Take advantage of an investing strategy only institutional or ultra-high-net-worth investors had access to in the past. Increase your investment portfolio’s after-tax return. Build your own index fund to invest in what matters to you. It’s tempting to dismiss these marketing claims as hyperbole, except they are coming from some of the best-known and most-respected names in the investing world, including Fidelity, Schwab and even Burton Malkiel, author of the investing classic A Random Walk Down Wall Street.

The fanfare is about a controversial trend: A growing number of investment firms now offer Main Street investors a strategy called “personalized” or “direct” indexing that typically requires buying and trading stocks directly, mimicking an index. Investment firms and advisers have long offered this strategy to the wealthy for an annual management fee that’s often more than 1% of the portfolio’s value. But now, enabled by no-commission trading, smart supercomputer programs and the ability to buy fractions of shares, at least three firms—Fidelity, Schwab and Wealthfront—are repackaging the service for cost-conscious index investors. The new offerings enable you to dabble in personalized indexing with portfolios as small as $1, for fees ranging from $4.99 a month to 0.4% a year (see the table below). 

There are two main types of these new programs. One focuses on personalizing your portfolio by allowing you to invest in thematic baskets of individual stocks—green energy firms, for example—or to tailor a broader index by eliminating companies you may object to or that you have large positions in elsewhere. The other type, which typically allows less personalization, is all about tax efficiency, focused on harvesting investment losses to offset gains or income and reduce your bill on April 15. 

Why not just pick the stocks on your own? Few average investors have the time and expertise either to buy and manage potentially hundreds of stocks in a way that replicates an index or to constantly swap money-losing stocks for similar issues to lock in tax losses.

Healthy Skepticism For Direct Indexing

Any new Wall Street offering should be scrutinized. And this one has plenty of critics: Rick Ferri, a financial adviser and president of the John C. Bogle Center for Financial Literacy, questions the fees and wonders whether the customized portfolios might make it harder to move assets from the provider who built the personalized index. 

As for tax efficiency, investors will have to weigh any advantage against the increased complexity of their tax returns: Schwab (which requires potential new clients to have a no-cost consultation with one of its advisers) warns its Personalized Indexing investors to expect 1099 tax forms that can exceed 50 pages, for example. And some individual investors might consider the minimum investment at Schwab and Wealthfront—$100,000—on the high side.  

Reasons to Invest

Even boosters—including fund-research giant Morningstar, which plans to roll out a direct indexing program to be sold through advisers late in 2022—concede that these new indexes aren’t for everyone. Daniel Needham, president of Morningstar’s Wealth Management Solutions, urges investors to first protect their core savings by building up an emergency fund and using tax-advantaged retirement-savings accounts to invest in the tried-and-true mix of low-cost stock and bond index funds. Once that’s done, he says there are three main reasons an investor might consider a personalized index: 

Preferences. Although there are already more than 10,000 mutual and exchange-traded funds with almost every imaginable mix of stocks, some investors may prefer to create a portfolio of individual stocks to address ethical or other concerns. Customization might be limited, though. Customers of Fidelity’s managed FidFolios can jettison up to five stocks or two industries from Fidelity’s preset portfolios; for now, Schwab’s clients can bar only three stocks after selecting a portfolio. An exception is Wealthfront, which gives clients the ability to eliminate an unlimited number of stocks from their personalized index.  

Balance. Employees of companies that offer significant stock compensation (tech firms, for example) may want to limit tech exposure elsewhere. They could create a personalized index that avoids the tech stocks that make up more than one-fourth of the S&P 500, diversification that could reduce overall portfolio risk. 

Taxes. Investors in high tax brackets who expect to reap significant capital gains can use personalized indexing to turbocharge tax loss harvesting in taxable brokerage accounts. The technique involves selling an investment that has declined in value and using the losses to offset taxes on capital gains from other investments (or up to $3,000 in income if losses exceed gains). To stay fully invested, investors use the proceeds to buy something similar. 

This requires expertise, because the IRS’s “wash sale” rule penalizes you for switching into investments that look “substantially identical” to whatever you sold in the past 30 days. You can’t sell and then buy back GM shares within the next month, for example. But you can sell GM and buy Ford 

Losses are abundant these days in mutual funds and ETFs, of course, but direct-indexing promoters claim that holding individual stocks allows you to cash in on losses that might be obscured by the overall return of a broad index fund. “Even in a good year, 20% to 30% of stocks will be down,” explains D.J. Tierney, a senior portfolio strategist for Schwab Asset Management Solutions. 

The boosters say tax-loss harvesting can be worth the work. A Wealthfront study says that over the five-year period ending April 30, the after-tax returns of the firm’s US Direct Indexing clients were typically 0.4 to 0.8 percentage point a year ahead of where they would have been had they stuck with ETFs and used standard tax-loss harvesting strategies.  

Malkiel, Wealthfront’s chief investment officer, says that tax loss harvesting is one of the only exceptions he makes to his passive-index-investing advice: “I absolutely believe in direct indexing. It is really very helpful in times like this, when the market has declined so sharply.”

But other cost-conscious investment advisers say most investors don’t pay enough taxes to make the strategy worthwhile, unless they expect large capital gains. It shouldn’t be surprising that a complicated tax strategy pays off most for those with high tax bills. For everybody else, personalized indexing, it seems, is like hiring a tailor to craft a bespoke shirt. Creating a customized stock portfolio for a fee might be a luxury to invest in only after taking care of the necessities.

Brokered certificates of deposits take these safe-but-stodgy investments and give them a turbo boost — they're a key way to take advantage of rising interest rates.

You buy brokered CDs through a brokerage firm. Brokered CDs typically provide above-average yields when compared with CDs offered through banks. For example, a one-year brokered CD at Fidelity yields 3.45%. A top-yielding one-year CD from a bank pays 2.80%, on average, according to DepositAccounts.com, a rate comparison site. 

Another pro: You’re not subject to early-withdrawal penalties. Brokerage firms that do this sort of packaging usually maintain an active secondary market for their CDs, meaning you can sell them back (by withdrawing your money) before they mature. Bank CDs have early-withdrawal penalties that range from three months’ to a year’s interest. 

However, having the flexibility to sell comes with potential drawbacks. First, your proceeds from selling a CD before it matures can vary with changes in interest rates. If rates have risen, you won’t get back as much as you paid for the CD. (On the other hand, if rates have fallen, you should get more.) CDs in the secondary market act in many respects like short-term bonds: When rates rise, the values of existing bonds fall; when rates fall, bond values rise. Another pitfall is that some of these CDs may be callable, meaning that if interest rates fall, the brokerage firm may redeem or sell your CD before maturity. In that case, you’ll miss out on future interest. 

You can buy brokered CDs at investment firms such as Charles Schwab, Fidelity and TD Ameritrade. Ask about the minimum requirement to purchase CDs, as well as possible fees. TD Ameritrade, for example, has a minimum requirement of $1,000, with a mark-up or mark-down price included in your price quote when buying or selling new issues. Also make sure your CD is insured by the Federal Deposit Insurance Corp. Brokerage firms typically partner with FDIC-insured banks, but not always.

Personal values play an important role in many aspects of our lives and have become more prominent recently in how we think about and manage our finances. More and more investors are asking how they can support the causes they care about through their financial decision-making.

Charles Schwab’s latest Modern Wealth Survey found that 69% of Americans say that supporting causes they care most about is a top consideration when it comes to their financial decisions. If you count yourself among them, consider starting with a financial plan to ensure you stay on track toward your long-term goals while also staying true to your personal values.

Define your saving and spending goals

The best way to start is by translating your dreams into concrete financial goals. Identify your most important goals and commit to saving toward each. Write things down so you can build confidence, stay focused and refine your plan over time while prioritizing both your own financial wellness and the greater good.

