Here at Wealth Daily, we strive to present investment ideas and trading strategies that you wouldn’t find coming from the likes of Wall Street or other investment advisory newsletters. But another of our goals, and maybe a more important one, is to make you a better investor so you don’t have to rely on others to give you ideas.
We want you to become an expert, too.
So, from time to time, we’ll focus on some tips, tools, and lessons that will help you get started in the market, become a better investor, and become a guru yourself.
The topics range from the very basic all the way to the expert level. I’ve personally covered some of these right here in the pages of Wealth Daily. I’ve given lists of the best investment apps, the top free financial resources, and the best fixed income investments.
Today I’m continuing that tradition of “best-of” lists because I know there are still a lot of folks out there who aren’t investing. And I want to help you get started. The other advice I give is useless if you’re not able to invest on it and turn your paychecks into profits.
I want to stress how important investing is when it comes to generating wealth. By investing your extra money, you’re assuring yourself a more comfortable retirement, and you’re making sure you’ll have something left to help your children and grandchildren.
So, I want to take some time today to cover some of my top accounts for saving and earning money.
I’ll start off with the most basic and work my way up to ones for more complex and active trading strategies.
Safe but Slow
First off are savings accounts and certificates of deposit (CDs). While I’d never recommend that anyone put a large part of their money in one of these, as you near retirement (or if you’re already retired), it becomes more important to have some funds in low-risk investing accounts that still generate some gains. When you don’t have the luxury of time to recover losses, it’s always a smart move to take some of your stock investments and move them to cash and lower-risk bonds so a market crash doesn’t wipe out your savings.
Best Savings Account: Goldman Sachs Bank USA — 1.30% APY, no minimum balance
A few years ago, investment bank heavyweight Goldman Sachs decided to get into retail banking. And it opened the subsidiary GS Bank. Now, backed by the might of a Wall Street giant, GS Bank offers some of the highest interest rates on the market.
Right now, you can open a savings account at GS and earn 1.30% APY on your funds. There’s no minimum balance and you don’t have to pay any transaction fees. The only real downside is that you have to transfer funds electronically to your checking account in order to access them. There are no ATMs here.
But you can keep up to $250,000 in your account, and all deposits are FDIC insured.
Best Certificate of Deposit (CD): Goldman Sachs Bank USA — 0.60%–2.45% APY, $500 minimum deposit
Goldman gets the top rank for CDs as well. This bank has consistently been paying some of the highest rates to savers since its inception. And with a strong desire to keep growing its business, that’s a trend it’s likely to continue.
In Goldman’s CDs, your funds are FDIC insured. And you’ve got several options as to how long you want to keep the money in the account. All of them offer extremely competitive rates, too:
- 1-year: 1.65% APY
- 2-year: 1.75% APY
- 3-year: 2.00% APY
- 5-year: 2.40% APY
- 6-year: 2.45% APY
Plus, there’s a low minimum deposit to start an account: just $500. So, if you don’t have enough to open one at another bank but still want to earn interest that’s at the top of the charts, GS is a great option.
Making the Money Work for You
Now we’re getting into the meat and gravy part of my list. These are the accounts where you’ll really see your savings grow. They’re the ones that’ll help you get that money working for you instead of the other way around.
I’ll start with one that’s perfect for getting started and doesn’t require you to be any kind of expert investor. Then I’m going to move into two that are more for active investors and people who want to take a little more risk to increase their potential reward.
Best IRA: TD Ameritrade — $6.95 per trade commission, no account minimum
TD Ameritrade got top marks here for several reasons. First, it’s got no account minimum. So you don’t need a ton of cash on hand to start investing. Second, it’s got a huge selection of different types of investments. You can buy stocks, ETFs, mutual funds, even options.
It’s got relatively low commissions on trades, too. And it offers many commission-free ETFs and no-transaction-fee mutual funds.
Customer support is outstanding, but broker-assisted trades are pretty expensive. So, with TD, I recommend doing all your trading through the online platforms. Those platforms (there are three of them) are some of the best and most user-friendly out there, though. So you shouldn’t have any trouble once you get going.
The research tools are another outstanding mark for TD. You get free access to some of the best tools and top research in the industry once you set up your account.
There are some cheaper brokers out there, and some with more advanced tools for trading, but TD really covers all the bases from novice investor to expert trader.
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Best Stock Trading Account: Robinhood — no commissions, no account minimum
Robinhood, as the name suggests, was created to get your money out of the hands of the rich and back where it belongs: in your investment portfolio.
The founders set out to create an app that allows individual investors like you and me to get the same kind of treatment as the big banks on Wall Street. And they did exactly that by taking all commissions out of the game. That’s right. FREE trading! Whaaaat? I know! I didn’t believe it at first either, but it’s true.
