Many retirees don’t want to worry about financial matters on a day-to-day basis — how they derive income in retirement, for instance. These retirees prefer to put their income stream on auto-pilot, making adjustments every few years as necessary (or having a financial planner make adjustments for them), and then enjoy their retirement years.
Open A Brokerage Account Now
However, many retirees are more proactive about their money, trying to squeeze extra income out of their savings. If you enjoy active engagement in your financial affairs and have a knack for research, plus some tolerance for risk, you might consider opening a brokerage account, allowing you to buy and sell stocks, bonds, mutual funds, and other financial products on your own or with the advice of broker. Most financial firms that allow individuals to open their own brokerage accounts have extensive websites with all the tools you need to buy and sell securities, keep track of what you own, and research stocks you’re considering purchasing. Most of these sites also provide a stock screener, allowing you to establish criteria for stocks that meet your requirements. You can spend as much or as little time as you wish managing your brokerage account, but nobody else will be doing it for you, so it’s advised to check in at least periodically and monitor your portfolio’s performance.
To Open A Brokerage Account
There are many things to consider when trading stocks; each transaction will have tax consequences, for instance. Many stocks pay out dividends on a regular basis, which of course provides you with income, but stock dividends are taxable. More pertinent to tax planning, however, is your portfolio’s capital growth. Capital gains are also taxable, but the tax is due only when you sell the stock. Following the general rule to “buy low, sell high,” there will hopefully be some taxes due with each sale. But inevitably you’ll want to dump some nonperformers, which you may be selling for less than your purchase price. You can offset your gains with such deductible losses. So, by strategizing how and when you sell stocks, you can reduce your tax bill.
Kinds of Brokerage Accounts
Full service Brokerage/Broker Assisted Trades
There are various kinds of brokerage accounts you can open, differing by level of service offered. Full-service brokerages are the most expensive; trading fees are higher, and broker-assisted trades involve even higher fees. You may be assigned an individual advisor who will examine your portfolio and offer suggestions. Don’t take advice blindly; your advisor should have your best interests at heart, but may not fully know your needs or your tolerance for risk. Merrill Lynch and Morgan Stanley are two of the best known full service brokerages, but there are many more.
A discount brokerage, on the other hand, offers a minimum of advice, but trading fees are the lowest available, often under $10 a trade. Charles Schwab was a pioneer discount brokerage, but now it’s a crowded field with popular brokerages such as E-Trade, TD Ameritrade, Scottrade, and more. These firms are for true do-it-yourself investors; their website will often have some research tools, but traders would be advised to do additional research at trusted websites such as Morningstar.
In order to gain market share, many full-service brokerages also offer cheaper packages for clients, and discount brokerages may offer premium services. Charles Schwab, for instance, has become such a hybrid firm. And one other option for saving money is to consider brokerage accounts at mutual fund houses, such as T. Rowe Price and Vanguard. If you already have money invested in mutual funds offered by a large investment house, you may be eligible for discounted trades if you open a brokerage account at the same firm.
There are many options for active investors. If you’re retired, however, be sure to know your risk tolerance, and maintain a conservative balance between stocks and more stable investments such as bonds. Don’t bet the house on the latest fad!
An investment calculator can be a wonderful tool if you are contemplating investing but are not sure which scheme will give you the best financial rewards. With so many companies now advertising on the internet, it is easy to gain access to a great many investment opportunities.
Many companies who are available to handle your investments will feature an investment calculator on their website. These are usually easy to use and will give you an idea of what return you can expect if you put your money with them. The calculator is there to help you get a clear picture of what you can expect back after a certain length of time. There are many variables which you can enter into the equation and all of these can be taken into account when calculating the results.