For example, we recently had a client looking for ways to maximize her charitable donations with a limited budget. After pinpointing the causes that she connected with most – the environment and medical research – we laid out a three-year charitable-giving budget. This helped her stay on track with her long-term plan while mixing in creative ways to give back, including ongoing gifts through a donor-advised fund supporting cancer research and volunteering for weekend river cleanups.

I also see this values-based approach in spending habits, with nearly eight in 10 Americans (79%) indicating that they aim to support brands that align with their beliefs. Shopping local, buying secondhand goods, and choosing brands that support environmental and social causes are a few ways consumers make an impact with their purchasing power. Knowing what you need to save toward your goals likewise helps you determine how much you can spend. Armed with that knowledge, you can then spend in a way that matches your values.

Align your investments with your values and interests

With personal beliefs and interests becoming more important in saving and spending, investors are also seeking ways to tie those values into their personal portfolios. Almost three-quarters of American investors (73%) agree that their values guide their investment choices, and most (69%) say that they invest in companies that align with their personal values. When looking at the factors that influence investing decisions, a company’s reputation (91%) and its corporate values (81%) are almost as important as more traditional factors like a company’s performance (96%) and its stock price (93%).

As you build your own portfolio, there are various options to help align your investments to your values. Environmental, social and governance (ESG) investing or socially responsible investing (SRI), are two strategies gaining traction. Additionally, thematic investing, an approach that uses research to identify trends, opportunities and relevant companies and group them into overarching themes, allows you to personalize your investing based on interests and values.

Whether you’re an experienced investor or just starting out, you can use DIY investing tools and resources or work with a financial adviser to invest your money while making a positive difference. Whatever your goals or investable assets, you have choices to ensure you’re on the right track.

Investing involves risk including loss of principal. Diversification strategies do not ensure a profit and do not protect against losses in declining markets.

The information here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The type of securities and investment strategies mentioned may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

©2022 Charles Schwab & Co., Inc. (“Schwab”). All rights reserved. Member SIPC.

(0822-2KDC)

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Robo-advisers, those automated investment services offered by banks, brokerages and other financial firms, promise low-cost, computer-driven investment management geared to your goals.

Although $1,000 is not enough to get started at Charles Schwab (it’s a heavy-weight competitor in robos, but its Intelligent Portfolio service requires $5,000 to open an account), it’s plenty for SoFi.

The fintech company’s digital advice service, called SoFi Invest, has a $1 minimum and no annual management fee. What’s more, SoFi’s digital service wins top marks as the best robo-adviser for first-time investors from the Robo Report, a quarterly publication from Condor Capital, a Martinsville, N.J.-based advisory firm, that measures the performance, among other things, of robo-adviser services.

SoFi’s program is similar to other robo services. You answer a quick online survey that touches (lightly) on your goal, financial situation and risk tolerance. Then an algorithm spits out a recommended diversified portfolio for you that holds a smattering of exchange-traded funds that are appropriate to your investment timeline.

SoFi competitor Wealthfront has a $500 entry minimum and charges 0.25% in annual management fees. Wealthfront’s robo portfolios have performed better than peers in recent years, according to the Robo Report, thanks in part to a 10% allocation to energy stocks, the best-performing sector in the U.S. stock market over the past two years.

At Fidelity, the price of entry and costs are low in the beginning for its Fidelity Go digital advisory service — there’s no minimum to open an account and no advisory fees for accounts with balances under $25,000.

That’s in part why the Robo Report names Fidelity Go as the best robo-adviser overall. Once balances exceed certain levels, annual fees apply; for balances above $25,000, it's a 0.35% advisory fee. But Robo Report also like Fidelity Go for its additional features, including live operational support and licensed advisers, as well as retirement planning features.

Related articles

• Should You Hire or Fire Your Robo-Adviser?
• Robo-Advisers: Weighing the Worth of Automated Advice
• How to Pick the Best Robo-Adviser For You

Fractional shares, increasingly available at online brokers including Schwab, Fidelity and Robinhood, allow you to buy a portion of a stock you might not otherwise be able to afford. You can even put together a portfolio of stock snippets, giving you a diversified ownership stake in the best of corporate America, even if you're just starting out and your budget is limited.

Say you had $1,000 to invest and wanted to buy stock in NVR (NVR), a homebuilder recently rated Strong Buy by investment research firm CFRA. You'd be out of luck, considering the shares recently traded for about $4,200 a pop. But at Schwab, for example, you'd be able to buy what the company calls a Stock Slice – a single slice or up to 30 slices at a time of any S&P 500 stock for as little as $5 per slice, commission-free. With Fidelity's Stocks by the Slice program, you can access more than 7,000 U.S. stocks and exchange-traded funds (ETFs) for as little as $1.

You can also trade fractional shares at Robinhood and InteractiveBrokers, each with programs starting at $1. Eligible stocks and ETFs at Robinhood trade for more than $1 per share and have a market value of more than $25 million. InteractiveBrokers allows trading in U.S. and European stocks and ETFs. Vanguard is testing fractional trading of Vanguard ETFs for launch later this year. The rules and eligible investments for fractional share-buying differ by broker, so be sure to compare options.

Investing by dollar amount rather than by number of shares makes it easy to dollar cost average – a strategy of investing a set amount at regular intervals which ensures that you buy more shares (or a bigger fraction of a share) when prices are low than when they are high. The process also helps to take the emotion out of investing.

You'll receive dividends on a pro-rated basis, but as a partial shareowner, you typically have no voting rights. And although you can sell anytime you want, you likely won't be able to transfer fractional shares to a new brokerage.

In the latest Kiplinger's Personal Finance Magazine, our editors offer advice on how to spend, save and invest $1,000. Get other smart tips:

• Add small-caps to your portfolio
• Open an account with a low-cost roboadviser
• Expand career options with online courses
• Lend money to a good cause

Is your broker helping you be a better investor? That was the key question we sought to answer as we rolled out our annual online broker survey.

After all, fees don't matter much anymore. They're low everywhere. So, what's left? Service.

Does your broker provide the tools you need to help you keep track of your financial life and goals? In big and little ways, is it guiding you toward smarter investment decisions? Did you learn anything new about investing from your broker over the past year? Can you get investment advice if you want it?

Can you graduate from an automated adviser to a dedicated financial adviser as you get older to get help with estate planning or Social Security? All told, we engineer our broker rankings to reward the firms that offer the most to the broadest group of investors.

How we chose the best online brokers and trading platforms

To start, we limit the field to brokers that offer stock, mutual fund, exchange-traded fund and individual bond trading. That's one reason you don't see the likes of Robinhood or SoFi here – you can't buy individual bonds on their platforms.

We surveyed nine firms in all: Ally Invest, Charles Schwab, E*Trade from Morgan Stanley, Fidelity, Firstrade, Interactive Brokers, J.P. Morgan Self-Directed Investing, Merrill Edge, and WellsTrade. T. Rowe Price, Vanguard and Citi Self Invest declined to participate.

The biggest, best-known firms score better overall, you'll notice. But each firm shines in one category or another, and no firm aced every one.

Best online broker overall

Drum roll, please. Fidelity landed on top this year by offering a solid mix of investment products, as well as tools and calculators for retirement planning and college savings, among other things.

The firm's fees are far from the lowest, especially if you want to buy shares in a mutual fund for which you must pay a transaction fee. But it was a competitive finisher in primary categories – investment choices, tools and education, and mobile app. And it won major points for its full range of advisory services, which pushed it to the top spot.

Interactive Brokers finished second for the second year in a row. The firm ranked first or second in the most important categories – investment choices, mobile app, and tools and education – and that helped lock in its position in the rankings.

We evaluated its "Lite" pricing plan and its website-based platform, Client Portal. But many of the firm's customers are active traders – defined by the firm as investors who make more than 120 trades per year – and they usually opt for the firm's "Pro" pricing plan and download its desktop trading platform, not considered here.

