Buying and selling. Will you have to work
though a broker, and what kind? Full-service brokers provide investment
counseling and research along with executing trades in different kinds of
securities. Discount brokers, including many of the online brokerage services,
simply execute your trades. As the name implies, discount brokers take less of
your investment dollars in fees and commissions, which may be an attractive
benefit if you can do the work of researching investments yourself.
Minimum investment. Many kinds of investment
instruments require minimum investments—from the $500 minimum balance you need
for a money market savings account to the $10,000 you need to get started in
many corporate bond issues. Mutual funds can be more flexible, but most of these
require you to make minimum investments as well.
Fees and charges. Even discount brokerages charge
fees and commissions for processing your trades. Investing in financial products
such as mutual funds and variable annuities may involve sales and distribution
costs known as loads. These products are likely to also have investment
management fees and administration costs. When using insurance products as
investments, you must also consider the costs of insurance. And many kinds of
tax-deferred investments involve fees as well as tax penalties for early
withdrawal.
Maturation. Debt securities like bonds repay your
principal upon a certain date on which they are said to mature. Maturity
periods can be decades long. Even if you can sell your security before it
matures, the length of time before maturity will have an impact on how easy it
is to sell and how much you'll get for it.
Tracking value. How will you know how your
investments are doing? For stocks and many mutual funds, the answer can be as
easy as picking up the newspaper or subscribing to an online investment
information service. Others may involve extra work, like researching a company's
bond rating or performing calculations to determine the lifetime value of a bond
issue. How much effort you want to put into tracking value may determine which
investment options you're comfortable with. |
