Brokerage Accounts: What You Need to Know to Get Started
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Have you paid off your debts and are looking to grow your money beyond savings? Learn how to create a strategy and plan so you can open and invest in your brokerage account!
Ready to Open and Invest in a Brokerage Account?
If you would’ve met us when we were first married and told me that we’d get to a point where we were investing besides for retirement, I probably would’ve laughed at you.
Considering at that time we were start off with over $30,000 of debt living in our tiny apartment right by the beach, it would’ve seemed unbelievable.
We were just trying to find our footing and create a budget that worked for both of us.
Fast forward to paying off our debts except for the mortgage and that’s where we found ourselves. Funny thing (maybe just to us) was that we hesitated a bit before opening that brokerage account.
We had become super savers and have been putting money into our retirement accounts, but somehow that next step was a bit scary.
What helped us was taking some time to step back and discuss our why behind this account. What was our hope or plan for this money?
For us, being on the path to financial independence meant freeing up options, whether it’s to spend more time with the kids, explore career pivots, or volunteer more. Having money invested in this account would be helpful.
With that in mind, we then worked out an investing plan we felt comfortable with. While I wouldn’t say it's been a smooth ride – especially this year – having those pieces in place has made investing easier.
You might be at this stage. You’ve paid off debts, saving, and now you’re looking to diversify your income and investing is one of those options on the table. How do you create a plan together for that money?
Today we’re going to be covering that and Kevin L. Matthews is here to discuss the essentials you need to know before you start investing.
He’s a number one bestselling author and former financial advisor who has helped hundreds of individuals plan for their retirement in addition to managing more than $140 million in assets during his advisory career.
Now he’s focused on teaching millennials about investing, making it more simple, and helping them craft their own plans with Building Bread.
In this episode we’ll get into:
- When you should open a brokerage account
- how to approach research before you invest in stocks
- how to create a financial and investing system that works for both of you
Let’s get started!
Resources to Stay on Top of Your Money
Here are some resources to make managing your money much easier!
- Best Budget and Money Apps: Personal Capital, Tiller, Mint
- Free 401(k) Analysis: blooom
- Open Up Your Brokerage Account: Vanguard, M1 Finance, Fidelity
- Jumpstart Your Marriage and Your Money
- How to Avoid 4 Bad Investing Habits That Can Destroy Your Nest Egg
- How to Start Investing (with $1,000 or Less)
- How to Maximize Your Retirement with Your 401(k)s
Thank You to Our Sponsor Coastal!
Support for this podcast comes from Coastal Credit Union. If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today!
Besides offering competitive rates on check and savings accounts, Costal has a wealth management team ready to work with you to create a financial plan that fits your specific needs!
Meet Kevin L. Matthews
Kevin L. Matthews II is a number one bestselling author and former financial advisor.
He has helped hundreds of individuals plan for their retirement in
addition to managing more than $140 million in assets during his advisory career.
By 2017, he was named one of the Top 100 Most Influential
Financial Advisors by Investopedia. Now he's helping millennials become empowered with their finances with Building Bread.
When Should You Open a Brokerage Account?
Elle Martinez: we have people in the community they've paid down their high interest debts like the credit cards, and they're happy to be out of that hole, but they want to start building some financial stability and some wealth.
So what I want to talk about is specifically when we're talking, investing, I know many people are familiar with what's offered at their office, the 401k, when they sign up for a job, they start investing there and they contribute at least to get the match and continue growing that.
And then the IRAs another retirement account that they can invest in. But what about a brokerage account? That's kind of this next step forward, if you want to put aside some money. So if you don't mind, I want to jump in and ask , when do you start using the brokerage account?
What kind of goals would you save for a brokerage account? For example?
Kevin Matthews: Yeah, I would say the first thing when you're talking about that broker's account, when you, like, when do you get to that point?
That answer is number one if you are already max out of your accounts, because there are limits to what you can put in your 401k, there are limits to what you can put in an IRA.
So once you've hit those limits, that's pretty much your, your next option.
The other thing is when you're ready to be more flexible.
If you're looking to do something outside of retirement, A brokerage account is really important because there are no income limits to how much you can put in.
You can take out as much as you want whenever you want. So if you have a goal that's more flexible, let's say you're investing for a rental property.
Let's say you're investing just to grow your money on the side or looking to replace your income for any reason. That's when you want to start to look for that, that brokerage account, but it's really any non-retirement goal is what a brokerage account is best for.
How to Research When Investing in Stocks
Elle Martinez: Gotcha. And you brought up a couple of interesting things.
One is with their brokerage account there are no income limits. [You also] so many choices.
For a 401k, depending on your company, you may be limited on what you can invest in.
Those choices sometimes can. Be overwhelming when you see so many different things.
