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How investment accounts can make you money

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Financial institutions tailor different investment accounts to suit different investor types and classes. A high-risk investment has the potential for the highest gains, but also for the highest losses.

How does an investment account work?

An investment account can be any number of accounts that give you a return. Investment accounts include: brokerage accounts, pension accounts, certificates of deposit, and retirement accounts such as a 401(k) or IRA. You can also choose from direct investment accounts that act as a hybrid savings account and brokerage account. Investment accounts present different risks and returns, and investment accounts are often tailored to different types of investors.

What are the different types of investment accounts?

Investment account is an umbrella term that includes a number of different financial products. Common investment account types include:

  • Brokerage accounts. Also known as stock trading accounts, brokerage accounts typically offer the widest range of investment options and are suitable for both short-term traders and long-term investors.
  • Robo-advisors. These accounts are often more limited in selection but offer the benefits of modern technology and lower costs than financial advisors.
  • Certificates of deposit. One of the safest ways to invest your money, a CD gives a higher return when you lock your money away for longer periods. There’s a penalty if you want to access your money before the term matures and there can be bonuses if you continue to invest your money once the first investment matures.
  • Money market accounts. A money market account is also called a high-interest savings account. Like a CD, this investment account gives you a guaranteed return on your deposit. However, you don’t have to commit your money to the account for a specific period of time
  • Retirement accounts. The most common options include 401(k), Roth IRA and traditional IRA accounts. Unlike a pension plan, these retirement accounts let you decide how your money will be invested.
  • Pension plans. This is a retirement plan set up by a company for an employee. The investment choices in a pension plan are made entirely by the company — the recipient of the pension has little to no control over how the money is invested.

What are the pros and cons of using an investment account?

Pros

  • Financial gain. Different investments and investment accounts have the potential for different gains. The potential for capital gains is tied to the risk of the investment.
  • Choice. These types of accounts give you control over how you spend your money.

Cons

  • Risk. The risk of suffering a capital loss.
  • Not for everyone. You need to do your homework and spend time researching before you start investing and open an investment account.
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Compare investment accounts

Name Product Available asset types Stock trade fee Option trade fee Annual fee
Stocks
Bonds
Options
Mutual funds
ETFs
Forex
Cash
$0.01 per share
($3 minimum)
$3 + $0.75/contract
0%
Trade stocks, options and ETFs for as low as $1 per order for a year when you open a new account by December 31, 2019, and fund it with $2,500 or more within 60 days.
Stocks
Bonds
Mutual funds
ETFs
$2.95
0%
100+ commission-free online stock and ETF trades with $0 minimum to start. Just $2.95 per trade thereafter.
INVESTMENT PRODUCTS: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
Stocks
Bonds
Options
Mutual funds
ETFs
Forex
Futures
$4.95
or $3.95 with a $100,000 average daily balance or 30+ trades over a rolling 3-month period
$4.95 + $0.65/contract
or $3.95 + $0.50/contract with a $100,000 average daily balance or 30+ trades over a rolling 3-month period
0%
Some of the industry's lowest fees plus a cash bonus up to $3,500.
Stocks
ETFs
$0
0%
Margin financing rates start at 3.99%. No monthly subscription fees for margin.
TradeStation
TradeStation
Stocks
Options
Mutual funds
ETFs
Futures
$5
$5 + $0.50/contract
$99.95 per month
A platform built for all kinds of traders and all styles of trading
Stocks
$1 per month

0.25% on balances of $5,001+
Stash is more than an investment app. You’ll have access to tools that can help you become a confident investor.
Stocks
Bonds
Mutual funds
ETFs
$4.95
$4.95 + $0.65/contract
0%
Get easy-to-use tools and the latest professional insights from a team of specialists.

Compare up to 4 providers

Name Product Minimum deposit to open Available asset types Annual fee
$500
Stocks
0.6%
Automated pure equity investing to help you achieve your goals. Free portfolio management for the first six months.
$100
ETFs
0%
Put your money to work. Pay zero SoFi management fees.
$0
0.25% on balances up to $99,999

0.15% on balances of $100,000+
Betterment's automatic investment site aims to improve your returns and support good financial habits with passive investing and financial planning support.
$500
Index funds
ETFs
0.25%
Wealthfront builds a free financial plan for the life you want and automate your investments at a low cost.
$100
Stocks
Bonds
ETFs
Cash
0.3% on balances of $100+
Automated investing, professionally managed.
$0
Stocks
Bonds
ETFs
$1 per month
Invest your spare change. Anyone can grow wealth.

Compare up to 4 providers

How do I compare investment accounts?

Consider these points when you compare investment accounts:

  • Risk profile. Riskier investments give greater returns. Savings accounts and certificates of deposit are among the safest types of investments, whereas stock trading has the potential for big gains and losses.
  • Your investment goals. Access to capital and risk appetite are two important factors in deciding your investment goals and subsequently which investment account is right for you. For example, a high-interest saving account is a better investment account for someone saving for their first home than a brokerage account. Stock trading can lead to big gains, but the chance of losing everything probably won’t appeal to someone saving for a mortgage.
  • Your investment strategy. You can hedge your bets by choosing the right mix of high- and low-risk investments. Using a variety of account types to diversify your investment portfolio is a common strategy.
  • The length of the investment. Are your investment goals short, medium or long term? Different investments have different investment cycles. For example, you need to pick the term length for a certificate of deposit before investing, while stocks can be a little more flexible. Your goals and time frame to realize those goals should help you make a decision about the best account for you.
  • Liquidity. Also compare different investment accounts based on how easily you can access your money. Savings accounts are among the most liquid type of investment account you can get your money when you want it. Securities only become a liquid asset if you can find a buyer.
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Bottom line

Investments come with risks — there’s no way around that. The amount of risk varies depending on the investment type. CD and money market accounts have very little risk — worst case scenario is that the interest rate dips below the inflation rate — but also small returns. On the other hand, investing in stocks means that you could lose most, or even all of your money or you could increase it exponentially. It’s up to you to decide what kind of risk, if any, you’re willing to take.

Frequently asked questions

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