What's more, Interactive is known for its access to international markets – more than 160 developed and emerging markets – and 71% of its account holders live outside of the U.S. They're mostly interested in trading in the U.S. as well as their local markets, the firm says.

Bear in mind that our survey results combine objective and subjective criteria. We rely on the information that each firm provides, vetting the data as best we can. The scoring boils down to the weighting we assign to each data point and to each category.

Although we base our weightings on what we hear from investors and the industry about what brokerage customers currently value, not everyone will agree with what we chose to play up – or down.

Below, we walk you through the highlights and lowlights of how the brokers performed in each of our categories, listed in order of significance to the final score.

Online brokers with the best investment choices

More is more in this category: The broader the range of investment offerings, from corporate bonds to mutual funds, ETFs and even cryptocurrencies, the better the broker ranked in this category, which makes up 20% of the final score.

Fidelity and Interactive Brokers came out on top. In addition to a robust roster of the usual securities available, both firms also offer better yields than peers on cash that's sitting idle in brokerage accounts (the so-called sweep account).

You can also buy a fraction of nearly every publicly traded U.S. stock or ETF. So instead of shelling out more than $1,000 for a single share of Netflix (NFLX) stock, for instance, you can buy a $1 slice (roughly 0.001% of one share). And you can set up a recurring purchase of shares in ETFs and stocks.

Plus, though it didn't count for much in this category score, Fidelity and Interactive Brokers were the only firms in the survey to offer cryptocurrency trading of select digital coins – the actual currency, not crypto futures or ETFs that track cryptocurrency prices. (Schwab says it expects to offer direct access to crypto in 2026.)

For the record, fractional-share trading is available at other firms, too, but to varying degrees. At Firstrade, customers can buy slices of nearly every publicly traded stock and more than 1,200 ETFs.

Schwab customers can only buy slices of S&P 500 stocks; at J.P. Morgan Self-Directed, fractional purchases are limited to S&P 500 and Nasdaq-100 stocks and all ETFs; and E*Trade investors can buy fractions of 221 ETFs for a $25 minimum investment.

Of course, not every investor wants or even needs access to every investable security. Mutual fund investors will find abundant choices at Charles Schwab, Fidelity and Interactive Brokers, for instance. And buyers of individual corporate bonds will find the greatest number of choices at E*Trade. Municipal bond investors should go to Interactive Brokers or E*Trade.

Want to invest in foreign stocks? You're out of luck at most of the firms we surveyed; only Schwab, Fidelity and Interactive offer access to foreign markets.

Ally Invest, E*Trade and Merrill Edge suffered because they don't offer fractional-share trading of stocks. WellsTrade does, it's worth noting. But Wells and Merrill also slipped, in part, because each of their platforms offers a below-average number of mutual funds and corporate and municipal bonds, relative to other survey respondents.

Online brokers with the best tools and education

How helpful is your broker at keeping you on track with your investment plan and the rest of your financial life?

In this category, which accounts for 20% of the final score, we asked each firm whether they offered certain tools or calculators that assist in a variety of financial goals: How much should I save for college tuition? How am I doing so far on retirement savings? Can I get help building a bond ladder, figuring out how much to withdraw each year from my IRA, and reviewing the asset allocation of my entire investment portfolio?

Calculators, portfolio analyzers, screens for stocks, ETFs and mutual funds, and the like can help investors put their money to work. We scrutinized the array of educational videos, webinars, podcasts and live events, too.

Schwab and Interactive Brokers triumphed in this category. Of the nearly 40 tools and functions we queried each firm about, Schwab offers 33, including savings, tax and retirement calculators and other useful tools, such as a bond-laddering tool and a trade ticket that can be filled out and saved for later. (E*Trade offers a saved trade ticket function, too.) Interactive Brokers finished with 30.

Many are embedded in the firm's retirement-planning tool (such as budgeting and debt management) and portfolio analyst tool (such as getting an aggregate view of asset allocation and risk in your portfolio).

Both firms also got a lift from good scores on the education front. We asked the firms about educational articles and videos available on their websites, as well as how many podcasts and videos were posted in 2024. Schwab and Interactive both scored well, which helped them win the top spots in this category.

But it's worth noting that Fidelity and E*Trade were nearly as strong on education, too. E*Trade, in particular, offers a daily podcast of five minutes or less from Morgan Stanley that covers commentary on the market and other investing topics. Recent podcast headlines: "Trump's AI Action Plan"; "Will the Entertainment Business Stay Human?"; and "Asia's $46 Trillion Question."

The laggards in the tools category were Ally Invest, Firstrade and WellsTrade. They trailed the pack in the overall number of tools offered – Ally with just 11; Firstrade with 16; and Wells with 17.

Ally Invest, for instance, doesn't offer a mutual fund screener, a spending-tracker tool or a "How am I doing?" retirement-savings calculator. WellsTrade offers more than Ally in the way of tools, but you can't export statements to Excel, for instance, and it doesn't include some tools, such as one that would help investors as they start to withdraw cash for retirement.

But Wells and Ally also missed on the education side. Unlike the other firms surveyed, for instance, WellsTrade doesn't provide any educational articles on investing and trading strategies, podcasts, or educational videos.

Ally Invest fared a bit better than Wells because it does provide educational articles, but it lacks the podcasts, videos and other events that the bigger players offer their customers.

Online brokers with the best mobile app

Most brokerage customers log in to their accounts in the mobile app more often than they do on a computer, according to some of the firms we surveyed this year.

They may be just checking their portfolio balance in the middle of the day. Even so, as apps improve, we expect that investors will want to perform more and more investing tasks on their phones over time. So in this category, which makes up 20% of the final score, we explored the breadth of functionality of each firm's mobile app.

The ability to trade stocks, ETFs and mutual funds is a given; every firm's mobile app allows you to do that. And access to stock research reports in the app is pretty much de rigueur.

But can you buy stakes in bonds and crypto in the app? Does it offer stock and ETF screening, for instance, as well as a shortlist of prescreened investments to consider? Can you select specific shares you own in a stock by tax lot before you sell? Can you access a similar variety of savings, retirement, budgeting and portfolio analysis tools that are available on the broker's website? Can you deposit checks electronically into your brokerage account?

Interactive Brokers answered yes to more of our nearly 60 queries than any other firm. It won this category by a clear margin, thanks to a robust array of retirement calculators, tools for tracking spending and college savings, and a bond screener on its app.

E*Trade's offering was similarly robust; it was the only other firm to offer a bond screener on its mobile app, for one thing. It came in second, followed by J.P. Morgan Self-Directed in third place and Fidelity in fourth.

Some of the firms' apps are strong in other ways. All but three of the firms allow you to measure your portfolio's performance against a benchmark, for instance (Ally Invest, Firstrade and WellsTrade are the holdouts).

We'd be content with just three benchmarks – one for U.S. stocks, another for U.S. bonds, say, and a foreign stock market bogey. But at Interactive, you can choose among 340 in the mobile app; Merrill Edge, 35; and J.P. Morgan Self-Directed, 12. Compare that with the five indexes available in Schwab's app and three in Fidelity's and E*Trade's mobile apps.

Meanwhile, for investors in search of investing ideas, only J.P. Morgan and E*Trade offer curated lists for stocks, ETFs and mutual funds on the app.

Fidelity, for instance, has select lists available in its app for mutual funds and ETFs, but not stocks. J.P. Morgan shines again for screeners. It's the only firm, along with Interactive Brokers, to offer screeners for stocks, ETFs, mutual funds and bonds in its mobile app.

Online brokers with the best advisory services

Many investors these days want help with their investments. Brokerage firms tend to offer tiers of service. These range from an all-digital, or automated, service (call it a robo service) to a blend of digital and a little human advice – what we call a hybrid offering – to a more full-service type of account that in some cases offers customized portfolios and a dedicated investment adviser.

