a debit card to make purchases and get cash from ATMs. And you can use the account to organize your cash into savings buckets – like an emergency fund, down payment on a house, or other large purchase – and use Wealthfront’s Self-Driving Money offering to automate your savings into those buckets.
If you have cash that’s getting rusty in a traditional bank account and you want to earn more, the Wealthfront Cash Accountis a great place to keep it.
Read more about the cash account in our Wealthfront Cash Account full review.
Wealthfront Portfolio Line of Credit
This feature is available if you have at least $25,000 in your Wealthfront account. It allows you to borrow up to 30% of your account value, and currently charges interest rates between 3.15% and 4.40% APR depending on account size. You can make repayments on your own timetable, since you’re essentially borrowing from yourself. And since the credit line is secured by your account, you don’t need to credit qualify to access it.
Wealthfront Free Financial Planning
This is Wealthfront’s entry into financial planning. But like everything else with Wealthfront, this is an automated service. There are no in-person meetings or phone calls with a certified financial planner. Instead, technology is used to help you explore your financial goals, and to provide guidance to help you reach them. And since the service is technology-based, there is no fee for using it.
The service can be used to help you plan for homeownership, college, early retirement, or even to help you plan to take some time off to travel, like an entire year!
Simply choose your financial objective, enter your financial information, and Wealthfront will direct you on how to plan and prepare.
Self-Driving Money
One of the biggest and largely unrecognized obstacles for most investors is something known as cash drag. That’s when you have too much of your portfolio sitting in cash, which may earn interest, but it doesn’t provide the investment returns you can get in a diversified investment portfolio.
Wealthfront has addressed the cash drag dilemma with their newly released Self-Driving Money features. It’s a free service offered by the robo-advisor that essentially automates your savings strategy. It does this by automatically moving excess cash to help meet your goals, including into investment accounts where it will earn higher returns. And in the process, it eliminates the need to make manual cash transfers, and the judgment needed to decide exactly when to make that happen.
Our vision of Self-Driving Money is going to be a complete game-changer for people’s finances, said Chris Hutchins, Head of Financial Automation at Wealthfront. We want to completely remove the burden of managing your money so you can focus on your career, your family or whatever is most important to you.
You can take advantage of Self-Driving Money from the Wealthfront Cash Account. You’ll set a maximum balance for the connected account, which should be an amount that’s more than you expect to spend or withdraw on a monthly basis.
How It Works
When Wealthfront determines you’re over your maximum balance by at least $100 it will schedule an automatic transfer of the excess cash based on your goals. For example, you can tell Wealthfront you want to save $10,000 in an emergency fund, then max out your Roth IRA, then put the rest toward saving for a down payment on a house. Once you set the strategy, Wealthfront will automate the rest.
And before it happens, you’ll receive an email alert, then always have 24 hours to cancel the transfer if you need to cover unexpected expenses. You’ll also be able to turn on and off your Self-Driving Money plan at any time.
It’s usually possible to set up automated transfers from external accounts into most investment accounts. But what sets Wealthfront apart is the fact that it will make those transfers automatically. They will make sure you always have enough cash to pay your bills, then automatically transfer any excess into your savings buckets or investment accounts to improve the return on your money.
The strategy is designed to optimize your money across spending, savings, and investments, and to make it all flow with no effort on your part. You can simply have your paycheck direct deposited into your external checking account or Wealthfront Cash Account, cover your expected monthly spending, then have excess funds automatically transferred into the Wealthfront account of your choice.
By delivering on its Self-Driving Money vision, Wealthfront is taking the robo-advisor concept to a whole new level. Not only do you not need to concern yourself with managing your investments, but now even funding those investments will happen automatically. The result will be near complete freedom from the financial stresses that plague so many individuals.
Wealthfront Fees
Wealthfront has a single fee structure of just 0.25% per year for their advisory fee. That means you can have a $100,000 portfolio managed for just $250, or only a little bit more than $20 per month.
The one exception is the Wealthfront Risk Parity Fund, which has a total fee of 0.50% per year.
How to Sign Up with Wealthfront
To open an account with Wealthfront, you’ll need to be at least 18 years old, and a U.S. citizen.
