I make a point to sock away a chunk of my income in a solo 401(k), which is a special retirement plan available to those who are self-employed. But I also like to invest for far-off goals in a regular brokerage account.
While 401(k)s are great, they’re somewhat restrictive. For one thing, annual contributions are capped at a certain limit that changes from year to year. And while solo 401(k)s could make it possible to save a lot more than a regular 401(k), if I’m able to, I like to save beyond what my retirement plan allows for.
Also, with a 401(k), you can’t touch your savings until age 59½ or you’ll incur costly penalties on funds you remove. With a brokerage account, you can take withdrawals at any time without penalty.
There are many different companies that offer brokerage services. But I choose to invest with Robinhood for a few key reasons.
1. It’s easy
I happen to think Robinhood’s platform is very user-friendly and easy to navigate. I can admit that I’m not always the most tech-savvy person, so to me, having a simple platform is important. Robinhood makes it easy to trade stocks, see where my money is invested, and transfer money over from my checking account.
2. There are no fees for stock trades
I don’t buy and sell stocks in my Robinhood account all that often. But when I do, it’s nice to know I won’t be hit with a fee for making such moves. Granted, most major brokerages these days have done away with fee-based trading, so there’s really no reason to subject yourself to that.
3. I can buy fractional shares
Years ago, if you didn’t have enough money to buy a full share of a given company’s stock, you had to wait until you’d saved enough to swing the cost of a complete share. These days, that isn’t necessary. That’s because many brokerages offer the option to purchase fractional shares, and Robinhood is one of them.
Fractional investing lets you buy a piece of a share of stock if you don’t want to buy a full share or can’t afford one. So, if a given company is trading for $500 a share and you only have $250 to invest with, you can buy half a share.
What I really like about Robinhood is that you don’t have to input your investments in terms of shares. Rather, you can do so as a dollar figure.
So, let’s say I manage to save $500 at the end of the month and want to use that money to buy shares of a given company. All I need to do is effectively tell Robinhood, “Invest $500 in Company X,” and that money gets put to work. I don’t have to be the one to sit there calculating what fraction of a share that gets me.
What’s the right choice for you?
There are plenty of brokerage accounts that are easy to use, come with fee-free stock trades, and offer fractional investing. But if you’re new to investing, it does pay to give Robinhood a look and see if it’s a good fit for you like it is for me.
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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.