We scrutinized the full gamut of offerings at each firm by dividing the overall advisory category into three parts – digital, hybrid and full service. The overall category accounts for 12.5% of the final score; digital service makes up just over half of the category score, and hybrid and full services account for the rest of the category score.

The range of advice varies at each firm. Firstrade doesn't offer any investment advice at all. And most firms offer only two of the three tiers of advice. J.P. Morgan Self-Directed, for instance, doesn't have a robo, but it offers a hybrid service as well as full-service-type plans through J.P. Morgan Wealth Management.

Merrill Edge has a robo (Merrill Guided Investing) and a hybrid (Merrill Guided Investing with Advisor). But it doesn't offer full-service advice – though that is available at a different Merrill business.

Similarly, Wells Fargo's WellsTrade has Intuitive Investor, its all-digital advisory, but no full-service advice. That's available through a different Wells business, so it wasn't included in the survey.

The only two firms to offer all three tiers of advisory services – again, digital, hybrid and full service – ran away with the medal in this category: Fidelity and Schwab. Indeed, Fidelity seems to have an advisory service to suit every kind of investor and account size. The breadth of offerings helped Fidelity come out ahead in this category. But in truth, both Fidelity and Schwab stood out in each tier, winning the top spots across the board.

Bear in mind that our scoring system weighed the nuts and bolts of the services at each firm – investment minimums, variety of portfolios, fees, expense ratios of fund holdings and access to estate-planning experts, among other things – not the portfolio returns.

Let's start with digital and hybrid services. Fidelity offers two kinds of automated advice: Fidelity Go and Fidelity Managed FidFolios. But Fidelity Go steals the show. For as little as $10, customers can get access to 16 different kinds of portfolios filled with funds that charge 0% expense ratios. What's more, accounts with less than $25,000 pay no advisory fee.

Managed FidFolios is a more sophisticated introductory offering – a team of experts manage an all-stock portfolio for you – and requires $5,000 to start. Choose among three actively managed strategies (which charge 0.70% each in annual advisory fees) and five direct indexing portfolios (0.40%), a strategy that involves owning the individual securities that make up a benchmark, instead of owning a mutual fund or ETF, which allows for active tax-loss harvesting (selling losers to offset gains elsewhere).

Fidelity's hybrid service is part of its Fidelity Go offering and kicks in when balances top $25,000. The fee jumps to 0.35% of assets per year, but that gets you unlimited one-on-one "financial coaching to help achieve retirement or other investing goals," according to the firm. Many of those coaches are certified financial planners.

By contrast, in its favor, Schwab's robo, Intelligent Portfolios, charges no annual advisory fee, and investors can choose among 81 diversified portfolios filled with cheap ETFs. Schwab's next step up in service, like Fidelity's, requires a $25,000 minimum. Intelligent Portfolios Premium, as it's called, requires a one-time $300 planning fee on top of a $30 monthly advisory charge. You get the same 81 diversified ETF portfolios as in the robo-advisory service, but the big plus is you have access to a team of financial planners.

At most firms, you must fork over more money to get a dedicated human adviser. That minimum varies from $100,000 at Ally Invest and J.P. Morgan Self-Directed to $500,000 at E*Trade, Fidelity and Schwab. (Firstrade, Interactive, Merrill and Wells don't offer these services.)

At the full-service level, Schwab offered most of the features we were looking for: A dedicated adviser, one-on-one access to specialists for bond and options trading as well as an estate-planning expert, and low advisory fees. For an account with a $750,000 balance, Schwab charges just 0.80% a year.

E*Trade and J.P. Morgan each had competitive offerings at the full-service level. J.P. Morgan has a lower minimum going for it – typically $100,000 for a dedicated adviser – plus access to experts on estate planning and bond and options trading, and a customized portfolio. And investors can choose among advisers at Chase bank branches and at different divisions of J.P. Morgan Wealth Management. Some charge annual advisory fees as low as 0.50% for a $750,000 balance; others cost more (as much as 1.45% a year).

E*Trade's full-service offering from Morgan Stanley Wealth Management stacked up nicely, too, with multiple experts at the ready to help you. Its 2% annual advisory fee for an account with a $750,000 balance was high, however. E*Trade says Morgan Stanley financial adviser rates vary, so it chose the highest rate by default. Of course, in exchange, you get access to Morgan Stanley's full breadth of products and services.

Online brokers with the best research

What some investors consider useful research may be gobbledygook to others. Some may put greater emphasis on technical analysis, for example – the practice of identifying trends or patterns in price charts to spot investing risks and opportunities.

Others may favor fundamental analysis, examining a company's financial statements and industry trends, say, to evaluate it as a potential investment. And then there are those who might find that news alerts and stories can be useful for pinpointing investing prospects, too.

To that end, in this category (12.5% of the final score), we asked the brokers to list the research sources they offer their customers for specific single stocks – Apple (AAPL), Goldman Sachs (GS), Honeywell International (HON), Alibaba Group Holdings (BABA) and WD-40 (WDFC) – as well as the SPDR S&P 500 ETF (SPY) and the Fidelity Contrafund (FCNTX).

We also asked about how many stock and bond market outlook reports were available to do-it-yourself brokerage customers, as well as any ongoing market commentary or analysis. We gave extra credit to firms that provide access to in-depth fundamental research (because that's the kind of research we favor).

That last question helped boost the scores of some firms, including E*Trade, Merrill Edge, Schwab and J.P. Morgan Self-Directed.

Merrill Edge offers access to proprietary analysis of single stocks from BofA Global Research, but only to customers who meet a $100,000 balance threshold. BofA market outlook and commentary reports, however, are available to all customers. We knocked the firm (only by a bit) for this balance requirement, but it was enough to push the firm from a first-place tie with E*Trade to a second-place finish.

Schwab finished a nose behind for third. Schwab offers brokerage customers solid bond and stock market outlooks and commentary from its asset management division, but we discounted Schwab's proprietary stock reports a little because the stock ratings are based on quantitative, not qualitative, measures.

Interactive Brokers blows away the competition with the stratospheric number of research resources it offers its retail customers: 57 reports on Apple and 38 for Goldman Sachs, for example, and a whopping 1,452 for reports on the outlook for the bond market.

By contrast, among all of the firms we surveyed, the median number of reports was three each for the single companies and two for bond market outlooks. But Interactive missed getting extra credit for in-depth fundamental stock analysis, and that's why it finished behind E*Trade, Merrill and Schwab.

Online brokers with the best customer service and security

In our digitized world, customer service takes many shapes. There's chat and email. You can pick up the phone. In some cases, you can even talk face-to-face with a human being at a local branch. No matter the method, one thing's for sure: When you have an investing-related question that you can't answer on your own, you want a prompt answer. Period.

That's why this category, which amounts to 10% of the final score, included questions such as the average telephone hold time for a customer service representative and average email and chat response time.

We also asked about the percentage of time that a customer was able to get an answer to their question at the first point of contact with a live representative, among other questions.

Charles Schwab won for customer service thanks to its 400 branches, a phone line with 24/7 live service, a 33-second average hold time on the phone (below the average 65-second hold time for the firms we surveyed), and a less-than-12-hour response time for email queries (below the average 33-hour response period). Thousands of clients walk into Schwab's retail branches a day, the firm says, and over the first half of 2025, it fielded more than 14 million calls.

Merrill Edge came in second. On top of a 24/7 live representative customer-service line, the firm says that it has a 90% success rate in answering customers' questions at the first point of live contact. It was the best response rate of the group, just ahead of Ally Invest (89%).

To be fair, we should note that some firms didn't disclose this figure, including Fidelity, Firstrade and J.P. Morgan Self-Directed.

