A while ago, I decided to finally sell my individual stocks I had been holding through Fidelity. Some of these I had held for a few years, and some were fairly new. After much research, I realized that individual stocks are a lot more risky than a well diversified portfolio. "Over the long run, your odds of success are much better if you invest in a diversified portfolio of stocks, via a low-cost mutual fund or an exchange-traded fund." (source)
To clarify, here are a few of definitions:
Stock: A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. (source)
Mutual Fund: An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus. (source)
Exchange-Traded Fund (ETF): A marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. (source)
So than, I had to decide between investing in mutual funds, or ETFs. I discovered that the expense ratios of ETFs are generally lower versus active mutual funds and in some cases, even lower than index mutual funds. Also, ETFs often have lower trading costs versus actively managed funds, due to their low portfolio turnover. The ETF cost savings can be significant, especially for long-term investors. (source)
A friend who is also invested in ETFs recommended I check out Wisebanyan. There are many websites through which you can invest in ETFs, including Vanguard, Fidelity, and most other major investing platforms, but Wisebanyan is free and makes it easy. It's free because they believe "investing is a right - not a privilege." They make money by offering additional services, but there is no pressure to use or sign up for these. I signed up here. (Full disclosure, this is a referral link, but I'm promoting Wisebanyan only because I have personally enjoyed their services). You can deposit as much or as little money as you want, and you simply take a quiz that determines the amount of "risk" you want to take. From there, computer algorithms build and manage your ETF portfolio. I've been with Wisebanyan since July of 2015, when I sold my individual stock I was holding through Fidelity. I've also recently set up automatic monthly transfers of $15. So far, my account has fluctuated with the general market, and I'll be excited to see it grow over time.
From the screenshot below, it's obvious that ETFs make it really easy to invest even a small amount of money (as little as $10) into a diverse portfolio. My allocation of stocks vs. bonds is based on the "risk score" I have set for myself, which is currently at a 7/10. I can change that any time I wish, and will likely go more conservative as I get closer to retirement. The best part is, I literally don't have to do a thing to manage my money, I just sit back and wait for time to pass. Unfortunately WiseBanyan does not integrate well with Mint, so if you are a Mint user you will have to manually track your protfolio's progress.
So to all of those that are considering investing, I highly suggest looking into mutual funds and/or ETFs as opposed to individual stocks. My plan for the future will be to house most of my savings (excluding my emergency savings) within this account as I (eventually) save up for a down payment on a home.
