Saturday, October 16, 2010

Tier 5: Managed Accounts

After you max out your retirement accounts like your IRA and 401k, the next step is to invest in accounts that do not have tax advantages. Some of the risks are the very same as your 401k and IRA. Some risks are additional. As always you should invest in Tier order (1-6). There are numerous places to open these accounts. Self managed accounts can be opened by ING Direct,, Scott Trade, and ETrade. I recommend Zecco for more actively managed accounts, and ING Direct for an automatic investment account. Both offer reliable service and very inexpensive trading. However, I would not recommend a self managed account unless you have been educated by yourself or others, and you can afford to loose the money you invest. Self managed accounts can be extremely risky.

Probably the easiest way and safest way to contribute to managed accounts is to get and financial advisor. Ironically it's not easy to find one. First of all don't pay someone a consultation fee. Second most financial advisors get paid by assets under management. That means they get paid a percentage (usually close to 1% depending) of the assets they are managing each year. It is important that you know so that if an advisors seems hesitant to allow another advisor to manage some of your money, greed is a possibility. Third, consider multiple advisors and multiple strategies. Take the time to interview multiple advisors. Ask about their strategies and philosophies. Ask your friends and family who they use. Most importantly find someone you trust.

This is not something that you can take lightly. There are many different advisors and many different types of strategies. Some strategies are better than others. It's hard to know what best and who is best. More often than not the difference between two advisors is a matter of good and better, not bad or good. That is why I recommend interviewing multiple advisors and finding someone you trust.


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