Best Places To Buy Investment Portfolios: A Comprehensive Guide

An investment portfolio is a collection of financial investments, such as stocks, bonds, commodities, cash, and cash equivalents. It is a term used to refer to all of an individual's invested assets. When creating an investment portfolio, it is important to consider your risk tolerance and time horizon. You can choose to manage your portfolio yourself or outsource the task to a robo-advisor or financial advisor. There are several steps to building a profitable portfolio, including determining your asset allocation, choosing individual assets, regularly monitoring and rebalancing your portfolio, and making strategic adjustments. Diversification is key to managing the risks of individual investments and maximising returns.

Robo-advisors

• Wealthfront: This robo-advisor offers a complete service for a low annual fee. Investors can start with as little as $500 and the platform offers multiple tax perks and a free financial planning tool called "Path".
• Betterment: Betterment offers a suite of financial planning tools and access to standard brokerage and retirement accounts for a low advisory fee of 0.25%.
• Acorns: Acorns is a great option for beginners, with a simple onboarding process and well-balanced portfolios consisting of low-cost index funds.
• Vanguard Digital Advisor: Vanguard is known for its low fees and this robo-advisor is no exception, charging advisory fees as low as 0.20%.
• SoFi Automated Investing: SoFi offers a unique robo-advisor service with no management fees, fully-automated investing, and access to human financial advisors and career counsellors at no extra cost.
• M1: M1 Finance is not a typical robo-advisor but offers automated investing solutions. It allows users to create their own investing "pie", which is a simple way of saying portfolio.
• Empower: Empower, previously known as Personal Capital, is a hybrid digital wealth management company and powerful finance app. It offers a number of free tools and calculators, as well as customized investment plans for high-net-worth individuals.

However, they may not be suitable for more experienced investors or those who want a human touch and are willing to pay higher fees for a traditional financial advisor.

Financial advisors

• Commission-based
• Fee-based
• Fee-only
• Combination of fees and commissions

When choosing a financial advisor, it is important to consider their credentials, such as whether they are a certified financial planner (CFP) or a registered investment advisor (RIA). It is also important to understand their investment approach and method of compensation, as this can affect asset selection.

• Identify your financial needs: Reflect on what you need help with, such as personal finance, debt management, investing, tax strategy, retirement planning, or estate planning.
• Know what credentials to look for: Look for financial advisors who are bound by a fiduciary duty and have relevant certifications such as CFP or RIA.
• Review financial advisor service types: Consider whether you prefer an online or traditional, in-person financial advisor. Also, think about the level of service you need, such as investment management or more comprehensive financial planning.
• Consider your budget: Financial advisors can be costly, so it's important to understand their fee structure before committing.
• Vet the financial advisor's background: Check their credentials, experience, and disciplinary history.
• Hire the financial advisor: Contact the advisor, gather information, and ask questions to ensure they are a good fit for your needs.
• Zoe Financial: Best for a 1-to-1 relationship with a financial advisor.
• Betterment Premium: Best for access to a team of financial advisors.
• Vanguard Personal Advisor: Best for access to a team of financial advisors.
• Facet: Best for a 1-to-1 relationship with a financial advisor.
• J.P. Morgan Personal Advisors: Best for access to a team of financial advisors.
• Harness Wealth: Best for a 1-to-1 relationship with a financial advisor.
• Wealthramp: Best for a 1-to-1 relationship with a financial advisor.
• Schwab Intelligent Portfolios Premium: Best for access to a team of financial advisors.
• Ellevest Private Wealth Management: Best for a 1-to-1 relationship with a financial advisor.
• Merrill Guided Investing with advisor: Best for a 1-to-1 relationship with a financial advisor.

Tax-advantaged accounts

Tax-Deferred Accounts

Tax-deferred accounts allow you to reduce your taxable income in the present by realising immediate tax deductions on contributions. However, future withdrawals from these accounts will be taxed as income. Examples of tax-deferred accounts include traditional Individual Retirement Accounts (IRAs) and 401(k) plans.

Tax-Exempt Accounts

Tax-exempt accounts, on the other hand, provide tax benefits upon withdrawal in retirement. Contributions to these accounts are made with after-tax dollars, meaning there is no immediate tax advantage. However, withdrawals from these accounts are typically tax-free. Examples of tax-exempt accounts include Roth IRAs and Roth 401(k)s.

