lesson 2: opening your account and brokerage reviews

Types of investment accounts you can and should open.

Brokerage account:
This is your average trading/investing account. Open one of these if you want the freedom of being able to deposit and withdrawal at any time.

Roth IRA: 
This is one type of retirement investing account. Here's how it works...
You can deposit up to $5500, after-tax into the account per year, you can also take your deposits out at any time with no fee. Any capital gains that you make in the account are not taxable as long as they stay in the account. Once you turn 59.5 and can start making qualified withdrawals, the capital gains will be taxed at your then tax rate. Due to the power of compounding, this is a fantastic account to open, deposit your yearly maximum, and let the markets do their magic.

Traditional IRA: 
This is another retirement investing account. The only benefit difference between this and a Roth IRA is how it can help your tax situation. You can deposit the same $5500 per year, however, when you make your deposits to this account they count as pre-tax dollars. So, when you file your taxes at the end of the year, you can show them that you deposited $5500 into your IRA, and it will look like you made $5500 less income! Woo!

Here's a little chart I created to show how much you can earn and save by letting your account compound and grow in a Roth IRA, assuming you deposit $5500 per year, earn the market average of 7%, and grow the account for 40 years.

You only deposited $220,000 and you end up with $1.25M. Nice!

I would recommend opening up both a brokerage and an IRA. If you already make a lot of money and need the benefit of lowering your taxes a bit, choose Traditional. If you don't need to worry about the tax break right now, choose Roth, and MAX THEM OUT!

Brokerage Review: Where to Open Your Account

There are a few brokerages I have worked with over the last few years, so I'll give you a short summary of each in order for you to decide what best fits you.

Charles Schwab
Schwab is amazing. I have a brokerage account, Roth IRA, and checking account with Schwab.

Pros:
Customer service is phenomenal. You'll talk to a person right away and they are always so happy to help you with any question or issue you might have. No matter how dumb the problem might be, the rep's will make you feel not dumb. They can help you with basic account questions, terminology, market ideas, etc. They even have a sweet chat feature, and someone is always there to answer.

Negotiable commissions is a huge one. Typically, online discount brokerages like Charles Schwab, Vanguard, Fidelity, ScottTrade, eTrade, TD Ameritrade, etc., all have pretty high fees to trade. I think these guys are anywhere from $7-10 per buy or sell order. These fees can hit your account pretty hard, especially if you don't have much to start with. The good thing about Schwab is that if they see you are making a good amount of trades, they will negotiate with you on the fees you pay. Currently, I'm sitting at $4.95 per trade, looking to negotiate a bit lower any day now. I'm sure most of these brokerages will work with you if they see a reason to, I only have experience with Schwab on the subject however.

Pretty good trading platform, for no additional costs. Schwab offers an online trading platform and a software download platform that make it easy to place trades, see charts, and find news and information on a company, for free with having an account. If you make a certain amount of trades each quarter, you also get level 2 quotes free, which is essential, at least to day traders.

The free checking account linked to your brokerage account is great as well. You never have to pay any fees. There is never any overdraft fee as it will move money from your brokerage account, or just decline the purchase. Best of all, you never have to pay ATM fees, WORLDWIDE. You get reimbursed for every single ATM withdrawal you make... which helped when I withdrew about ten different times, at $6 a pop, in Vegas.

Cons:
None. I love Schwab. I will always recommend them. Wonderful brokerage company for beginners to veterans. Go open an account online now, so easy!!!

Robin Hood
This one is new to me... I just barely opened my account a week ago for the sole purpose of writing a review for y'all. Think about starting here if you are a beginner with little $$$ to jump in with.

Pros: 
It's free. This is a big deal. If you are just starting and don't have much knowledge on trading/investing and also little money to begin with, download this and open an account ASAP. There is NO TRADING FEES. Buy and sell all you want and don't worry about how much you're spending on those pesky fees.

It's an app. You can trade from your phone so incredibly easily. All you need to do is log in to your bank's online banking site, through their app, and make a transfer to get started. Very intuitive.

Cons:
No premarket or aftermarket trading. This means you can only make trades from 8:30am-3:00pm CT. Whereas, elsewhere you can typically trade from 7:00am-7:00pm CT.

Other than no fees, this brokerage doesn't have much to offer a serious trader as it relates to company information, market news, charts, quotes, etc., because it's just an app...

TD Ameritrade/ThinkorSwim
Like Schwab, this discount brokerage offers much of the same. Plus an additional benefit.

Pros:
The ThinkorSwim platform is the single best platform I have come across so far. So many options and possibilities, probably a bit much to take in as a beginner.

Cons:
Can't think of any really! This is a great broker for experienced traders/investors.

Hold on for LESSON 3! I'm gonna make you figure out what type of trader/investor you are and how to start investing!