You’ll need to provide the following information:
Your name
Address
Email address
Social Security number
Date of birth
Citizenship/residency status
Employment status
As is the case with all investment accounts, you’ll also be required to supply documentation verifying your identity. This is usually accomplished by supplying a driver’s license or other state-issued identification.
As mentioned earlier, you complete a questionnaire that will be used to determine your investment goals, time horizon, and risk tolerance. Your portfolio will be based on your answers to that questionnaire, and will be presented to you upon completion of the questionnaire.
For funding, you can use ACH transfers from a linked bank account. You will also have the option to schedule recurring deposits, on a weekly, biweekly, or monthly basis. The platform can even enable you to set up dollar-cost averaging deposits.
If you already have a brokerage account with another company, Wealthfront makes it easy to transfer your funds to your new account. If you’re invested in ETFs that Wealthfront supports, Wealthfront will assist with an in-kind transfer.
That means that you won’t have to sell your shares before transferring funds, which lets you avoid capital gains taxes that would be triggered by a sale.
Wealthfront Alternatives
Wealthfront’s closest competitor, and the robo-advisor that offers the most comparable services, is Betterment. They also have an annual advisory fee of 0.25%, but require no minimum initial investment. That could make it the perfect robo-advisor for someone with no money, who plans to fund their account with monthly deposits. Read the full Betterment review here.
Related: Wealthfront vs. Betterment
Another alternative is M1. Also a robo-advisor, M1 enables you to invest your money in what they call “pies”. These are miniature investment portfolios comprised of both stocks and ETFs. You can invest in existing pies, or create and populate pies of your own design. Once you invest in one or more pies, the platform will automatically manage it going forward. What’s more, M1 is free to use. Read more about M1 here.
Related: Wealthfront vs. Vanguard
Read More: The Best Robo Advisors – Find out which one matches your investment needs.
Wealthfront Pros and Cons
Investment options: Wealthfront offers more investment options than just about any other robo-advisor, particularly for investors with at least $100,000.
Reasonably priced: The annual fee of 0.25% is extremely reasonable, especially when you consider the degree of sophistication offered by Wealthfront’s investment methodology.
Tax-loss harvesting: This is available on all accounts, and Wealthfront is probably better at this investment strategy than any other robo-advisor.
Portfolio credit line: Gives you the ability to borrow against your portfolio with ease, and represents a form of margin investing.
Financial planning feature: The financial planning service is free to use and is available to all investors.
Limited access for smaller investors: Some of the more advanced investment portfolios and services are available only to investors with $100,000 or more to invest.
$500 minimum initial investment: It’s a minor issue, though some competitors require no funds to open an account.
FAQs
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Should You Sign Up for Wealthfront?
In a word, absolutely! Wealthfront is one of the very top robo-advisors, and you can’t go wrong with this one. Not only do they offer far more services than most other robo-advisors, but they also allow you to grow along the way. For example, as your account increases in value, you can take advantage of more sophisticated investment strategies, including advanced tax-loss harvesting.
That Wealthfront offers its portfolio line of credit and free financial planning services only makes the platform a bit more attractive, But the real benefit is the actual investment service. Wealthfront’s investment service comes extremely close to that of traditional human investment advisors, but at only a fraction of the annual cost.
When I learned that my late grandfather had left me his prized watch in his will, I was swept away by a confusing mix of emotions.
I felt touched, of course, that he thought of me and wanted me to inherit something he treasured so highly. Naturally, I also felt a pang of melancholy realizing that the watch came loaded with memories of his vibrant life, but also his passing.
The more surprising emotion, however, was stress. Did I really deserve this watch? What would I do with something so valuable? Would he expect me to wear it? What if I lost it? Am I allowed to sell it?
According to CNBC, around 40% of America’s young generation will inherit wealth. Much of the time, that wealth will come in the form of physical valuables like watches, jewelry, clothing, art, and collections.
If you’ve inherited something valuable or think you might in the future, you might already be facing the confusing mix of emotions that I went through. That’s why I felt inspired to write this piece. Despite the fact that millions of young people will inherit valuables, there’s not a lot of material out there to help us not only appraise and sell the items but get comfortable with the idea of selling in the first place.
What’s Ahead:
Process those complex emotions and decide if selling is right for you
When I received my grandfather’s watch, I found myself in a similar headspace as Frodo when he inherited The One Ring. Staring down at our newfound jewelry, the hairy-footed hobbit and I both realized three things:
It’s valuable.
