March 30, 2016
How Investing Is Similar to Shoe Shopping
What woman doesn’t love a good shoe? What if I told you that investing was similar to going to the mall?
With so much information out there, even the thought of investing can feel overwhelming. However investing is the key to making your money grow over the long term, so you need to feel equipped enough to get started. It doesn’t have to be so complicated. If you have been looking for some place that breaks down the information in a language you understand, your search is over.
When you go to the mall there are lots of stores, and department stores typically anchor the mall. For our purposes today, those department stores are going to represent brokerage houses.
Picking a Brokerage is Like Picking Your Favorite Department Store
A brokerage house is where you go when you want to set up an account to invest in the market. Picking a brokerage is like picking your favorite department store. They all offer similar products, but the brand offered and price point may vary greatly. Each brokerage house has its own characteristics similar to how department stores do. A department store target customer may be working families who need affordable quality products that last long term. Another department store may be geared towards young hip professionals, who are looking for trendy items straight off the runway and another department store may only offer high end luxury brands. True, all carry shirts, pants, dresses, and shoes, the same way all brokerages will carry stocks, bonds, mutual funds, and etfs, but the type of offerings and prices that they charge will all be different.
A Stockbroker is Like Your Personal Shopper
If you have a lot on money to invest and want to be assigned a stockbroker, you would first find a brokerage house that offers this service. This person would be similar to a personal shopper in a department store. Â They will recommend a variety of products and then actually take your money, invest it and manage it for you, for a fee of course.
Do you want to Self Park or Valet?
To get started each brokerage house has its own minimum account balances you need to get started. Some have no minimums, sort of like self-parking, others require a minimum balance in the thousands, more like valet.
Individual stocks can be purchased at any brokerage, but there are certain mutual funds and index funds that are exclusive to a particular brokerage house. Think of it as the brokerage houses private label. Similar to how department stores have their exclusive brands that you can only buy from them.
(Of course you should always talk to a financial advisor before getting started. I am not a financial advisor and this post should not serve as a substitute for professional financial advice.)