The best way to invest money is to put funds into an account that’ll increase over time. However, it can be a little confusing to figure out how, given the various types of investment accounts on the market. Here’s an explanation of some of the types of investment accounts that you can use to save money.
Brokerage Investment Accounts
A brokerage account is a general type of investing. A person, or a group of people, hire a broker or a brokerage firm to invest on their behalf. There are two different types of brokerage accounts — individual and joint.
Individual accounts are designed for one person. However, if a group of people is looking to invest, they can open a joint brokerage account. A joint account allows multiple people to pool money for larger investments, which could yield higher returns.
Retirement Investment Accounts
Did you know that you can save a nice nest egg for your retirement using an investment account? Individual Retirement Accounts (IRAs) are simple investment tools used to earn funds and retirement savings. There are many different types of IRAs including a traditional, Roth, and simple IRA. Each has unique pros and cons, so it’s important to learn about each type before choosing to open a retirement investment account. You can learn more about IRAs on our article here.
Custodial Investment Accounts
A custodial account is the type of investment style where you save funds for a child’s future. These types of accounts can also be used to save up for someone you have guardianship over. One of the most popular types of custodial investment accounts is an education savings account. This is where a client will evaluate investment opportunities for a minor that will enable their child to use the funds as college tuition at a later date.
A custodial account allows someone to open an investment account on behalf of a minor. Unlike some other accounts for the benefit of a child, because they have specific restrictions, contributions are irrevocable gifts owned by the minor, and there is an age of termination. Additionally, both the minor and the custodian must be listed on the application.
Specialty Investment Accounts
Specialty investment accounts are ones that don’t fit any other category, such as a trust. Trusts are created through a will of a deceased person, and securities are registered in the name of the trust. A trustee manages the account until the items that are willed to individuals can be distributed.
Other specialty accounts involve profit sharing, 401ks, and pension plans. These are defined as contribution and defined benefit plans that are created for the employees of a company. A qualified individual is required to open these accounts to allow investments for the future of eligible employees.
Business Investment Accounts
Business investment accounts, as the title suggests, are only available to those who own companies. Many businesses choose to provide additional features that are useful for firms to attract more customers, such as earning interest without locking into a fixed term, extra security, specialized debit cards, and more.