If you haven’t read Parts 1 - 6 of this series, you may find it helpful to go back and read through them. Please leave any question, comments, or suggestions in the comments at the bottom of each post, or email me with the contact page. Thanks!
This post is going to be relatively short, leaving you plenty of time to go out and take some action. Now that you know what type of account(s) you're going to open, it's time to decide where to open them. I personally hate reading posts like this that never actually point you to a company in particular, but instead tell you what to look for. I'll talk about what to look for, but I'm also going to give you my recommendations on which companies to go with for the most common scenarios.
Assuming that you've decided to open an IRA or a traditional brokerage account (non-tax-advantaged), you've got about 17,000 options. Probably not quite, but close enough. The choice of what's best for you depends on a few things:
What to look for
Vanguard and Fidelity
In general, my feeling is that the best option is an account at Vanguard or Fidelity. Both companies are rock solid with a focus on index investing (which we'll cover in detail later). The fees are very low and you'll have plenty of solid options on what to invest in. However, they do have account minimums, so if you're unable to come up with the cash right away (usually $1 - 3k per fund, and you'll need 3 - 5 funds), consider going with one of the options below and transfering to these guys in the future when you've built up the necessary amounts.
This post used to be longer and more complicated, but I've recently discovered that Fidelity waives their minimums if you setup automatic monthly contributions of at least $200. This is a fantastic deal that I highly recommend. If there's any way at all to swing that $200 / month, do so. Hopefully Vanguard will offer a similar deal soon.
Sharebuilder
Sharebuilder allows you to setup an automatic monthly investment plan that transfers money from your bank account each month and invests it in your chosen stocks and funds. The interface is easy to use and they have a very good selection of investments, at least for our purposes. The downside is that you'll pay a monthly fee for this service of $8 - 20. This may not sound like much, but if you're investing smaller amounts, it can be a relatively large percentage. If you only have $100 / month to invest, $12 means that you're losing 12% right off the bat. Ouch! In general, I would only use this service if I could keep my monthly fee below 2-3% of the amount I'm investing.
Bringing it all together
In general, here's what I would do:
Task: Open your accounts, setup your direct deposit, and create your automatic investment plan.
If you absolutely can't invest $200 / month, I would honestly just open an online savings account at HSBC Direct or ING Direct and stash the cash in there while I figured out how to increase my income or cut my expenses enough to be able to afford that $200 / month. If you're only investing $100 / month or something, the $15 or $20 / month fee is going to cut into your investments too much if you go with Sharebuilder. You're better off going with a high-interest savings account while you try and get your monthly investing budget to $200.
If you can come up with the $200 / month, call Fidelity today (or if you have the required minimum balances, Vanguard). Tell them you want to open an IRA and setup automatic monthly deposits. I don't get paid anything to recommend these companies and I have specifically NOT recommended other companies in this post because I don't feel that they are trustworthy enough. However, these two will take very good care of you. Don't wait.
When you setup the account, don't choose what funds or investments that you want to put your contributions into just yet. We'll cover that in later posts. For now, just get the account opened and the contributions flowing into it.
Disclaimer: I am not a professional financial adviser. All information herein is provided in good faith. It is not intended to be, and should not be relied on as, a substitute for independent legal, financial, tax or other professional advice. Readers should seek appropriate legal, taxation, accounting, investment or other expertise in their local and overseas jurisdictions.