Best Sites For Investing: Choosefi Guide To Online Platforms

ChooseFI is a website that provides resources and insights to help people achieve financial independence. The website covers a range of topics, including investing, banking, credit, debt, and emergency funds. They also offer a weekly newsletter and podcast episodes with interviews and success stories from people who have achieved financial independence. In terms of investing, ChooseFI recommends using low-cost index funds and provides comparisons between different investing options such as stocks, mutual funds, exchange-traded funds (ETFs), and real estate. The website also discusses the benefits of investing in a Health Savings Account (HSA) and provides recommendations for the best banks to invest with. Overall, ChooseFI offers a comprehensive guide to investing and financial planning.

Investing in real estate

Real estate is a popular path to building wealth, and there are several ways to invest. Generally, there are four main ways to invest in real estate: residential rental properties, commercial real estate, real estate investment trusts (REITs), and real estate crowdfunding.

Residential Rental Properties

Residential rental properties are homes that have one to four units, including single-family residences (SFRs), duplexes, triplexes, fourplexes, townhomes, and condos. There are three primary ways to invest in rental properties: retail, turnkey, and distressed.

• Retail: Buying a home off the MLS using a realtor and turning it into a rental property.
• Turnkey: Buying a property that an investor has already converted into a rental property with a tenant in place.
• Distressed: Buying properties that need repair and are unattractive to most buyers, then rehabbing the home to create value and attract tenants.

Commercial Real Estate

Commercial real estate (CRE) investors look to invest in apartments (five or more units), office buildings, strip malls, storage unit complexes, and more. The cash flow of CRE properties determines the value of the property and the terms of the loan.

Real Estate Investment Trusts (REITs)

REITs are the real estate equivalent of mutual funds. Like mutual funds, REITs have multiple investors and focus on a particular sector of the market, such as shopping malls, commercial properties, or retirement homes. There are two types of REITs: publicly traded REITs, which are listed on a market index like stocks, and non-traded REITs, which may be difficult to sell if you need to cash out.

Real Estate Crowdfunding

With real estate crowdfunding, individual investors combine their money with others through online platforms to buy fractional shares of real estate investments. This method allows investors to buy pieces of multiple properties to reduce their concentration risk.

Factors to Consider

When considering how to invest in real estate, it's important to understand the options available, required minimums, liquidity, your level of involvement, and how it will affect your taxes. Here are some key factors to consider:

• How much money do you need to invest?
• What is the time commitment required?
• How will real estate investments affect your taxes?
• Which real estate investment option is right for your needs and goals?

Additionally, there are several real estate investing apps and platforms available that can make the process more accessible and convenient. These include Apps like AppitiesMogul, Fundrise, Yieldstreet, Groundfloor, EquityMultiple, CrowdStreet, DiversyFund, and Arrived. These platforms offer a range of features, such as low fees, dividend payouts, pre-vetted properties, and investment opportunities for both accredited and non-accredited investors.

Investing in stocks

There are two main ways to make money from stocks. One is by the stock appreciating in price. For example, if you buy a stock at $100 and it grows to $120, you've earned a 20% return on your money. The other way is by receiving investor dividends. Many investors prefer dividend-paying stocks because they can provide a steady stream of passive income, separate from the stock's overall price performance.

Stocks are a liquid investment, which means they can be bought or sold at any time on stock market exchanges during open market hours or during after-market hours. They also come with advanced trading options that aren't available to mutual fund owners, like the ability to make stop-loss and trailing-loss orders. A stop-loss is a limit order that will only execute if your stock drops below a certain price. For example, if you buy a stock at $100, you could set a stop-loss order at $95. If the stock ever falls to $95, the broker will immediately work to execute the order. Stop-loss orders are popular because they limit the investor's risk. However, they can only execute during regular market hours, and stocks can fall sharply during pre-market hours. So it's important to remember that stop-loss orders don't eliminate risk entirely.

A trailing stop is an advanced form of a stop-loss order. Instead of setting a specific price as your stop-loss limit, you use a percentage. For example, you could set a trailing stop of 5%. In this case, any time your stock drops 5% below its latest high, the sell order will execute. Trailing stops can be more effective at limiting your risk because your risk doesn't increase as the stock appreciates.

Stocks can be low-cost investments. Since you're not buying a fund that needs to pay fund managers, there is no annual expense ratio, and you won't be charged a sales load either. Once you've purchased the stock, your expenses are virtually over. Stocks are also a tax-efficient investing vehicle. While mutual funds can generate capital gains throughout your time as a shareholder, you won't get hit with a capital gains tax on stocks until you actually sell your shares.

However, stocks do come with some significant downsides. They are the riskiest of the four main investing options: stocks, mutual funds, index funds, and exchange-traded funds (ETFs). If the company you've invested in tanks, your portfolio will too. This lack of diversification is the biggest downside to stock investing.

Another potential drawback is trading fees and commissions. Although several brokers now offer free trades, trading fees can add up quickly and hurt your overall return if you're trading frequently.

Investing in mutual funds

Mutual funds are a great investment option for conservative investors who want to avoid market volatility. They are groups of stocks, meaning that when you buy a share in a mutual fund, you get a tiny fraction of each stock in the fund, giving you better diversification.

