Investing used to be only for the rich, but today almost anyone can get involved. To get started, you may consider opening a traditional or online investing account. But what is it? How can you use it?
Don’t worry. Your friends here at Academy are here to answer those questions and more in this article.
What is an investing account?
An investing account is a bit like a bank account, but with an investing firm. Also called “taxable accounts,” these accounts give you access to numerous investment options like mutual funds, stocks, and bonds. Different brokerage firms offer a variety of services, including online, mobile, and other interactive options.
Read also: 8 basic investment tips for beginners
Before you open an investing account, keep in mind that your earnings may be counted as capital gains. That means you’ll have to pay tax on them as you would with other income.
You will probably also have to pay fees to the firm that manages your account, although the exact amount varies based on how much you invest and the services you access.
Why should I get an investing account?
It’s true that your profits in an investing account are taxed at a higher rate than some other accounts.
However, one huge perk to using an investment account (compared with, say, an IRA) is that you can withdraw money without paying penalties at just about any time. You can also invest as much as you like.
That’s a lot more flexible than an IRA, which dictates when and how often you can withdraw or invest money.
How can I open an investing account?
Before you open an investing account, first decide how much you want to invest, your risk tolerance, goals, and the type of platform you’d like to use. Determining the answers to these first two questions can help you decide which platform to use.
After you make your initial deposit, you’ll make investments in the type of financial securities you want. Over time you can add to these investments and use the dividends (either to reinvest or for whatever else you want!). Just don’t forget to consider your investments, earnings, and losses when it comes time to declare your taxes!
Remember that you don’t have to be wealthy to start investing — today, you can take advantage of platforms like FlexInvest to get involved in the stock market and improve their financial fitness. For more ideas on how to become a smart investor, check out the rest of the Academy financial education library.
