If you’re a young adult, you might feel that you’re barely keeping your head above water. Student debt looms large, which makes it hard to accept an entry-level job with a low salary. Combine these career headaches with pricy rent and sky-high health care costs, and you’ve got all the components of a cash-strapped existence. How can there possibly be any cash left to invest at the end of each month?
Investing while you’re young is always a good idea, even if you can only contribute meager amounts at first. Careful investing isn’t just about maxing out your 401(k), it’s about building good habits and letting the power of time work in your favor.
In this article, we’ll look at some of the best online brokerages for young adults.
Quick Look: Best Investment Accounts For Young Adults
- Best Overall: Charles Schwab
- Best for Minimizing Costs: Robinhood
- Best for Day Trading: Interactive Brokers
- Best for Retirement Planning: Vanguard
- Best For Mobile Trading: E-Trade
- Best Education and Research: TD Ameritrade
Why Should Young People Invest?
Time is a powerful weapon you’ll only have at your disposal while you’re young. If you begin investing in your early 20s, you’ll likely have 45+ years to learn the market, make mistakes, and yes, eventually build a nest egg.
Starting young also gives you the advantage of keeping it simple. A portfolio of low-cost index funds will give even the most uneducated investor a solid lifetime return if the holding period spans multiple decades.
Building good habits in your 20s will also result in lots of smart investing decisions in your 30s, 40s, and 50s. Even if you can only invest small amounts each week or month, you’ll get in the habit of paying yourself first and making consistent contributions to a brokerage account. Forming good, simple habits like these builds discipline and takes the emotion out of investing, or at least keeps it at bay.
What To Look for in an Investment Account
Compared to seniors or baby boomers, young adults aren’t looking for the same things in an investment account. Older investors might prefer human connection and trades placed over the phone and young adults prefer chat and email support and an immersive mobile experience. Oh, and low fees. The secret’s out on costs and young people won’t (and can’t!) pay outrageous commissions.
If you’re in your 20s and looking to open your first brokerage account, you’ll want to consider the following: getting a lot of bang for your buck is a must. Look for a broker that can provide a great mobile experience with low trading costs and no minimum account balance. Pore over a list of commission-free ETFs for some great ideas. You might also want some sort of live news feed and access to research materials, including interactive stock charts.
Common Characteristics of the Best Investment Accounts
Minimizing costs should be the most important goal of any investor, but that’s especially true for a young adult who might work with limited capital. Thankfully, there are plenty of discount brokerages with very minimal fees that welcome low-balance accounts with open arms. Here are a few things the best brokerages have in common when it comes to meeting the needs of young investors.
- Low commissions: The days of charging $10 per trade are over. Many brokers today charge between $5 to $7 per trade and provide customers with a variety of commission-free investment options.
- No minimums: Starting small is always a good idea. Find a broker that doesn’t make you drop $1,000 in an account to get started.
- Easy-to-use mobile app: All brokers have a mobile app these days, but not all mobile apps are created equal. You want a smooth and streamlined experience when investing over a smartphone. Some of the best investment apps can be accessed by getting accounts at these brokerages.
- Access to investor research and education materials: Want to know the difference between traditional and Roth IRAs? Or maybe you’re interested in learning how to use stop-loss orders on your trades. Your broker should provide research and information to help you make better decisions.
- A wide variety of investment options: Investing in individual stocks can be risky, so make sure your brokerage account has access to low-cost index funds (and a list of commission-free ETFs).
- Excellent customer service through multiple forms of communication: No hour-long waits on hold! The best brokers have phone, chat and email options for reaching customer service.
Best Investment Accounts for Young Adults
Using the characteristics listed above as criteria, Benzinga has come up with a list of the best investment accounts that young adults can open today. Not every account will be a good fit; young adults will have to decide their investment goals before choosing an account to open.
Full article at Benzinga