J.P. Morgan Self-Directed was hot on Merrill's heels, boosted in large part by a robust training program for its representatives. Depending on the representative's role, the firm says, some training programs last for two-plus years. A below-average phone-line hold time of less than 30 seconds and a roughly 12-hour average response time to email queries helped, too.

Firstrade, Ally Invest and WellsTrade faltered in this category for different reasons. Each of the firms reported shorter training periods for representatives than the other brokers, for a start. Ally and Wells also reported above-average wait times for representatives on the phone.

Security accounts for one-tenth of this category's score, but it's a growing concern as scammers and hackers get better at what they do. We gave extra credit to firms that make two-factor authentication mandatory, namely Ally Invest, E*Trade, In-teractive Brokers and J.P. Morgan Self-Directed. The extra step can be annoying, but it is becoming increasingly necessary.

To be clear, the other firms in the survey offer two-factor authentication as well; you just have to opt in and set it up.

Online brokers with the best commissions and fees

A little over a decade ago, this category accounted for 25% of the final score. This year, commissions and fees make up just 5%. Everyday investing transactions – buying and selling stocks, shares in ETFs or mutual funds, and bonds – are free, or nearly so. And the tasks that do incur a levy – wiring money, say, or having a representative place a bond or options trade for you over the phone – are likely to be infrequent.

And yet, there are some hidden trading costs. Embedded in the price of an individual bond you buy, for instance, may be a transaction cost, such as a markup (the difference between the price a broker-dealer paid to buy a bond and sell it to an investor) or a selling concession (a fee paid to the seller or distributor of the bond you're buying).

Similarly, the brokerage firm may receive a small payment to route trades to certain securities dealers, which can cost you in the form of slightly less favorable prices. These levies are small, but they can add up, and what you don't outlay in fees you can put to work toward your investing goals. So we asked the firms about these hidden transaction costs, among other charges, as well as what they charge for margin interest rates and options contracts.

As expected, the contest was tight. J.P. Morgan Self-Directed skated past the others, largely because it charges middle-of-the-road fees – rarely the highest or lowest on any query. FirstTrade, on the other hand, though it ranks seventh in the pack on fees, boasts the lowest charge for broker-assisted stock and ETF trades ($19.95) and options contracts ($0).

WellsTrade brought up the rear in this category. Its margin rates are above average and bond purchases include a markup, among other things.

Best online brokers for your specific needs

Best for index fund lovers. Fidelity and E*Trade both have suites of zero-fee index funds, but only individual investors with brokerage accounts at those firms can buy them.

Fidelity has four zero-fee index funds – a total market index fund, an in­ternational stock fund, a small-company stock fund and a large-company stock fund.

E*Trade has five no-fee index funds available exclusively to self-directed E*Trade investors. If you start working with a Morgan Stanley adviser, you can take them with you (E*Trade has been a Morgan Stanley-owned company since 2020). The five funds include strategies that track the performance of international markets, U.S. bonds, municipal bonds, large-company shares and the total stock market.

Best for individual bond buyers. Of all the firms in our survey, Interactive Brokers offers the greatest number of municipal bonds. But buyers of corporate debt should consider E*Trade. What's more, both firms charge no markup on corporate or muni bond transactions. At E*Trade, Treasuries trade for no fee.

Best robo advisory. Fidelity prevails with its digital offering, Fidelity Go, which charges no annual advisory fee for balances under $25,000 and includes 16 different portfolios (from conservative to aggressive allocations). The kicker: The portfolios hold only no-fee mutual funds, so you're not shelling out anything in annual expense ratios.

Fidelity gets another nod, too, because its most aggressive Fidelity Go portfolios hold 100% of assets in stocks (other firms have a 94% to 96% allocation to stocks).

But Schwab Intelligent Portfolios merits an honorable mention. There's no annual fee, though it takes $5,000 to open an account. And the 81 available portfolios hold low-fee exchange-traded funds that charge annual expense ratios between 0.04% and 0.16%.

Best all-in-one bank and broker. Several firms offer benefits to customers who bank and broker with them. But Merrill Edge and its parent, Bank of America, through its Preferred Rewards program, offer the best benefits.

We like, for instance, that the bonuses start when you have a three-month combined average daily balance of just $20,000 – at the bank and in any Merrill investment account. The pluses include a bump in cash rewards on Bank of America credit cards, priority on customer service phone lines, and interest rate discounts on auto loans and home equity lines of credit.

As your balance grows, the perks improve and expand. When your average daily balance hits $100,000 or more, on top of bigger interest rate breaks on loans and bonuses on credit card rewards, you can get a discount on robo-advisory fees at Merrill Edge, a boost in the interest rate on a Bank of America Advantage Savings account and a waiver on ATM fees at non-BofA banks in the U.S. and anywhere else in the world.

Best for options traders. Active options investors should favor Firstrade, which doesn't charge a contract fee like the others. Most of the other firms we surveyed charge a 0.65-cent fee per contract. Ally Invest is one exception; it charges a 0.50-cent contract fee.

Best for cash hoarders. Fidelity gets kudos for paying the highest yield on idle cash sitting in brokerage accounts. In late May, the firm's so-called sweep accounts – the account that your broker automatically "sweeps" any cash into – paid a 3.94% yield. Some of the other firms, by contrast, offered a 0.01% yield. Interactive Brokers stood out, too, with a 2.83% yield on its sweep account.

Best for investors just getting started. None of the firms we surveyed require a minimum to open an account, but we favor Fidelity for investors with small balances for a couple of reasons.

For starters, for as little as $1, you can buy slices of more than 7,000 stocks and exchange-traded funds. No other firm except Interactive Brokers can match that. The other plus: The firm's digital advisory service, Fidelity Go, has the lowest minimum – just $10 – to get started. In addition, there's no annual advisory fee if your balance is below $25,000, and the funds in the portfolios don't charge annual expenses.

Best for mutual fund investors. Interactive Brokers and Schwab offer the biggest roster of mutual funds for no load and no transaction fee. But we want to give Ally Invest, E*Trade, Firstrade and J.P. Morgan Self-Directed a shout-out, too.

All the funds on each of these platforms – albeit a shorter list of funds than Schwab or Interactive offer – trade for no fee.

Best for margin traders. If you're big into trading on margin – a strategy that allows an investor to borrow money from a brokerage firm to purchase securities – Interactive Brokers' Lite tier charges just 6.83% for a margin balance of less than $100,000, a little over half the going rate at the other firms for the same balance.

Best for investors with foreign addresses. Americans living abroad sometimes have problems opening brokerage accounts at U.S. financial firms. But at Interactive Brokers, citizens and residents of nearly every country can open accounts.

And the firm offers overnight trading of stocks and ETFs from 8 pm to 3:50 am Eastern Standard Time, Sunday through Friday, which makes it more convenient for overseas customers in faraway time zones to buy and sell shares.

Best for ETF investors. Stick with Fidelity, Interactive Brokers and J.P. Morgan Self-Directed, which allow you to buy and sell fractional shares of thousands of ETFs. (Firstrade and E*Trade allow you to buy slices of ETF shares, too, but fewer funds are available.)

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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You may have heard about direct indexing recently. It isn’t new, but it may feel that way given all the attention and interest it is generating these days. The elimination of trading commissions has been a major factor in making direct indexing significantly more accessible. A strategy that was once relevant only to very wealthy investors is now something that almost any investor can consider. But is it right for you?

To help answer that, I put together a primer covering some of the basics – what direct indexing is and how it works, the primary benefits it is designed to offer, and some things to consider if you’re curious about learning more.

What is direct indexing?

It’s pretty simple, really. Direct indexing – which we call “personalized indexing” at Schwab – means you own the stocks (or a subset of stocks) that make up an index directly. This differs from traditional index mutual fund and ETF investing where you own shares in the fund (alongside many other shareholders), but it’s the fund that owns the stocks. The price of your shares therefore rises and falls with the stocks in the index, but you don’t actually own the underlying stocks themselves. Your exposure to them is indirect.