The company offers all sorts of investments ranging from ETFs to common stock and, soon, even options. This is a brokerage that lets you actively trade stocks and funds but won’t suck you dry trying to make a buck. Not too many of those out there. Actually, there aren’t any of those out there. Robinhood is literally the only free trading platform in the world.
There’s no account minimum, either, so you can get started with whatever you’ve got to spare.
Right now, you can only trade through the company’s app on your smartphone or tablet. But a web-based platform is coming very soon. Then you’ll be able to invest from whatever computer you’re near. And other online brokers will really have to step up their game if they want to stay in business.
Best Options Account: Ally Invest — $4.95 + $0.65/contract commission, no account minimum
Ally Invest almost got the top IRA spot, but because it’s not as friendly to novice investors, TD took that accolade. But Ally still gets a top spot thanks to its purchase of TradeKing a few years ago. That made this broker the go-to place for options traders.
It’s got some of the lowest commissions in the market at $4.95 a trade plus $0.65 per contract. And it also has some of the most lenient margin standards for those buying and selling naked options. That means you won’t have to put up too much cash up front as collateral against your trades.
Ally also doesn’t have an account minimum. So, you can open one there with whatever spare change you’ve got in your pocket. And you’ll get free access to stellar research and tons of data to help you make the most of your trades.
Ally is also great for more active traders. If you place 30 or more per quarter (or if you’ve got a balance of $100,000 or more), you get a discount on your commissions. You’ll only have to pay $3.95 per trade and $0.50 per contract.
Don’t be fooled by Ally’s low commission costs; this discount broker gives customers the same platform power as much more expensive ones.
Plus, Ally’s options trading tools and customizable dashboard make it a great choice for those just getting started trading options. Add all that free research and data, and you’ve got a top-notch place to start maximizing your gains and minimizing your expenses.
The Piggy Bank They Should Use
Last but not least, I want to talk about the best bet for young investors just getting started. Because of the power of compound interest, the best thing you can do for your kids and grandkids is to get them started investing early.
If Warren Buffett hadn’t started investing when he was so young but rather waited until he was in his 30s, he wouldn’t even come close to making the Forbes’ Richest People list.
So, if you’ve got a young saver, tell them to put that piggy bank to work with something that’ll get them closer to taking Buffett’s top spot.
Best Investment Account for Young Investors: Betterment
Betterment is what’s known as a robo-advisor. That means it’s a company that uses algorithms to manage your portfolio. I’m not an engineer, so I’m not sure how it’s designed. But what it does is keep an eye on the markets and rebalance accounts to match whatever investment strategy you’ve decided to use. Robo-advisors are much faster than their human counterparts, and they don’t have things like emotions to get in the way of their decisions.
What’s best about robo-advisors and Betterment for young investors is that you don’t even have to pick any stocks or strategies. You answer some questions about risk and goals, and the algorithms do the rest.
When it comes to fees, Betterment is a great choice. Instead of charging per trade or a fixed amount per year or month, Betterment charges 0.25% a year of the assets you have invested there.
This is important because fees can eat away at your earnings, especially with the account size many young investors will have.
Think about an account with only $100 in it. If you’ve got that with a company charging $1 a month, then you’re effectively paying 12% per year in annual fees. Unless you’re having a record year in the market, that’s going to eat away at your account really fast.
Once you accumulate more wealth and more expertise in investing, you may want to take a more active role in your investments. That’s when you’ll transfer your Betterment account to one of the brokers I listed above. Then you can start taking charge of your investments and keep building a nice cushion for retirement.
Best Self-Directed Investment Account for Young Investors: Robinhood
If your young investor is more interested in taking an active role and figures since she’s got so much time to learn the tricks of the trade she can afford a few losses, then I again recommend Robinhood. It’s got a great app — right now the only way you can access the platform — that makes trading stocks a breeze.
And, as you’ll remember from above, there are no commissions on trades placed through the app. None at all.
Plus, as I mentioned, Robinhood will be launching a web platform in the very near future, so your young investors can access their accounts on a desktop or laptop instead of just their smartphone or tablet. That’s going to be a game changer for the other online brokers. Even if they’ve got low commissions, they’re still higher than no-commission Robinhood.
No matter what type of account you choose for your investments, you need to be taking an active role in your finances. You can’t just rely on Social Security or a 401(k) to get you through retirement.
And you certainly don’t want to just sit on the sidelines and watch others make their fortune in the stock market.
So, take a little time, check out the accounts I listed above, and start building your wealth.
We’ll be there along the way giving you new investment ideas and profit-generating strategies every day.
To your wealth (both present and future),
Follow me on Twitter @AllBeingsEqual
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