Brokerage accounts (fidelity/etrade) are better then bank accounts in every way (in the US). Use them with a margin account to safely maximize your investments. The margin account will basically function as an overdraft / short term loan at very favorable rates. Reasons:
direct deposit in to your brokerage account—all surplus money should be sweeped in to an index fund (SPY or global equiv)
You can have a ATM card and do all your checks through them usually for free
they all have bill pay service for free
depositing checks—they can be mailed in
Even if you don’t invest the money it will automatically be in a money market account earning you interest
investment interest payments (on the margin) can be tax advantaged unlike credit card payments
I didn’t have a bank account for over a decade. There is no reason to think about checking and savings being separate things.
Concerns about margin account being scary are only that way when you margin a substantial fraction of your account. If you are under 10% and invest in stable index funds you won’t have a worry.
instead of investing in SPY consider Berkshire Hathoway (brk) for the tax advantages - (Warren Buffet doesn’t like to pay taxes). I’d look at costco’s sharebuilder if you can’t afford to buy 1 share.
This seems like awesome advice that I have never heard before. Do you think it might be dangerous for some people? Like is it a “you must be this tall to ride this ride” kind of thing?
Also, it seems like it might help to have this made actionable by talking about the steps someone would take to convert their financial service provider setup to this. Do you have a good method for picking a broker? If someone was not very financially savvy (like they didn’t know what a brokerage even was exactly) what should they do right after reading here to start on the path to setting things up this way?
Brokerage accounts (fidelity/etrade) are better then bank accounts in every way (in the US). Use them with a margin account to safely maximize your investments. The margin account will basically function as an overdraft / short term loan at very favorable rates. Reasons:
direct deposit in to your brokerage account—all surplus money should be sweeped in to an index fund (SPY or global equiv)
You can have a ATM card and do all your checks through them usually for free
they all have bill pay service for free
depositing checks—they can be mailed in
Even if you don’t invest the money it will automatically be in a money market account earning you interest
investment interest payments (on the margin) can be tax advantaged unlike credit card payments
I didn’t have a bank account for over a decade. There is no reason to think about checking and savings being separate things.
Concerns about margin account being scary are only that way when you margin a substantial fraction of your account. If you are under 10% and invest in stable index funds you won’t have a worry.
instead of investing in SPY consider Berkshire Hathoway (brk) for the tax advantages - (Warren Buffet doesn’t like to pay taxes). I’d look at costco’s sharebuilder if you can’t afford to buy 1 share.
This seems like awesome advice that I have never heard before. Do you think it might be dangerous for some people? Like is it a “you must be this tall to ride this ride” kind of thing?
Also, it seems like it might help to have this made actionable by talking about the steps someone would take to convert their financial service provider setup to this. Do you have a good method for picking a broker? If someone was not very financially savvy (like they didn’t know what a brokerage even was exactly) what should they do right after reading here to start on the path to setting things up this way?
Hey.
You suck.