I don’t exactly know why it was given to me.
I probably shouldn’t tell anyone that I have it.
Naturally, Frodo and I both reached the same, misguided conclusion – that we should hide it and never speak of it again. This, of course, was the wrong choice; basically, a form of procrastination until we figured out what to do with it.
Whereas Frodo eventually threw his inheritance into a volcano, that isn’t really an option for you and me. We know that whoever left us the item wouldn’t have wanted us to just bury it in our linen closet, so that leaves us with two choices: use it or sell it.
Most people assume that if their late relative left them something valuable, it’s because they wanted them to use it and enjoy it as they did in life. Therefore, if you immediately turn around and sell it, it’s like returning their thoughtful Christmas gift to the store. It’s awkward and uncomfortable, and the fact that it’s your inheritance makes it feel even worse.
However, while it’s possible that your late relative wanted you to enjoy whatever they left you, it’s important to distinguish the difference between inheritances and gifts.
Inheritances are not gifts
A gift is something that someone gives you with the full intent that you’ll use it and benefit from it. Therefore, if you return a gift to the store, it signals to the gift-giver that they missed the mark. That’s why we do it in secret.
An inheritance, however, is a form of wealth transfer. Your late relative may have intended for you to use and enjoy the item, or they may have fully intended for you to just sell it and benefit financially.
The difference between an inheritance and a gift, therefore, is the intent of the giver. A gift is always meant to be kept, while an inheritance is meant to be kept or sold.
If an inheritance is meant to be sold, why not just sell it and leave the money in the will? Well, most people don’t sell their valuables in their twilight years; they enjoy them in life and let the next generation decide what to do with them.
How do I know whether my late relative intended for me to keep or sell my inheritance? It’s impossible to say. There’s no statistic that says “XX% of baby boomers intend for their grandchildren to sell their inherited valuables,” and even if there was, everyone’s situation is different.
There are signs, however – if your late relative left you an extensive art collection for your 500 sq. ft. apartment, they probably intended for you to just sell it. If they left you their wedding ring and they know you’re about to get engaged, it’s a safe bet that they want you to use it.
But even if you conclude your late relative probably wanted you to keep your inherited valuables, it’s still OK to sell them.
Here’s why you shouldn’t feel guilty selling your inherited valuables
Inheritances can come in countless forms, from real estate to trust funds to diamond earrings. They can be intended for the recipient to keep or to sell, or anything in-between.
But regardless of their form or surface-level intent, the underlying intent of all inheritances is exactly the same: whoever left it to you wants you to prosper and be happy.
Your goal, then, is to handle your inheritance in a way that honors your late relative’s underlying wish: to make you happy. Keeping it and enjoying it might honor that wish, but so could selling the item and investing the money so you can achieve financial independence faster.
For instance, you could consider a robo-advisor with a lower buy-in like Betterment. Betterment stands out with an easy-to-use platform, a generous selection of Socially Responsible Investing (SRI) opportunities, and the ability to access a human advisor once your balance exceeds $100,000.
Putting your money into an investment opportunity can do a lot more for you than keeping the gift in a box at the bottom of your dresser for years.
Protect the item from theft, damage, and depreciation
Before you get your inherited valuable appraised and sold, you need to educate yourself on how to store it, protect it, and overall preserve its value.
For example, I inherited a rare Japanese teapot from a grandparent a few years ago valued at around $100. Because I love tea so much, I decided to classify this inheritance as a “keep.” However, because I never taught myself how to properly maintain such a fancy teapot, I let water sit in it for too long and rust it. Totaled and worthless, the teapot now sits in my kitchen as an ignominious reminder to not be a lazy knucklehead with my valuables.
The first step to inheriting something valuable, then, is to teach yourself how to use it, maintain it, and store it. Teapots may need special cleaning; art may need to be stored in a cool, dark location; leather goods need routine conditioning; watches may need winding, etc.
In tandem with proper care and maintenance, you’ll want to keep your valuables someplace safe. Even if your renters insurance has adequate theft protection to cover the value of your goods, you still run the risk of the claim being rejected or getting paid less than the item’s market value.
For small items like watches, jewelry, or card/coin collections, consider renting a safety deposit box at a local bank. $60 per year is a small price to pay for peace of mind!
