- How's it going today, guys? I hope you're having a fantastic day. In this video here, we're gonna be talking about the best investing accounts to open in 2018. If you're somebody who's looking to start investing, but you don't really know where to start and you're looking at the different options out there, this video should give you a good idea as far as what investing account is going to make the most sense for you. I'm gonna be listing out my top three picks for investing accounts available out there right now for a complete beginner to get started with. Now, the one thing I do want to stress is this. If you are thinking about investing and you're on the fence, start taking action. With a lot of these accounts, you can open an account with as little as zero dollars in some cases.It's not gonna be a lot of money to get started, but if you put this off for another six months or a year, you're gonna look back and wish you started today. If you are thinking about investing, I highly encourage you to take action and get started today. Maybe one of these accounts will make sense for you. If not, continue to do your research and find an investing account that's gonna offer to you what it is that you are looking for. Now, first of all, I am doing my weekly stock radar giveaway. Again, that is my weekly stock analysis membership site.
It's gonna be closed up until August 1st and then it will be back open for enrollment. This week's winner is Zach E. Pointer. He sent me a message on my Facebook page that said hashtag, stock radar, and so I selected you as the winner for my stock radar weekly giveaway. You get a lifetime membership to my private investing membership site. Congratulations, Zach E. we'll see you over there.
Now, I do have a link to all these investing accounts down in the description below. Some of these are affiliate links, but you do not have to use them, however, if you do, understand it's helping support my channel and my work, and allows me to make videos like this that help people when it comes to investing. The first account I want to recommend is for somebody who's looking for a very passive approach to investing.
You don't want to think about it, you don't wanna worry about it, you wanna automate the entire process and just know that every single month or maybe every single week you have money going into some kind of investing account. My recommendation is going to be betterment. First of all, let's go ahead and talk about the requirements for opening a betterment account. The account minimum is absolutely nothing. You can open an account with zero dollars and they charge a 0.25% expense ratio for betterment digital or if you're looking for more guidance and you have at least $100,000. If you have a $100,000 balance with betterment and you are paying a 0.4% expense ratio, you'll get access to betterment premium which will give you unlimited phone access to a financial advisor. If you're somebody out there who's looking for guidance when it comes to your investments or you just want somebody that you would be able to call and ask questions to, betterment premium might be a good option for you.
However, I'm assuming most people watching this video, especially young people, do not have $100,000 to invest. If that is the case, you will fall under betterment digital and just pay that 0.25% expense ratio. What exactly is betterment? Betterment is what you call a Robo-advisor. When you create an account with betterment, you're going to be doing a risk tolerance assessment where they're gonna ask you questions about whether you are comfortable with risk or if risk is scary to you. Based on that, they're going to determine an asset allocation. They're also gonna look at your goals and your objectives. Betterment is really good for people who are goal-oriented or objective-oriented. Let's say, for example, you're 25 years old and you want to be investing for your retirement by age 65.
You open a retirement account with betterment and you say I wanna have $500,000 in my retirement account by the time I'm 65. Well, you can put those goals and objectives in there and betterment will tailor a portfolio for you. The main thing that I like about betterment is the fact that they do automated rebalancing and that is something that a lot of people forget about, especially passive investors. What that means is at least once a year, and if not twice a year, you should be going into your investing account and making sure that all these assets are carrying the correct weight in your portfolio, because they are going to be moving in different directions at different times. At some point, you may be up on a particular asset, but down in another. Let's say, for example, you wanted to have 25% of your portfolio in international stocks and 75% in domestic. Well, you could check back a year later and find that you're 30, 70 or 35, 65 and you'd want to rebalance and get those levels back to normal, but a lot of people fail to do this and they miss out on having a balanced portfolio.
They end up being overweight in certain areas because they're forgetful. If you are somebody who's going to likely be forgetful, you're gonna want to take advantage of a service that's going to offer rebalancing for you, and betterment is going to automate that rebalancing and keep your portfolio at the correct weight based on your risk tolerance and your investment objectives. Now, if you are somebody who's looking to invest in individual stocks, betterment is not gonna be for you because you cannot buy individual stocks through betterment. You're gonna be investing in low-fee ETFs or exchange-traded funds and betterment is going to build an asset pool for you based on your goals and based on your risk tolerance.
It is for the most passive investors out there and you can automate contributions every single week or every single month so you know that your money is going into your investing account and you have to do absolutely nothing. Betterment is for the most passive investors out there. Now, the second account I would recommend is for people who want to be picking some individual stocks. Maybe you do want to be investing in some ETFs to form a foundation of your portfolio, but you also want to be more active with your investments and invest in some individual stocks. Now, traditionally I would have recommended Robinhood here, but I've recently learned about a new investing account out there called M1 Finance. Having looked into this investing account myself, I feel this is a much more superior product than what Robinhood has to offer. The only difference between these two accounts is that Robinhood has a zero dollar minimum account balance while M1 Finance has a $100 minimum account balance or $500 for retirement accounts. Most of us have at least $100 to get started with investing, otherwise I would just wait and save up some more money.
The general rule of thumb that I have is about $500 to $1,000 is a good amount to fund your account with and get started just so you have enough to have some skin in the game here. M1 Finance has some very interesting perks or features that they offer that go above and beyond what Robinhood has to offer. I think we are all familiar with Robinhood at this point. They offer commission-free trading with no minimum account balance, and so it's completely free investing, completely free trading for people in the United States.