Ownership matters because it allows you to customize the stocks held in your account. At one time that would have been very expensive to do because trading came with commission costs, and you had to buy stocks in increments of whole shares. Not anymore. With the large-scale elimination of commissions, direct indexing suddenly emerged as a viable strategy for investors of all kinds.

That said, it’s not for everyone.

Benefits

Direct indexing allows you to personalize your investing approach. There are a number of potential features associated with that, but for the sake of simplicity I’m going to focus on the two primary benefits:

Tax efficiency

It may sound counterintuitive but stocks with losses can represent an opportunity to help a portfolio. When you sell a stock that has gone down in value, the tax code allows you to use that capital loss to offset capital gains that come when you sell another stock that has gone up in value. It can either be done right away or banked for future use. It’s called “tax-loss harvesting,” and it spans more than just stocks – it can be applied to different securities, such as bonds, and different investment products, such as mutual funds and ETFs. So as markets fluctuate, opportunities emerge to create losses that can be offset with taxable gains, thereby lowering your tax liabilities over time.

Direct indexing allows you to make tax-loss harvesting systematic – banking losses for use against future gains – while staying invested in the market. Active tax management also provides the potential to outperform the index on an after-tax basis – a potential benefit sometimes referred to as “tax alpha.”

Customization

Most direct indexing offerings begin with access to some core indexes, such as the S&P 500 or Schwab 1000. From there you have the option to personalize the portfolio by excluding certain companies in it. Those decisions could be driven by personal values and beliefs, such as excluding fossil fuel producers, gun manufacturers, alcohol and tobacco companies or other stocks.

Customization can also be used to balance out an overconcentration elsewhere in your portfolio – for example if you own stock in the company you’re employed by, or you already have positions in a company and prefer not to take on more. The bottom line is that the level of transparency into each holding offered by direct indexing can create more opportunity to personalize investments.

There are other potential benefits such as the flexibility to give your portfolio customized tilts toward certain styles such as value or momentum, and even do charitable giving through the donation of handpicked appreciated securities. But the place to start for most investors who are thinking about direct indexing is to consider what the tax efficiency and customization upsides are worth given your own individual circumstances and preferences.

Is direct indexing right for you?

While direct indexing solutions have come way down in price, they’re not free. So, any benefits have to be weighed against the costs to buy in. By way of example, Schwab offers a solution at a fee of 0.40%.

With that in mind, those most inclined toward direct indexing solutions tend to fall into the following categories:

• Investors with sizable taxable accounts and in higher tax brackets who may benefit most from tax-loss harvesting;
• Investors who wish to better align their portfolios with their personal values in a customized way rather than through pre-packaged ESG products; and
• Investors with concentrated positions in one or more stocks who are seeking a customized way to bring their portfolios into better balance.

If you fall into one of those categories, take a closer look and do your due diligence, as there are nuances between the many offerings currently on the market. Fees vary of course. Consider also what’s an appropriate investment minimum for you to fully benefit from tax-loss harvesting benefits. Also explore whether the offering is fully automated or comes with the help of a human adviser.

Direct indexing may not be for investors with smaller accounts, in lower tax brackets or with assets primarily in tax-deferred accounts because they wouldn’t benefit as much from tax-loss harvesting opportunities. The same can be said for investors who don’t have individualized circumstances or points of view that would benefit from the ability to customize their portfolios in a personal way. In both cases, those investors may be better suited to an index mutual fund or ETF. For a more sophisticated product like direct indexing, human help can be invaluable, so speak with your financial consultant or registered investment adviser.

The last thing I’d say is even if you decide direct indexing isn’t for you, continue to watch the trend toward greater personalization as it grows and evolves. In some of the same ways that our experiences have become so individualized in other parts of our lives – when we’re driving, shopping, using our phones and more – the same is happening in our financial lives, and more is coming.

Disclosures: Neither the tax-loss harvesting strategy nor any discussion herein is intended as tax advice, and Schwab Asset Management does not represent that any particular tax consequences will be obtained. Tax-loss harvesting involves certain risks, including unintended tax implications. Investors should consult with their tax advisers and refer to Internal Revenue Service at www.irs.gov about the consequences. Diversification and asset allocation strategies do not ensure a profit and cannot protect against losses in a declining market.

Please refer to the Charles Schwab Investment Management Inc. Disclosure Brochure for additional information. Portfolio Management for Schwab Personalized Indexing is provided by Charles Schwab Investment Management Inc., dba Schwab Asset Management, a registered investment adviser and an affiliate of Charles Schwab & Co. Inc. Both Schwab Asset Management and Schwab are separate entities and subsidiaries of The Charles Schwab Corp. 0722-28AM

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Wall Street started the week on a shaky note as the 10-year Treasury yield hit its highest point in more than three years, but stocks' difficulties were limited to mild declines.

Monday's session saw the yield on the 10-year T-note climb to as high as 2.884% – a rate last seen in December 2018 – before easing a hair, to 2.866%. That spooked equity traders early, though BlackRock Investment Institute strategists say stock prices have already priced in rapid rate hikes by the Federal Reserve.

"We believe fears about a further downdraft in equities are overblown," they say. "The rate hikes we expected are happening faster, but we don't see central banks raising policy rates beyond neutral levels that neither stimulate or restrain the economy."

Bank earnings were also front and center Monday amid what so far has been a lousy Q1 earnings season for the broader financial sector.

"Financials had the weakest start of earnings since 1Q20, with just 36% of the 11 companies that reported beating on both sales and [earnings per share] so far (40% beat last quarter after Week 1)," say BofA Securities strategists Savita Subramanian and Ohsung Kwon.

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Bank of America (BAC, +3.4%) headed higher as better credit quality among its borrowers translated into a modest 1.8% revenue improvement to $23.3 billion and a 12% profit decline to 80 cents per share – both ahead of Wall Street's estimates.

However, Bank of New York Mellon (BK, -2.3%) also reported a double-digit profit decline (11%) that topped expectations but its stock was dragged lower. And Charles Schwab (SCHW, -9.4%) was the S&P 500's worst performer after higher expenses weighed on profits and caused it to miss the mark on both the top and bottom lines.

The Dow Jones Industrial Average (-0.1% to 34,411), S&P 500 (off marginally to 4,391) and Nasdaq Composite (-0.1% to 13,332) all traded similarly throughout the day, floating between positive and negative territory before finishing slightly lower.

Other news in the stock market today:

• The small-cap Russell 2000 declined 0.7% to 1,990.
• Gold futures edged up 0.6% to finish at $1,986.40 an ounce.
• Bitcoin managed to get back above the $40,000 mark, rising 2.5% to $40,756.73. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.
• Synchrony Financial (SYF) rose 6.2% after the credit card provider reported earnings. In the first quarter, SYF recorded adjusted earnings of $1.77 per share and net interest income of $3.79 billion, higher than the $1.73 per share and $3.76 billion analysts were expecting. The firm also boosted its stock buyback program by $2.8 billion and hiked its quarterly dividend by 5%. Still, CFRA Research analyst Alexander Yokum maintained a Hold rating on SYF stock and lowered his price target by $3 to $40 – about in line with where shares closed today.
• UBS Global Research analyst Myles Walton downgraded United Airlines (UAL, -2.6%) to Neutral (Hold) from Buy. "Although we see strong pricing in the second quarter and beyond, the operational picture could be less smooth for UAL as they adapt to an aggressive growth strategy," Walton says. Several other travel-related stocks closed lower today, too, including American Airlines Group (AAL, -2.4%), Southwest Airlines (LUV, -1.1%) and Carnival (CCL, -2.7%).