For medium-sized items like artwork or furniture, your first inclination might be to borrow space in a friend or family member’s basement or attic. After all, a giant painting is probably too big to steal!
Storing valuable art/furniture in a basement or attic is a common mistake, however, because these areas are subject to moisture and variable temperatures, which can damage and devalue your stuff. Consider renting a climate-controlled storage unit instead, and look for one outside the city limits where it’s cheaper.
Lastly, if you inherit something really big like a car, you’ll want to protect it from the elements by parking it in a covered space or at least investing ~$250 in a fitted car cover. Since you’ll inevitably have to drive it, you’ll want to get some cheap collision and comprehensive coverage, too, which will also protect it against damage and theft. That may all sound expensive, but keep in mind that you’ll get it back when you sell it.
Big or small, once you have your inherited valuables safely stored and protected, it’s time to see what they’re worth.
Appraise the item
Before getting a professional appraisal, you can get a rough idea of how much your inherited valuable is worth by heading to eBay.
Don’t pay too much attention to asking prices in active listings. Sellers can ask for whatever they want; doesn’t mean it’ll sell.
For a better idea of your item’s true market value, filter by SOLD listings only. You can do this by searching for your item, then clicking “Advanced”
Then check the box for “Sold listings”
In this example, you can see that in general, vintage Gucci bags are selling for anywhere from $300 to $500.
eBay is an excellent self-appraisal tool, but you can also get a more accurate appraisal from a site dedicated to reselling your specific goods.
For example, I got my grandfather’s watch appraised at Precision Watches & Jewelry and Crown & Caliber – both were entirely online, requiring only a description and serial number.
For cars, I recommend using Edmunds’ True Market Value (TMV) Tool. It’s entirely free and can give you a realistic valuation of your inherited car in seconds. If you’re thinking of keeping the car your late relative left you, you can research its True Cost to Own (TCO) to know how much it’ll cost you in depreciation, gas, maintenance, repairs, insurance, etc. If you decide to sell the car, well, you can do that on Edmunds, too!
For art, furniture, and other assets that might prove difficult to appraise online, you can connect with a live appraiser. The American Society of Appraisers has an online directory where you can search for and connect with an appraiser of your goods in your area. Most appraisals cost ~$150 or less, and it’s worth it so you don’t end up underselling your stuff!
Sell the item
Your penultimate step, of course, is to make the sale.
Whoever appraised your item will also have tips for how and where to sell it. They’ll likely make an offer themselves; if so, just be sure to get multiple appraisals online to ensure you’re getting a good deal.
At the risk of sounding lecture-y, just be sure you follow the essentials of selling a high-value item; ship the item well-packed and well-insured, and if you meet anyone in-person, bring a friend and meet somewhere safe. Lastly, be sure the buyer brings cash or cash equivalents, such as Venmo or PayPal, so you receive your full asking price onsite.
I got some cold feet before selling my grandpa’s watch and you might, too. It helped to remind myself that my grandpa didn’t necessarily want me to wear his fancy watch; just to do something with it that made me happy. My grandpa was smart with money and achieved financial independence early in life, and would surely want the same for me. Therefore, I knew that if he saw me sell his watch and invest the money wisely, he’d be proud.
If you use the money from your inherited valuable to inch closer to freedom, happiness, and financial independence, your late relative will likely be proud of you, too.
So make sure you park your money somewhere safe. A Chime® Savings Account is a good example, with no monthly fees2 and a slick UI.
2 There’s no fee for the Chime Savings Account. Cash withdrawal and Third-party fees may apply to Chime Checking Accounts. You must have a Chime Checking Account to open a Chime Savings Account.
Summary
Inheriting a high-value item like a watch, jewelry, car, or even a rare piece of art can elicit a mixed bag of emotions. You may feel glad that your late relative thought of you, sad that they’re gone, and guilty that you aren’t sure what to do with the precious asset that they left you.
Selling an inherited valuable may initially feel uncomfortable, but it’s important to remember that whoever left it to us probably just wants us to be happy. Selling the item and investing the money to accelerate our financial independence is a great way to honor that wish.
It wasn’t until I had children that I really started to think about the products and food I was buying and consuming.
I wanted to know what I was putting on my babies’ skin and in their bodies. I wanted to know what type of material their tiny little clothes were made from and was contained in their diaper cream and baby shampoo.