The one thing I will mention is all of these brokerage accounts are U.S. only. I do apologize, I know a lot of people are interested in European brokerages. That's an area that I do not know a single thing about, but if I get enough requests for that, maybe I can do some research and do a video like this for non-U.S. investors. The main thing here that they're offering is automated investing. What you can do with M1 Finance is build out your portfolio and design your portfolio and say, okay, I wanna put 20% of my money into Alibaba stock and I wanna put 50% into VOO, the Vanguard 500 fund, and then maybe you wanna put some more money into some kind of international fund or you have another individual stock you want to own. Well, with M1 Finance you can design your portfolio, setup your portfolio how you want it, and setup those pieces of that pie. Then, it's going to automatically be investing in what is underweight in your portfolio.
What M1 Finance does is automate that whole process of rebalancing your portfolio so all you're gonna be doing is adding money to M1 Finance and when you do that, they're going to be buying what is underweight and what you need to load up on. If you are redeeming or pulling money out of your M1 Finance account, they're gonna start by pulling money out of what you're overweight in. They're automatically going to be buying low and selling high for you on your behalf, and that's gonna take care of that whole rebalancing aspect that, like I said, a lot of investors fail to do. If that's not good enough, there is still one big feature that M1 Finance offers that we haven't talked about yet and that is fractional shares. There are a lot of shares out there or stocks that trade at massively high prices per share. For example, Amazon stock is over $1,700 per share and we know Berkshire Hathaway is over $280,000 per share. I don't know about you guys, but I don't have a quarter of a million dollars to put into one share of Berkshire Hathaway stock.
If you're trying to invest in these stocks through an account like Robinhood, you have to buy a single share of that stock and you'd have to have $1,700 or so to buy a share of Amazon, but with M1 Finance you can buy fractional shares of a stock and you can buy a $10 position in Amazon stock or a small position in Berkshire Hathaway. You don't have to have all this money to buy a whole share of these stocks that are trading at such a high price. With M1 Finance, you can buy fractional shares of some of the these very high-priced stocks that have not split up into smaller pieces. That is another key advantage I see to M1 Finance and for those two reasons, that is why I prefer M1 Finance to Robinhood for a beginner.
It's going to allow you to set up your portfolio the way you want it, automate your contributions, and the other thing I like about M1 Finance is it takes the human error out of the equation, whereas you're going to be automatically re-buying shares of what is low. While most people would be afraid to do that, it's going to do that automatically on your behalf. That is another big plus I have for M1 Finance is it takes that human error out of the equation, because you set up your ideal portfolio and then you just automate the entire process. For people looking to have a more active approach to investing, you're looking to invest in some ETFs and also individual stocks, and you're not looking to pay commission to a broker, M1 Finance is going to be my number one pick.
Then, my third favorite investing account for 2018 has nothing to do with the stock market and the reason that I included this is because a lot of people should consider diversifying their assets. A lot of people out there are only invested in stocks and they don't have any bonds, and they don't own any real estate, and you really have to be investing in different assets because they're going to move in different ways at different times. I'm looking at investing in real estate. I'm actually looking at investing in some physical real estate, but I've also started investing in a platform called Fundrise that allows you to be investing in real estate and kind of take advantage of those private real estate investment opportunities that are not traditionally available to the general public.
The only way that people can invest in real estate in a stock market-like form is by investing in a real estate investment trust and that's gonna be a pool or collection of different commercial real estate. It's gonna be managed and you're gonna be earning dividends on that REIT, but the main problem with that is because it trades on the major stock exchanges, it's going to correlate very closely with the stock market. What you would look to do is invest in real estate that has nothing to do with the stock market. It's not trading on a stock exchange. Now, traditionally this was reserved for the very high-ticket investors who had hundreds of thousands if not millions of dollars to invest in real estate projects, but basically what Fundrise has done is allowed investors to pool their money together and invest in real estate projects with as little as $500.
I just got started with Fundrise. I put $1,000 in the account. I'm gonna see how it goes and I'm gonna plan on building up a good chunk of money in my Fundrise account just because it's an asset that is completely different than stocks and it's not going to be as correlated to the stock market because it doesn't trade on the stock exchange. Fundrise offers you what is called an eREIT. It's a little bit different than a real estate investment trust and I'm gonna do a whole video talking about Fundrise and going into more detail about this, but understand that with an eREIT they're basically cutting out the middle man entirely and they're able to offer this product with less fees and expenses.
Like I said, I'm gonna go into more depth about this in a different video, but let's go ahead and take a look at the returns from Fundrise so far. The one thing I do have to say is that while these numbers are very high and they are very exciting, we only have four years of operating history here. We can't go by that and assume that all the future returns for the years going forward are going to be like this. We certainly hope they are, but with only four years of operating history, they don't have a seriously long track record to go off of. Do understand that these returns, of course, are never guaranteed and they certainly do not have as long of an operating history as some of these real estate investment trusts out there. The returns from Fundrise so far have been excellent. In 2014, the average annualized return was a 12.25%, 12.42% in 2015, 8.76% in 2016, and 11.44% in 2017.
These are very good returns. Typically we see an eight to 10% return from the stock market, so based on these four years, they're a little bit higher than the returns you typically see from the stock market. Now, again, that's not why I'm investing in Fundrise. I'm investing in Fundrise to diversify assets and to have more exposure to real estate in a way that is not directly correlated with the stock market. But anyways, guys, that's gonna wrap up this video. I hope you enjoyed it. If you want me to do a more in-depth review or overview of some of these investment accounts, drop me a comment down below and like I said, all of these investment accounts are linked up down in the description below. Thank you guys so much for watching this video and I will see you in the next one. If you are interested in learning more about investing in the stock market, I've created a free course just for you.
The link is in the description below. Here are a few of the videos you might enjoy as well. (upbeat music) .
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