Another Big Day for Energy

Monday's top-performing sector is certainly starting to become familiar with the winner's circle. The likes of Marathon Petroleum (MPC, +3.3%) and Phillips 66 (PSX, +5.2%) helped keep energy stocks (+1.5%) way out in front in 2022, buoyed by a 1.2% rise in U.S. crude oil futures to $108.21 per barrel.

Indeed, the energy sector has now raced to a 46% gain so far in 2022, more than 40 percentage points ahead of the next closest sector (utilities, +5.8%) and far better than the 7.8% loss in the S&P 500.

An anticipated "return to normal" in global travel as summer starts to near, as well as a drastic reshaping of global oil supplies thanks to Russia's invasion of Ukraine, have driven U.S. crude prices up well more than 40% in 2022 alone – in turn lifting all parts of the sector, from refiners to pipeline master limited partnerships (MLPs).

Now, while it's fair to argue that the easy money has likely been made in the energy sector, that doesn't mean all the money has been made. Despite the sector's torrid run, analysts see upside of at least 20% in a number of the sector's shares.

Read on as we look at five oil and gas stocks that still command a large number of analysts' Buy ratings, as well as lofty price targets suggesting even more gains ahead.

A low-cost brokerage account will allow you to buy individual stocks, mutual funds, exchange-traded funds and other investments outside of your employer’s retirement account. You can open an account, deposit money and execute trades online with a computer, a tablet or even a smartphone.

But first, you have to pick a brokerage firm. The one that’s right for you depends on the kinds of services you want. For starters, check out Kiplinger’s annual survey of online brokerage firms, which rates nine online brokers on a variety of measures, from fees to breadth of investment offerings to customer service.

What You Need to Open an Account

Brokerage firms make it easy to open an account online, as long as you meet a few requirements. You must have a valid Social Security number and a legal U.S. residential address within the 50 states, the District of Columbia or Puerto Rico, among other things.

You’ll have to choose whether you want to open a taxable (non-retirement) account or a retirement account (such as a traditional or Roth IRA). Both types of accounts allow you to buy and sell stocks, mutual funds, ETFs and other investments.

One thing you won’t need is a ton of money. Many online brokerage firms, including Schwab and Fidelity, don’t require a minimum to open an account, though some firms may require a modest balance of, say, $500 or $1,000. And at most brokerages, trading is free.

You can contribute as much or as little as you want to a taxable brokerage account in any given year. But retirement accounts come with annual contribution limits. For example, you can invest up to $6,000 in an IRA each year if you’re younger than 50 years old or $7,000 if you’re 50 or older.

Taxes on Stock Trading

There are tax consequences to consider if you trade securities in a taxable brokerage account. Any profits you pocket when you sell an investment will incur capital gains taxes. How much you owe depends on how long you’ve owned the investment. (Trades in a traditional or Roth IRA brokerage account don’t create a taxable event as long as the money stays in the account.)

Suppose you buy 10 shares of Apple stock in your brokerage account for $165 per share, and the price appreciates to $300. Your shares are worth $3,000, for a gain of $1,350. If you sell all of your shares and you’ve owned them for one year or less, you’ll pay the short-term capital gains rate—your ordinary income tax rate—on those profits. But if you’ve held the shares for more than one year, you’ll pay a lower tax—the long-term capital gains rate—of 0%, 15% or 20%, depending on your marginal income tax bracket.

What if the stock drops in value and you sell? You can use those losses to offset any capital gains realized on other investments, as long as you match up short-term losses with short-term gains and long-term losses with long-term gains. If you end up with a surfeit of losses, you can deduct up to $3,000 in losses from your income and carry over unused losses on future tax returns.

Hiring a (Robo) Pro

If you’re nervous about trading stocks or funds on your own, or if you just don’t want to bother, consider the low-fee advisory services driven by computer algorithms that many brokerage firms offer. You fill out a short online questionnaire about how long you plan to invest (a “time horizon”) and your tolerance for risk, and a computer model recommends a portfolio of low-cost ETFs that are right for you.

These robo-advisers, as they’re commonly called, charge low annual fees and do all the investment work for you, from rebalancing your portfolio to shifting your assets to an appropriate mix over time as you age. Brokerage firm Betterment, for example, offers a robo service for an advisory fee of 0.25% to 0.40% per year, depending on the account balance, and its portfolios charge a typical annual expense ratio of 0.11%. For our take on 12 robos, see Find the Right Robo Adviser for You.

How Your Account is Protected

Assuming your brokerage firm is a member of the Securities Investor Protection Corp. (and most are), your account is insured in the event your brokerage goes out of business.

Brokerages are required by law to keep customers’ investments separate from securities owned by the brokerage firm, an arrangement that offers some protection against fraud. But if the firm fails and customers’ assets go missing due to theft, fraud or unauthorized trading, SIPC will protect each account held by a customer for up to $500,000 for securities and cash (including a $250,000 limit for cash only). SIPC won’t protect you against investment losses, and it doesn’t get involved until the firm has exhausted all other options, such as merging with another brokerage firm.

The Risks of Trading on Margin

If you followed the meteoric rise of GameStop stock and other so-called meme stocks last year, you probably heard a little about margin trading. When you trade on margin, you borrow money from your brokerage firm—using your cash and securities as collateral—to buy securities. These accounts allow you to increase your buying power (regulators allow you to borrow up to 50% of the purchase price), but typically you have to apply and qualify for one at your brokerage firm.

Margin trading is mostly for sophisticated investors or speculators because it’s risky—you can lose more than you invested. And margin accounts charge high interest rates (Fidelity charges 8.325% on loans of up to $24,999). Margin rates are variable, too, and they’ll head higher when the Federal Reserve hikes short-term interest rates. There’s a minimum amount of collateral to maintain as well. Just how much can vary: The Financial Industry Regulatory Authority, the self-regulatory arm of the brokerage industry, requires that you keep a minimum of at least 25% of the value of the margin securities, but some firms call for more.

If the market heads down, you may have to add cash or securities to restore the minimum maintenance amount—the dreaded margin call. If you don’t, your broker has the right to sell your investments to cover it. That could amplify your losses, because your investments will likely be sold at a loss. Plus, you’re still on the hook to pay the margin loan back to the broker.

For many people, one of the most daunting financial challenges in life is figuring out how to pivot into retirement. It’s quite a leap to move from making a regular paycheck to being responsible for generating your own stream of income and regulating how to spend down your savings.

A recent Schwab study found that nearly three out of four people (72%) within five years of retirement are worried they’ll outlive their savings, and nearly six in 10 (57%) feel overwhelmed about determining how much they can spend in retirement.

This uncertainty can be paralyzing. The average retiree still has 80% of their savings after 20 years of retirement, according to research. In one way that shows impressive discipline. In another it could show that fear is driving decision-making during a period of life when people should be enjoying what they’ve worked hard to earn.

With a retirement income plan, the challenge is how to get it right, and the good news is there’s no shortage of products, tools and resources to help. Many providers – including Schwab – offer a range of income-focused solutions to meet different clients’ needs and preferences. Some deliver guaranteed income, such as annuities. Others, such as bonds and managed accounts, can be utilized within a plan to generate income streams. There are also digital tools that automate the process and offer a flexible, low-cost way to generate income from a portfolio.

It’s most important to recognize that this is not an either/or decision. In fact, sometimes a combination of these solutions is optimal, depending on your unique financial picture. Let’s break down a few options, as well as how they can work together.

If you like certainty and are comfortable handing over the reins…

Annuities can be a good starting point for your retirement income plan. There are many types of annuity products, but at their core they take the guesswork out of things by guaranteeing an income stream either over a specified period or a lifetime. That often comes at the cost of giving up control of your assets and turning everything over to an insurance company, which backs these products and their guarantees.

There’s a lot to like about annuities. They can provide you with confidence that you have a guaranteed income for the rest of your life or a period you choose. Depending on the type of annuity you choose, you can take payments immediately or defer them to a date down the road, and you don’t have to worry about things like the stock market dropping at the wrong time.