Honestly, this process was illuminating and a bit concerning at times. While I assumed the powers that be are looking out for us in terms of the quality and standards around products and food, I was surprised by some of the ingredients that are considered okay.
Similarly, while it’s nice to think that every company supports adequate working conditions, fair pay, and environmental practices – when I started to do some research I found that this is not always the case.
For me, having children was the catalyst that pushed me towards becoming a more conscious consumer. I really started to think about what I was buying, where it was coming from, and the values of the company I was supporting. And I’m not alone in this. More and more people are moving away from blind consumerism and towards a more deliberate and informed way of consuming.
Read on to find out what conscious consumerism is, why it’s important, and how you can begin to implement conscious consumer practices into your day-to-day life.
What’s Ahead:
What is conscious consumerism?
Conscious consumerism is the practice of becoming more aware of your purchase decisions.
A conscious consumer thinks before swiping a credit card or emptying their Amazon shopping cart. A conscious consumer considers how their spending is affecting society at large with a social, environmental, political, or economic lens.
Simply put, conscious consumerism is about aligning your values with your purchases.
Why does conscious consumerism matter?
While our individual decisions and behaviors can feel insignificant in the grand scheme of things, just remember that all change starts with the individual. If you want to see more companies thriving that value their employees and the environment, then you need to start supporting these organizations.
Here are a few reasons why conscious consumerism matters at an individual and societal level.
It promotes change
Conscious consumerism matters because you vote with your wallets on a daily basis. When you buy a product from a company that doesn’t provide fair treatment or fair compensation to their employees or companies that don’t support important social movements, you are supporting those values. Values that you may not agree with.
If we want companies to change their ways and do better, then we need to put pressure on them. If we continue to buy products from companies that we don’t believe in, then there is no reason for them to change.
And people are voting. In a survey by Empower of 1,000 Americans, 60% of respondents said that they had stopped spending money at companies based on their social beliefs – this was for reasons like not agreeing with their approach to COVID-19 precautions or not agreeing with their political point of view.
It promotes awareness
Conscious consumerism also promotes awareness. Rather than making blind purchases from companies you know nothing about, the process of becoming a conscious consumer encourages you to dig deeper, to explore your values, and to find companies and products that match them.
It’s good for you, and others
Conscious consumerism also matters because it’s good for you. As an example, think about buying local, organic food as opposed to unhealthy, processed food.
Organic food is a conscious choice and a healthier choice. It’s also better for the environment. The same is true when it comes to the clothing you wear or the products that you put on your body. The local, sustainable, ethical products are usually better for you, the employees producing the products, and the environment.
Can just anyone be a conscious consumer?
The answer to this is a little bit more complicated than you might think.
In theory, yes. Anyone can become a conscious consumer. All of us can think about what we value and then use the internet to research companies or products that align with these values.
In practice, it can be more difficult.
Ethically sourced, sustainable products are expensive. The reason fast fashion and fast food are so popular is because they’re affordable. The reason so many celebrities preach the value of “organic this,” and “sustainable that,” is because they can afford to purchase quality items.
While many people want to eat only organic, locally sourced, and sustainable food, it’s not always a reality because of cost.
It also takes time, effort, and energy to research companies and products that align with your views. People who are consumed with working multiple jobs in order to put food on the table for their family don’t have the luxury of researching each and every purchase.
Assuming most of us value fair pay, positive social change, and sustainable products, we also value efficiency and convenience. There’s a bit of a tug-of-war between our desire to purchase the products we believe in and the ease and affordability of things like fast fashion.
How do you implement conscious consumerism ideals and practices in your own life?
While becoming a conscious consumer takes time and effort, there are varying levels of engagement. It’s not an all or nothing deal. You don’t have to be an extremist. You can take baby steps when entering into this practice.
Here are a few ways you can begin to implement conscious consumerism into your own life.
Assess your values
First, take some time to think about your values. What matters to you? Are you concerned with the state of the environment and the effects of global warming? Do you want to see the end of child labor? What social movements do you believe in? What kind of clothes do you want to wear? What kind of products do you want to put on your body? What kind of companies do you want to support?
How do you want to vote with your money? Not everyone will be motivated by the same things, and that’s okay.