And I know many in our community with their retirement accounts are less inclined to I wouldn't use the word experiment, but they don't want to branch out too much.
They look at index funds, they see that's consistently a long-term plan they want to hit, but with their brokerage account, they are looking to expand what they're investing in.
With stocks in particular or maybe certain industries, but there's a lot of noise, Kevin, that, you know, there's always this high stock tip.
How do you separate the noise from finding actual information? And how do you decide what to invest in?
For example, how would you decide before you jump in and invest in a company? What kind of research would you do?
Kevin Matthews: Yeah, all great questions. It is, or it can be rather difficult to separate the noise.
The first thing I would say is it is perfectly fine to stick with index funds and do nothing else are plenty of millionaires who do that.
And as a former advisor, I get to see what people actually invest in.
And again, I've seen millionaires. It's like, yeah, I'm just. Putting my money in the index bond and that's fine. And I'm like, you sure you don't want to do anything. I was like, yeah, it's how I got here. Definitely know that it is possible. You don't have to be fancy or extra, but for those that do, there are a few things that I like to look at.
One of the most important things is to look at how well the stock has actually done over the past five to 10 years.
The reason I say that is no, it's not going to predict the future, but it does give me a good impression or record of how well and how stable the company is. That's extremely important because if it doesn't have that history, you're taking on a big risk.
Same thing when you are going into a relationship, you want to know like, Hey. Sometimes you ask about credit. You ask about the job, you ask about just general health and wellness. Right? I want to know, like you're a healthy person. I want to know your habits, all of these things you want to know about a company too.
If you don't know that you don't have that type of information or it's shaky, they might not be something you want to invest in, but also more importantly, you want to make sure that company is growing; that the company has made money and that they are likely to make you money.
once you get that information, you can start to kind of take steps and decide whether or not you want to invest in any individual company.
Syncing Up with Your Investment Styles
Elle Martinez: Okay. And I know some people get excited and with couples I've seen this happen where one is conservative in a financial sense, because they don't want to invest in different stocks or companies.
They, like, you mentioned want to do index funds and there's nothing wrong with that. But for a couple, that's trying to come up with their plan. Are there any like rules and guidelines ?
I know you want to diversify, but how do you kind of keep things in line? So you're not putting yourself in unnecessary risk with investing.
Kevin Matthews: Yeah, the first thing there, there aren't any super hard rules when it comes to couples are some for just by yourself, or one easy way that we do this is what's called a risk tolerance questionnaire.
So it's usually five it's in questions that you answer. And then we'll actually spit out where you should be as an investor. So I think if you go to like vanguard.com/risk tolerance, it'll pop up on any website and it's totally free to take. And as a couple. You can come together and say, look, my school was here.
Your school was here. We want to try and meet somewhere in the middle. And that is one way to do it. But another thing that you want to pay attention to, or at least that you want to acknowledge is to see where you are as a couple too, for example, Not every couple is 12 days apart. So my wife and were born in October.
Elle Martinez: Wow.
Kevin Matthews: our parents were actually married on the same day in 1986. Yeah. And then it's crazy. We didn't know this until like, you know, like passing engagement, like wedding planning, all that stuff. Yeah. Apparently Valentine's day, 1986 was the day to get married. But anyway, that, that aside, our, our goals are going to be relative to that.
And we plan on retiring at the same time. Income is roughly closed, but that's not the case for everyone. Sometimes you can be 10 years apart and you may want to retire at different times. So you do want to acknowledge that. So, number one, is that the case? Because if so, the person retiring first. May want to be more conservative because they are closer to the end of the career.
And that allows the younger spouse to be more aggressive. What are the income levels are? Yeah, those are too far apart. Yeah. You may have a different strategy there and that's okay. So that's the, those are the two things you want to consider and planning and how you want to kind of draw on those buckets.
The other thing too is. If a spouse has 10 or 15 years apart, that's, you know, the person who's younger may want to be more aggressive because they need to have money to likely last a lot longer. So you always want to pay attention to that type of thing. But number one, take the risk. number two, understand the strategy is and how you're going to attack that strategy.
If your incomes are different. And if your age, your age difference is more than I would say, probably six or seven years.
Talking About Money Together
Elle Martinez: Yeah, all good stuff. I love that. And I'm kind of curious since you were mentioning that you and your wife were having this conversation, when, how do your conversations with money go?
Not just with the investments. how often do you check your regular accounts and how often do you check your investments? Accounts?
Kevin Matthews: Yeah, so for the investment account, We have a semi-annual check in as someone who's like an investor that's part of the meeting. We, we kinda came up with very distinct roles because I am more of a, I don't like to use the word type a cause I feel like.