Other Types of Tax-Advantaged Accounts

In addition to retirement accounts, there are other types of tax-advantaged accounts designed for specific purposes:

• Health Savings Accounts (HSAs): These accounts are similar to 401(k)s but offer even greater tax advantages. Contributions are made with pre-tax dollars, investment growth is tax-free, and withdrawals are tax-free when used for qualified healthcare expenses.
• 529 College Savings Plans: These plans are tax-exempt, meaning contributions are made with after-tax dollars, but investment growth and withdrawals for qualified education expenses are tax-free.
• Coverdell Education Savings Accounts: These accounts are designed to help save for college, allowing tax-free withdrawals for qualifying education expenses. Contributions are not tax-deductible, and contributing individuals must meet certain income requirements.
• Achieving a Better Life Experience (ABLE) Accounts: These accounts are designed for eligible individuals with disabilities. Contributions are typically made with after-tax dollars, and withdrawals are tax-free when used for qualified expenses. ABLE accounts may also allow beneficiaries to maintain eligibility for certain government benefits.

Taxable online brokerage accounts

A taxable online brokerage account is a versatile investment option. It is a type of brokerage account that does not receive favourable tax treatment like IRAs or 401(k)s. While taxable brokerage accounts don't offer tax-deferred growth or immediate tax savings, they provide greater flexibility and more investment options than a savings account.

• Taxation: In a taxable brokerage account, your realised earnings are subject to taxes. Earnings are realised when you sell stocks, exchange-traded funds, or mutual funds at a profit, receive interest payments from taxable bonds, or receive dividend payments. These gains are typically subject to capital gains taxes instead of ordinary income taxes.
• Control and Flexibility: Taxable brokerage accounts offer more control over taxes when compared to tax-advantaged retirement accounts. You can tailor your investment portfolio to be as conservative or adventurous as you desire and use gains to improve your income. Additionally, there are no contribution limits or income restrictions on how much you can invest annually.
• Accessibility: You can withdraw money from a taxable brokerage account at any time without penalty, providing you with greater liquidity. This accessibility makes taxable brokerage accounts suitable for both long-term savings and short-term financial goals.
• Investment Selection: Taxable brokerage accounts typically offer a wide range of investment options, including stocks, bonds, exchange-traded funds (ETFs), and various other securities. This variety allows you to build a diverse portfolio that aligns with your risk tolerance and financial goals.
• Tax Strategies: While taxable brokerage accounts involve paying taxes on investment earnings, there are strategies to mitigate the tax impact. For example, you can use tax-loss harvesting to offset capital gains with investment losses. Additionally, long-term capital gains may qualify for more favourable tax rates depending on your taxable income for the year.

When considering a taxable online brokerage account, it's important to weigh the benefits against potential drawbacks. While these accounts offer flexibility and investment choices, they may not provide the same tax advantages as retirement accounts. Additionally, taxable brokerage accounts may require careful tax planning and strategies to optimise your tax obligations.

Deposit accounts

A deposit account is a central hub for managing cash flow within an investment portfolio. It allows users to allocate funds for investment activities and track incoming and outgoing cash transactions. It can be thought of as a list, akin to a shopping list, where transactions such as withdrawals and deposits of digital money are recorded.

There can be multiple deposit accounts within a single portfolio, for example, for different currencies that are traded. Deposit accounts can be used to keep dividends and taxes separate, and they can also be negative. It is good practice, however, to first add a deposit of a large enough sum to cover subsequent buy transactions.

Certificates of deposit (CDs) are a type of savings account that pays a fixed interest rate on money held for an agreed-upon period. CD rates are usually higher than savings accounts, but there is a penalty for withdrawing your funds early. CDs are safer and more conservative than stocks and bonds, but they offer a lower opportunity for growth. They are also federally insured if opened with an FDIC- or NCUA-insured bank or credit union.

CDs are ideal if you have cash that you don't need now but will want within a few years. They can also be a good option if you want some of your savings invested conservatively, as they can help you achieve lower risk and volatility than investing in the stock and bond markets.

Frequently asked questions