Look for Certified B Corporations
If you want to be a more conscious consumer, but you don’t have the time to research every company and product on the market, one thing you can do is look for certified B Corporations.
Certified B Corporations are businesses that have met standards on social and environmental criteria as outlined by the B Lab. Certified B Corporations are concerned with more than just their bottom line. They care about things like the treatment of their employees and their environmental impact.
Buy used
One simple way to practice conscious consumerism is to buy used products. By shopping at thrift stores you’re preventing items from ending up in the landfill.
With online marketplaces like Poshmark and Letgo, it’s never been easier to buy and sell used items.
Buy local
Look to buy local products. When you purchase products locally from small business owners, you have a better chance of getting to know where your food and products are coming from. You’re also putting money into the hands of small business owners as opposed to enormous corporations.
Buying local also means the product doesn’t have to travel as far to get from the producer to you, the consumer. Less travel is better for the environment.
Minimize consumption
Do you really need another shirt, another hat, a new iPhone, or another pair of shoes? I mean, really?
Conscious consumerism isn’t just about deciding what companies you want to buy from, it’s also a question of whether you need to buy more.
Part of being a conscious consumer is evaluating the impact of your purchases. Buying more for the sake of having more, often results in more waste. So, part of being a conscious consumer is knowing when to minimize your consumption.
Use a water bottle
This is a super simple way to practice conscious consumerism. If you don’t want to add to the insane amount of plastic water bottles in our landfills and oceans then start using a reusable water bottle. It might seem small but it all adds up. Similarly, start using reusable coffee cups, straws, and food containers.
Become a socially responsible investor
Traditional investing is all about the bottom line. Where you invest is based on what is going to yield the highest value. Socially Responsible Investing (SRI) still aims at making you money but it also takes environmental, social, and governance (ESG) issues into account.
And, you don’t need to sacrifice returns to invest with a conscience. A study in the Economist reported that sustainable funds outperformed the broader market during a market downturn.
Betterment offers socially responsible investing opportunities.* Betterment believes that you don’t have to choose between value-based investing and working towards your financial goals. They offer SRI portfolios that can help you to invest in your goals while staying true to your values.
Empoweralso offers SRI investing opportunities. They can help you to invest in companies that are managing their environmental, social, and governance issues and they make it easy to add these options to your portfolio. Empower will work with you to determine what investments align with your values whether you are looking for companies that value fair treatment of their employees or companies that care about environmental issues like carbon emissions.
*Higher bond allocation in your portfolio decreases the percentage attributable to socially responsible ETFs.
Research companies before you make a purchase
If you have the time to put into researching companies and products before making a purchase then by all means – do it. It’s all about awareness. The more you know about a company or product, the more confident you can feel that you are supporting a worthy company or removing your business from a corporation that doesn’t deserve it.
Of course, it can be a challenge to find reliable information, and even when you do locate the details of a product, it can be difficult to interpret (I’m thinking of all the ingredients I can’t even pronounce when it comes to food or beauty products).
If you want help identifying the environmental or ethical qualities of a company there are a number of different apps you can use such as Agreeable & Co or TradeMade.
What does the future of conscious consumerism look like?
If 2020 has taught us anything, it’s that we can’t predict the future. However, we can make some educated guesses as to where the future of consumerism is headed.
Minimalism and the sharing economy
Over the past decades, we’ve seen a rise in trends like minimalism, tiny houses, and the sharing economy.
Plant-based diets
There’s also been a trend towards reduced meat consumption with a rise of vegetarianism and veganism. Think about it, there were no Beyond Burger or Impossible Burgers twenty years ago.
Socially responsible investing
The investing world is anticipating a similar trend. A 2020 article by CNBC suggests that socially and environmentally conscious investing options will be “the next mega-trend in equities.”
The article quotes Peter Garnry, Head of Equity Strategy at Saxo Bank who says,
“We believe that these green stocks could, over time, become some of the world’s most valuable companies – even eclipsing the current technology monopolies as regulation accelerates during the coming decade.”
Increased awareness and action
According to a white paper by Empower, more Americans are becoming more actively involved in regards to where their money is being invested as opposed to leaving it up to a financial advisor.
This is especially true when it comes to the younger generations. In a survey of over 1,000 Americans, 55% of Millennials respondents reported that they chose the companies they wanted to invest in compared to 39% of Baby Boomers.
