Do you know how much you are paying in advisory services and fees to a big bank managing your investment or retirement accounts? The answer will surprise you. A study from Personal Capital compared the costs of investing your money with big banks compared to lower-cost providers like Fidelity or USAA.

Take a look at a $500,000 account and how advisory services and fees impact the portfolio over 30 years:

Having an investment account at Merrill Lynch is 45% more in total costs than Fidelity! Also, if you do business with a company like Merrill Lynch, there is no fiduciary duty to you. In plain English, that means your financial advisor is working for Merrill Lynch, not for you or in your best interest.

Take action by opening accounts at lower cost providers like Vanguard, Charles Schwab, or Fidelity and transfer your investment or retirement accounts there. Or find a fee-only financial planner who charges a retainer fee and not an AUM fee for managing your account.

h/t to Personal Capital for the survey. Full whitepaper here.

Source: Business Insider

 

I am an active contributor on NerdWallet and WalletHub and see many questions about how to get started with investing and how much money you need to do it. First, most trading firms require a minimum of $500 or more to open an account, though there are a few that have no minimum. Second, you should figure out the type of trading that you want to do. Let’s take a look at your choices.

1-Online Brokers

If you are interested in the traditional method of portfolio management, you should select an online broker that offers the features that you want in addition to providing a low-cost self-directed trading account. A few important features to look for:

• Account Minimum – make sure that you have enough money saved to open an account or choose an online broker with no minimum.
• Commission Per Trade – $10/trade or less. If you are planning to trade more frequently than just quarterly rebalancing, this feature may be more important to minimizing your overall costs.
• Commission-Free ETF Trading – some online brokers offer 80 or more commission-free ETFs, so look for this feature if you are interested in owning ETFs.
• Research – if you are an advanced trader or would like to spend your time learning about investing, look for top rated trading software, research reports and real-time data.
• Promotions – offers include free trading the first 60 days or $600 cash bonus for opening a new account based on the initial deposit.

When you open a new online broker account, you will need to select an asset allocation based on your goals, time horizon, and risk tolerance. Then, you will select securities (e.g., index funds, target date funds) to buy, place the trade(s) and set a reminder to rebalance your account quarterly or annually. Here are a few discount online brokers and their minimums to get started as of August 2015:

• Charles Schwab – $1,000 minimum
• Vanguard – $1,000 (only STAR and target date funds), $3,000 minimum and up for other funds.
• ScottTrade – $2,500 minimum
• Fidelity – $2,500 minimum
• TDAmeritrade and E*Trade – $500 minimum
• Trade King – no minimum

Automated Investing

Growing in popularity, you may be interested in automated investing. This type of investing requires the least amount of your time and effort, as the online platform does the work of selecting your asset allocation and securities, placing the trades, and rebalancing your account automatically. If you are interested in automated investing, choose an online advisor, open an account by transferring money from your bank or retirement/investment account, and the automated investing platforms below will select, buy and reinvest stocks and bonds in your portfolio automatically. Here are a few online advisors:

• Schwab Intelligent Portfolios – $5,000 minimum
• WiseBanyan – no minimum and no fees
• Betterment – no minimum
• Wealthfront – $500 minimum

The most important thing is to get started with investing now! If you know that you are not interested in learning about investing or don’t have the time to manage investments in an online broker account, then automated investing may be the easiest way to open an account and get started investing.

Need an extra nudge? Below are 2 charts that compare the different rate of returns from keeping your money in a savings or CD to investing in the stock market:

How a single investment of $1,000 grows

How a $1,000 per year investment grows

Remember- don’t get distracted by the noise of which company or type of trading is better than another. Make a decision that fits your needs and open an account and start investing.