There are people more tightly than me. That could be a shame. So I am more in type II than she is. And she is more, a more fluid if you will. So when it comes to the planning, the forward looking thing, I'm kind of more in charge of that. So every six months we sit down and reevaluate, all of our accounts decide what needs to go, what needs to change, or if we're going to stay where we are.
I also sit down and decide like, Hey. If you say this month, this much, every month we'll be here in a year. So that's kind of my forward-looking job. And as a family planner, when it comes to the budgeting and the things that we're doing right now, how is it expenses are coming out, what things we need to buy for our son and our daughter and what we need to do.
Like right now, she's more on top of that. And she's the one that says, look. This is our grocery budget is what we're buying the clothes now that you choose. Now, here's how much we're spending on that. So we kind of take a current look, which where she is right now, and I'm kind of the forward looking person.
And that's just kind of the roles that we are. As a professional planner, that's kind of what I do. Yeah. The first year or two, we really had to understand like where we were, because she's much more of a spender right now. She wants to enjoy and use the money for brunch vacation, all that stuff, which is fine, but it also fit in the longer term strategy.
So it took some, some discussions and how to find out where to fit. So on our current expenses, we probably meet once a month for it. Our investments are longer term planning. I meet and sit down with that every six.
Keeping Emotions Out Of Your Investments
Elle Martinez: I love that you guys have a system and it fits and works for you because I know, you know, every couple of different, some do it, every paycheck, some do it every month.
That's kind of like our flow, but then also there's a different rhythm with investments because from personal experience and chatting with other couples, I've noticed being on top of your money. Good. Constantly checking your investments is different than, you know, checking your bank accounts because I feel like we can be our own worst enemy when it comes to investments.
like this was the year that you really don't want to be constantly checking because. The emotions get involved. And I know you've had this experience helping couples out with investing.
Have there been certain mistakes that couples make or certain things that successful couples have done that have helped them stay the course with their investing?
Kevin Matthews: Yeah. That, that emotional thing is difficult to handle. And I've, I've seen plenty of situations that were mistakes were. I had a situation many years ago where it's mom and dad had had two kids, kids were teenagers and dad, the investment decision didn't tell them. And when the market tanked at that point in time, it was, it was like, Very heated discussion as to like, why did you invest in that?
And how did this go? So, number one, you always want to communicate and make sure that communication is transparent. But number two, what I do for myself, when I help my clients do is we sit down and we pick the dates that we are going to make changes in our investment strategy. Well, in advance and we hold firm to those days.
So for me, I'm looking at January, I'm trying to do the math. Yeah. January. Yeah. Three months later, it is April. Yeah, we have July. Yeah, we have October. Yeah. But I said, I have those days and the calendar was, you can make it the first, the 15th. It doesn't really matter, but you want to look at it at a quarterly basis or even easier every June and every December, every six months.
And the reason why you want to do that is twofold. Number one, we have studies that show that when you're checking your account monthly and weekly, you're more likely to make a mistake. And that's not what you want to do because any investment you have, you have to be right. Three times in a row. If you're looking every single month, that's just because you have to choose what to invest in when to invest in it.
And when to get out and to do that consistently every week where you're checking it every month to checking it, I was like, that's not going to end up well.
Elle Martinez: Yeah, yeah.
Kevin Matthews: Or you should have saw the conversations that were in when the market fell back in March. And everyone has said, Hey, I want to pull out, I want to go do this.
I want to go like that. My message was. Just wait. It might be six months. It might be a year. It might be two years, but normally if you're just consistent, stay the course, you're probably going to be okay. The thing is those who invested in January and left everything alone by June would have broken. Even nothing would have happened.
It would've been right back where they started, if you did nothing, but those who panicked, those who tried to do the most and tried to like save themselves. Those were the ones who got hurt.
Elle Martinez: Yeah. Yeah. I can speak from personal experience. When I first started investing , at my job, they offered it, that was a smart move, but then I got sucked in with the headlines and it'd be like, I got to put the money in and maybe it wasn't a great investment. because I didn't have that research .
And then also emotions can just change. I don't want to age myself, but I remember, 2008, and everything is shifting there. So definitely want to say longterm. And also just, yeah. Having a strategy helps out
easier said than done, but having a system in place. Definitely pays off Kevin. I know we just scratched the surface on this and we can talk about this a bit more, especially when your parents and you're trying to juggle the now with the kids and your longterm future. But if anyone listening and watching this wants to learn more and reach out to you, what's the best way they can do that.
Yeah, you can find out more about me anywhere on social firstname.lastname@example.org. I'm on almost every platform at building bread.
Well, thank you so much, Kevin. I appreciate it. And I hope you have a wonderful evening.
Kevin Matthews: Thank you.
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This episode was originally published in October 2020. Show notes have been updated June 2022.