Summary
The first step to becoming a conscious consumer is simply understanding what conscious consumerism is. It’s about understanding what you value and looking for opportunities to support the companies that you truly believe in. This is opposed to shopping blind and making purchases solely based on convenience and price.
While it’s important to acknowledge that not everyone has the resources to be the consummate conscious consumer, we can all do our part. There are simple strategies like using a reusable water bottle or buying used products. So, if you’re ready to be a more conscious consumer then pick one small strategy and start today!
(Personal Capital is now Empower) Empower Personal Wealth, LLC (“EPW”) compensates Webpals Systems S. C LTD for new leads. Webpals Systems S. C LTD is not an investment client of Personal Capital Advisors Corporation or Empower Advisory Group, LLC.
Figuring out how to manage your money isn’t something that comes intuitively to most people. Instead, it’s a skill people have to learn. I was lucky that I started learning early. Even if you’re a later starter, it’s never too late to take control of your finances.
Thankfully, there are plenty of resources to help you grow on your financial journey. One of those resources is a financial advisor.
Financial advisors typically help people grow their wealth through investing and strategy. Unfortunately, financial advisors tend to only work with people that have already started building assets.
If you’re on a low income, a traditional financial advisor may be out of your reach. Instead, you may get solicited to work with financial advisors that are more like salespeople. They get paid commissions based on the services and investments they sell you. Often, these investments aren’t your best options and could result in you losing a large part of your future returns. Even so, they may be better than not investing at all.
So what can you do to start managing your finances in a better way? How can you find a financial advisor that will work with you even if you have a low income? Here are some ideas to get you started.
What’s Ahead:
Who can benefit from hiring a financial advisor?
Anyone can benefit from the services a professional financial advisor or planner can offer. Financial advisors usually help you build a financial plan. The plan helps guide you to where you want to be in the future. These professionals help create strategies to get you to that future financial position and educate you about methods you may have had no idea about.
For instance, financial advisors can help you understand the tax advantages of different ways of investing. They can also make you aware of tax planning opportunities to help you keep more of the money you work so hard to earn.
Another key benefit of using a financial advisor is getting direct advice about your situation. They can share the results of the potential impacts of making a specific financial decision. These professionals may advise you whether there are better options available, too.
Financial advisors often earn their fees when markets are facing a downturn. People understandably get concerned they may lose a significant amount of money during an economic downturn.
I know first hand that it can be tempting to sell and lock in your losses. These professionals can talk you off the ledge and help you stick to your strategy which is set to work for the long-term.
If you’re looking for a financial advisor – find the best options for you through the Paladin Registry – a free resource.
What if you don’t have a lot of money?
Even if you don’t have a lot of money, financial advisors can be beneficial. If they’re tax-savvy, they can suggest tax credits and other tax advantages you may qualify for as a low-income individual. These could include the saver’s tax credit, the earned income tax credit, and more.
Advisors can help you build a plan to start growing your income and your assets. This type of strategic planning can often benefit from a second set of eyes. Advisors can help from an accountability partner standpoint, too. They can check-in to make sure you’re sticking to the activities you need to complete in order to reach your goals.
Why it is important for people on a low income to have a financial advisor
If you’re a self-starter and educate yourself about personal finance, you may not need a financial advisor right away. In fact, I’ve never had one. That said, people that don’t have the time or don’t care to learn may benefit enormously from the knowledge financial advisors have learned through education and through experience over their careers.
A fiduciary financial advisor, one that must keep your best interests in mind, can help you avoid making costly financial mistakes. Avoiding mistakes is half of the battle of growing wealth.
You don’t have to pay a financial advisor on a recurring basis. You can pay some advisors a flat fee or an hourly rate to develop a financial plan for you. Once you have the plan, you may be able to enact it on your own. You can then hire a financial advisor on an ongoing basis after you’ve started to grow your assets.
Can you get a financial advisor for free?
You might be able to find financial advice for free, but chances are you won’t find a free financial advisor. Financial advisors can be compensated in many ways that make them appear to be free or low cost, though.
However, they may be taking commissions from the amounts you invest or a percentage of your assets each year. This means their services aren’t free, even if you aren’t paying them with cash or a credit card for each visit.