There are five main types of mutual funds:

• Growth: consists of stocks that are poised to have above-average growth
• Growth and Income: consists of both growth stocks and stocks that pay dividends
• Value: consists of stocks that are believed to be underpriced
• Balanced Funds: consists of both stocks and bonds
• Target-Date Funds: the portfolio of this type of fund becomes more conservative over time

The difference in each of these categories mostly comes down to asset allocation. No matter your investing profile or goals, you'll be able to find a mutual fund that suits your needs.

Pros of Mutual Funds

• Diversification: Mutual funds offer automatic diversification, meaning that when you buy a share of a mutual fund, you're buying little pieces of hundreds of underlying individual securities.
• Risk profile: You can match mutual funds specifically to your risk profile.
• Professional oversight: Mutual funds often come with professional fund managers, which can add a layer of comfort and security for new investors. However, this also adds fees.
• Dollar-cost averaging: Most mutual funds allow investors to buy "fractional shares", making it easier to invest specific dollar amounts on a consistent basis.

Cons of Mutual Funds

• Cost: Mutual funds come with expense ratios, and the expense ratios on actively managed mutual funds can be high, often ranging from 0.50% to 1.5%.
• Sales loads: Many mutual funds also come with upfront sales loads, which can be as high as 8.5% of the amount invested.
• Liquidity: Mutual funds aren't as liquid as stocks. They trade once a day after the market closes, so you can't get out of a losing fund as easily as you could with stocks.
• Investment minimums: Mutual funds often come with investment minimums of $1,000 or more.

Mutual Funds vs Index Funds

Index funds are a type of mutual fund that attempts to replicate an index (e.g. the S&P 500) as closely as possible. They are passively managed and don't need to pay fund managers, so they tend to be much more cost-effective than actively managed mutual funds. While the average mutual fund expense ratio is over 0.80%, the typical index fund expense ratio is below 0.20%.

Mutual Funds vs ETFs

Like mutual funds, exchange-traded funds (ETFs) are funds made up of pools of securities. However, unlike mutual funds, ETFs are bought and sold on stock market exchanges just like stocks, so they are more liquid. ETFs also don't usually come with investment minimums.

Final Thoughts

Mutual funds are a good option for investors who want diversification and the ability to match investments to their risk profile. However, they tend to be more expensive and less liquid than other options like index funds and ETFs.

Investing in index funds

Index funds are a type of mutual fund that tracks an index, such as the S&P 500. Index funds are passively managed, meaning they don't have to pay fund managers to pick stocks, which leads to lower fees. While the average mutual fund expense ratio is over 0.80%, the typical index fund expense ratio is below 0.20%.

Index funds are considered a good investment option because they are cost-effective and tend to yield better returns than actively managed mutual funds. Over 82% of actively managed mutual funds have underperformed the S&P 500 over the past 5 years.

When choosing an index fund, it's important to consider the broker and the fund's expense ratio. Vanguard, Fidelity, Charles Schwab, T-Rowe Price, and TD Ameritrade are all popular options for index funds.

It's also important to remember that investing in index funds, or any other financial product, carries risks. Diversification and a long-term perspective can help mitigate these risks.

• Index funds are a form of passive investing that tracks a market index.
• They have lower fees than actively managed mutual funds, which can result in higher returns over time.
• Over 82% of actively managed mutual funds have underperformed the S&P 500 in the last 5 years.
• Popular brokers for index funds include Vanguard, Fidelity, Charles Schwab, T-Rowe Price, and TD Ameritrade.
• Consider the fund's expense ratio when choosing an index fund.
• Remember that investing carries risks, and diversification can help mitigate these risks.
• A long-term perspective is often beneficial when investing in index funds.

Investing in exchange-traded funds (ETFs)

Exchange-traded funds (ETFs) are a type of index fund that can be traded like stocks on an exchange. They are a basket of securities that can be bought and sold throughout the day, offering low expense ratios and fewer broker commissions than buying the stocks individually. ETFs are similar to mutual funds, except they can be bought and sold all day long, and they don't involve direct ownership of securities.

ETFs are a popular investment choice due to their low cost, high liquidity, and diversification within the funds. They are also more tax-efficient than mutual funds, as most buying and selling occur through an exchange, keeping tax costs lower.

There are two types of ETFs: passive ETFs and actively managed ETFs. Passive ETFs aim to replicate the performance of a broader index, such as the S&P 500, while actively managed ETFs have portfolio managers making decisions about which securities to include in the portfolio. Actively managed ETFs tend to be more expensive for investors.

There are several types of ETFs available, including stock ETFs, industry or sector ETFs, commodity ETFs, currency ETFs, Bitcoin ETFs, and inverse ETFs. Stock ETFs provide a basket of stocks that track a single industry or sector, offering diversified exposure to that industry. Industry or sector ETFs focus on specific sectors or industries, such as energy or financial services. Commodity ETFs invest in commodities like crude oil or gold, and currency ETFs track the performance of currency pairs. Bitcoin ETFs expose investors to bitcoin's price moves, and inverse ETFs allow investors to profit from stock declines by shorting stocks.

When investing in ETFs, individuals can use online brokers, traditional broker-dealers, or robo-advisors. Many platforms offer commission-free trading, and investors can use ETF screening tools to narrow down their options based on criteria such as trading volume, expense ratio, and past performance.

ETFs are a good choice for investors seeking a cost-effective way to gain exposure to a broad basket of securities. They offer diversification benefits and are more liquid and tax-efficient than mutual funds. However, some ETFs may have higher fees, especially actively managed ETFs, and those focusing on a single industry may limit diversification.

Frequently asked questions