Stock mutual funds or exchange-traded funds. These mutual funds let you purchase small pieces of many different stocks in a single transaction. Index funds and ETFs are a kind of mutual fund that track an index; for example, a Standard & Poor’s 500 fund replicates that index by buying the stock of the companies in it. When you invest in a fund, you also own small pieces of each of those companies. You can put several funds together to build a diversified portfolio. Note that stock mutual funds are also sometimes called equity mutual funds.
Keep good records for the IRS. If you’re not using an account that enjoys tax-favored status — such as a 401(k) or other workplace accounts, or a Roth or traditional IRA — taxes on investment gains and losses can get complicated. The IRS applies different rules and tax rates, and requires the filing of different forms for different types of traders. (Here’s an overview of the IRS rules for stock traders.) Another benefit of keeping good records is that loser investments can be used to offset the taxes paid on income through a neat strategy called tax-loss harvesting.
Thinkorswim is a particular standout in options trading, with options-trading tabs (just click “spread” if you want a spread and “single order” if you want one leg), plus links that explain the strategies on the order page. Its Strategy Roller feature lets investors create custom covered calls and then roll those positions from expiration to expiration.
Learning about the greatest investors of years past will provide perspective, inspiration, and appreciation for the game which is the stock market. Greats include Warren Buffett, Jesse Livermore, George Soros, Benjamin Graham, Peter Lynch, John Templeton and Paul Tudor Jones, among others. One of my favorite book series is the Market Wizards by Jack Schwager.
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Like Fidelity and Vanguard, Charles Schwab is one of the older brick-and-mortar investment brokers that successfully modernized its trading platform for the Internet Age. Of all our picks, Charles Schwab is the best option for advanced traders who want a full buffet of options (stocks, ETFs, options, bonds, mutual funds, futures) and an impressive suite of research tools. Best of all, even with all the perks Charles Schwab offers, it’s still one of the lowest-cost trading platforms, with cheaper fees than E*TRADE or TD Ameritrade on most trades.
An online brokerage account likely offers your quickest and least expensive path to buying stocks, funds and a variety of other investments. With a broker, you can open an individual retirement account, also known as an IRA — here are our top picks for IRA accounts — or you can open a taxable brokerage account if you’re already saving adequately for retirement elsewhere.