Advisors are in business to make money so you shouldn’t avoid them because of these fees alone. Even so, you need to carefully select a financial advisor that has your best interests in the front of their mind, not the amount of money they’ll make from commissions from selling you products.
Financial advisor services to consider
If you’ve set aside money to pay a financial advisor for advice, here are a couple of options you may want to consider.
The Paladin Registry
The Paladin Registry is a free service that matches you with a financial advisor. The service vets the financial advisors you meet in advance. They also rate the advisors and document essential information you should know about them, such as education, experience, and certifications.
You have to share your portfolio range, which is likely less than $50,000, as well as your name, email address, zip code, and phone number. After you do this, The Paladin Registry matches you with one to three potential financial advisors within 24 to 48 hours that fit your profile that would be willing to work with you.
Once you get your financial advisor matches, you get to interview the advisors to see if they’ll be a good fit. You can also discuss how they’ll be compensated and how they can help you with your specific financial needs. You’re under no obligation to move forward with any of the advisors. If they aren’t a good fit or don’t fit your budget, you can move on to other options.
What are your options if you can’t afford a traditional financial advisor?
If you’re living paycheck to paycheck and can’t afford the fees financial advisors charge for one-time or ongoing advice, you aren’t alone.
There are still plenty of places you can get inexpensive or free advice about personal finance or investing. You may have to spend a little bit more time applying concepts to your particular situation, but you can still find the knowledge you need.
Robo-advisors
Robo-advisors are a great way to learn how to start investing. They use technology to provide some of the investment picking services a financial advisor would offer at a fee lower than most traditional advisors. They usually offer educational resources on their websites for free, as well.
One key aspect that makes robo-advisors accessible to those with low incomes are the low minimums to get started investing. Some robo-advisors have no minimums while others have small minimums that are within reach, such as $100 or $500. Robo-advisors usually offer many educational resources, as well. Here are just a couple to choose from:
Acorns
Acorns provides investing services for fees as low as $3 per month. This service could be especially useful to those with low incomes because it helps you start investing without directly feeling the pain.
Acorns offers a tool called round-ups. This rounds up your purchases to the nearest dollar. Then, it invests the change. It won’t necessarily build your assets quickly. That said, it’s a great way to get started with the habit of investing. You can also make automatic purchases. These purchases can be scheduled on a daily, weekly, or monthly basis.
Betterment
Betterment is another option for those without a lot of money to invest. You can get started with just a $10 minimum deposit, and Betterment charges 0.25% of assets under management each year, which is much lower than a traditional financial advisor’s 1% assets under management fee.
Betterment uses technology to match you with a portfolio that meets your needs and investment goals. They also offer strategies to help you minimize the amount of taxes you pay on your investments and portfolio rebalancing to keep your investments on track.
Also, Betterment is a fiduciary, which means they must keep your best interest in mind when making financial recommendations.
Personal finance books
Personal finance books provide a vast amount of knowledge for the extremely low cost of buying a book. If you borrow the book from the library, it can even be free.
Many financial advisors have written books about managing your money and building wealth. The advice won’t be tailored to your specific situation, but you can pick up plenty of great tips to help you get started.
You may have to read a few books to get a good idea of different strategies. That way, you can pick the one that’s best for you. Make sure to read reviews of the books, as well. Some get outdated and others may offer controversial advice. Reviews may point out areas where you should be cautious following the advice given in a book.
Local and online resources
Local and online resources provide even more knowledge, often for free. Check with the companies you already do business with to see if they offer free financial resources. Be skeptical of any offers, though.
These companies are often trying to sell products that generate more profits. That said, companies like Vanguard or local credit unions may have educational materials you can learn quite a bit from.
You can read through the archives at Money Under 30 to learn about many personal finance topics, too. Other websites also provide a ton of useful information. These range from professional publications such as Kiplinger to other personal finance blogs.
The key is knowing who to trust and verifying the information with reputable sources. After all, not everything on the internet is true.
Summary
Getting financial advice when you have a low income isn’t easy. Many financial advisors won’t work with you because you don’t have any assets they can manage. Then, some of the advisors that will work with you charge outrageous fees.
Consider the options listed above to find financial resources that fit your budget and situation. Then, take action to start improving your finances and growing your wealth. Eventually, you may be able to hire a traditional financial advisor if you still feel it is in your best interest at that time.