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What Are the Different Investing Options?

Depending on your goals and comfort zone, there are a few investing options you can use to get started investing—each of which will affect your initial and lifetime costs in different ways.

🤔 Understanding your investing options

Here are some of your options.

Robo-advisors

Robo advisors are one way to invest without going it alone. This type of investment tool uses algorithms and AI to determine the best portfolio for your situation. These systems can even take into account financial goals, risk tolerance, and your investment time horizon to make the best possible decisions.

Often times, robo advisors will point you toward ETFs as your main investment vehicles. These typically have lower costs and are automatically diversified due to their makeup. (Diversification tends to bode well for your portfolio – which makes ETFs an obvious choice).

Robo advisors are “set it and forget it” methods, which means that you don’t have to stay on top of your investments more than you want to. These advisors are popular with both first-time and veteran investors, as they reduce risk and cost without compromising on quality.

In fact, due to lower fees, robo advisors can prove to be a wise investment for many as they carry much lower costs over a longer time horizon. Many robo advisors offer expense ratios (fees) as low as 0.25%, sometimes lower depending on how much you invest. This brings the cost to invest down.

Typically, these fees come out of the interest you earn before it’s paid out to you, so you don’t have to worry about scrounging up extra cash to cover the costs.

To get started with a robo advisor, you’ll need to decide how much money you want to spend. While many of these services require $500 or less to get started (your minimum deposit), some require upwards of $10,000 for your first investment.

Full-service brokers

Full-service brokers are the most expensive option when it comes to investing, which brings the cost to invest up. As a result, they typically only deal with high net worth clients, as some firms set their minimum deposit at $25,000 or higher. For this price, they offer a full range of services and financial advice, including:

  • Retirement accounts
  • Estate planning
  • Healthcare accounts
  • Trading in stocks, ETFs, and mutual funds
  • Exercising more exotic trading options (pun intended)

Usually, full-service brokers work by charging commission on your transactions in addition to charging a percent of the value of your assets. Some may also impose an annual fee equivalent to a membership charge.

Full-service brokers justify their higher expenses by hand-tailoring your accounts to your situation. However, this does not mean they’re the most cost-efficient, as their higher fees will cut substantially into your potential profits over time.

Discount brokers

Discount brokers are the new normal for many who can’t afford the exorbitantly high fees of a full-service operation. These online brokers may allow you to make commission-free stock trades, though they’re likely require for more advanced financial transactions.

Some discount brokers have minimum deposit restrictions, ranging from $100 to $1,000 or more. These are usually quite low compared to full-service operations. Some accounts don’t require minimum deposits, but they make up their losses by charging other fees (everyone wants their money, after all).

Other brokers may lower their costs – such as trading and account management fees – if your balance rises above a threshold. This encourages you to invest more, which hopefully means that everyone makes more money in the long run.

However, with great freedom (and cheapness) comes great responsibility. For instance, you not only have to buy and sell on your own terms. But you also don’t have personalized advice from an expert. This means you have to do your own research and make selections based on your best judgement.

That being said, often times these brokers publish free educational materials for their investors. This can help you get started with all the tools you need to make (hopefully) wise decisions on your own.

What this means for you

You have various routes you can take to get started investing. But Q.ai offers you the best of all worlds with AI-powered investment Kits that dig into the data and crunch the numbers for you.

You can explore our various Investment Kits to put into your portfolio. And you can always swap them out for others or tack on more. However, we recommend giving our Kits time to do their work without switching it up so often.

Disclosures

Q.ai is the trade name of Quantalytics Holdings, LLC. Q.ai, LLC is a wholly-owned subsidiary of Quantalytics Holdings, LLC ("Quantalytics"). Quantalytics offers automated financial advice tools through Quantalytics Investment Advisors, LLC ("QAI"), an SEC-registered investment advisor. QIA’s investment advisory services are ONLY available only to residents of the United States. Disclosures concerning QIA’s investment advisory services are available on its Form ADV filed with the SEC. The content in this newsletter is for informational purposes only and does not constitute a comprehensive description of Q.ai's investment advisory services.

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