As far as some cons to consider, the current or potential costs for annuities tend to run higher than some other options, and they generally require long-term commitments, which can make them less flexible if your retirement circumstances change. For some annuities, there can be general fees, as well as other costs associated with optional annuity riders. There may be additional charges for making early withdrawals. For income annuities that have no fees, the opportunity cost of what you could have earned if you invested elsewhere or don’t live as long as the average retiree can be substantial. However, the guarantees that annuities provide can be worth it for many people.

If you want greater flexibility and are most comfortable having control…

Consider an automated income solution. Automated income solutions use technology to provide an easy way to pay yourself from your investment portfolio, typically at a low cost. One example is Schwab Intelligent Income®, a feature available with Schwab Intelligent Portfolios®. An automated solution can help you answer hard questions, such as how much to withdraw, how to invest based on individual goals and time horizons, and how to withdraw from a combination of taxable, non-taxable and Roth accounts in a tax-smart and efficient way.

People like automated income tools for a range of reasons. Generally, they’re inexpensive and allow you to retain control over your money and portfolio. With Schwab Intelligent Income, for example, you can start, stop or change the withdrawal amount, frequency and deposit location however you want. You can stay in the market, so your capital has the potential to continue to appreciate and choose an asset allocation that aligns with your risk tolerance. While not guaranteed, we believe the flexibility of the withdrawal rate that you get with Schwab Intelligent Income (which leverages a Lifetime Adjustable Income approach), positions you to help achieve your income in average or better markets. The advanced technology behind the offering also provides ongoing monitoring and alerts guiding investors to make updates if needed (such as reviewing your withdrawal rate). Additionally, the offering is designed to help manage your tax liability.

Automated income tools don’t come with guarantees, however, and they can be considered mainly for clients who are comfortable with technology and a degree of automation.

It’s also worth noting that for those who like automated income tools, these tools can often be used for income needs other than retirement too – for example, if you want to help satisfy an income need to support an aging parent or a child at college.

When a combination is optimal

The range of income solutions available today is great news for investors. In reviewing your choices, you may find that a combination of both annuities and an automated income solution might make the most sense. So how do you get started?

When it comes to the annuity portion of the equation, most investors generally have at least one type of “annuity” providing predictable income as part of their retirement tool set already – Social Security. Adding additional forms of predictable or guaranteed income, such as a relatively efficient single premium immediate annuity (SPIA), in addition to a portfolio can provide both income flexibility for a portion of savings, and a floor of guaranteed income. In this scenario, the guaranteed income from annuities or predictable income from Social Security could be used to cover ongoing core expenses, such as medical costs, housing and utilities.

One important thing to know about SPIAs is that most don’t provide payments that increase with inflation, depending on the payment option you choose. This is another reason an investor might consider adding a solution like Schwab Intelligent Income to their retirement income plan, as the offering is designed to consider inflation as it evaluates withdrawal rates, while providing flexibility for the investor to increase or decrease withdrawals if needed or desired.

By adding an automated income solution (such as Schwab Intelligent Income) to the mix, investors have the additional benefit of flexible, adjustable income from a portfolio. A good way to use this is for supplemental income for more discretionary expenses a retiree may have, including travel or entertainment. During strong markets, an investor might want to increase withdrawals from Schwab Intelligent Income to enjoy more leisure or travel expenses. When the markets decline, they have the flexibility to reduce income from Schwab Intelligent Income along with reducing these discretionary expenses. Additionally, Schwab Intelligent Income’s ongoing monitoring and alerts can help guide these decisions in real-time.

By combining annuities with an automated income solution, such as Schwab Intelligent Income, investors can balance income and expenses in multiple ways, and update that balance as their situation changes. Of course, it's often a good idea to speak with a financial professional who can help talk through the options and trade-offs within any diversified retirement income plan.

The choice is yours

Solving the income challenge is complicated, but there is an array of solutions that can help. Whether you prefer the guaranteed income offered by an annuity or the flexibility of leaning on an automated solution (or a combination of both), there is a choice that’s right for you. And remember that human advisers can play an important role too, especially for more complex needs and circumstances.

Please read the Schwab Intelligent Portfolios Solutions™ disclosure brochures for important information, pricing and disclosures related to the Schwab Intelligent Portfolios and Schwab Intelligent Portfolios Premium programs. Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium® are made available through Charles Schwab & Co. Inc. (“Schwab”), a dually registered investment advisor and broker dealer.

Portfolio management services are provided by Charles Schwab Investment Advisory, Inc. ("CSIA"). Schwab and CSIA are subsidiaries of The Charles Schwab Corporation.

Schwab Intelligent Income® is an optional feature for clients to receive recurring automated withdrawals from their accounts. Schwab does not guarantee the amount or duration of withdrawals, nor does it guarantee meeting Required Minimum Distributions. You may incur IRS penalties for early withdrawal of funds depending on the account type.

Annuity guarantees are subject to the financial strength and claims‐paying ability of the issuing insurance company.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Wall Street’s analyst community is broadly optimistic about the market’s prospects for the year ahead – but they’re torn about where exactly those gains will come from. In other words, 2022’s top stocks to invest in could come from numerous corners of the market.

Just consider the headwinds that the pros are factoring in as the new year approaches. Inflation. Supply-chain chaos. The potential for more COVID disruptions. Sky-high equity valuations. And none of that accounts for potential “black swan” events in 2022.

Still, the consensus direction for the stock market’s arrow remains up for 2022. Infrastructure spending and a resumption of the economy’s rehabilitation should help prop up equities in general, goes Wall Street’s thinking.

“We expect solid economic and earnings growth in 2022 to help U.S. stocks deliver additional gains next year,” says Ryan Detrick, chief market strategist for LPL Financial, the largest independent broker-dealer in the U.S. “If we are approaching – or are already in – the middle of an economic cycle with at least a few more years left (our view), then we believe the chances of another good year for stocks in 2022 are quite high.”

Also noteworthy is LPL’s S&P 500 target for 2022, which stands at 5,050 at the midpoint. That represents a roughly 10% gain from when the call was made Dec. 20, but closer to 5% from today’s prices. Plenty of other Wall Street strategists have similar targets. Thus, if you want anything more than a mid-single-digit return in 2022, you might need to stray from the index and instead delve into individual picks.

But where should you begin?

Here are 22 of the pros’ highest-conviction stocks to invest in for 2022. We used TipRanks data to unveil the crème de la crème, as viewed by Wall Street’s analyst community. Each stock currently earns a consensus Strong Buy rating based on opinions from analysts surveyed by TipRanks.

As of today, these stocks are expected to produce upside of between 10% and 82% over the next 12 months – handily more than consensus S&P 500 projections. And like Kiplinger’s best stocks for 2022, they represent just about every corner of the market.

Data, including consensus price targets and ratings, is as of Dec. 28. Stocks listed in reverse order of projected 2022 returns.

• Market value: $161.6 billion
• TipRanks consensus price target: $95.80 (10% upside potential)
• TipRanks consensus rating: Strong Buy

Financial stocks can thrive in an environment of rising interest rates and high liquidity. Banks can earn even more on their lending products (think mortgages and car loans), and services firms that make money from trading volumes will collect more in fees. One firm that has done particularly well is Charles Schwab (SCHW, $85.50), which is involved in both these services, as well as wealth management.

SCHW shares, which are poised to finish 2021 up by about 60% or so, aren't expected to have as explosive a 2022, but they're still among the pros' favorite stocks to invest in.

Deutsche Bank's Brian Bedell, who calls SCHW stock a "top pick," is encouraged by Schwab's "balanced focus on organic growth, client service, [and] merger integration," as well as its "ability to generate significant financial operating leverage to higher interest rates and client asset growth."

He also sees much more upside to shares than the analyst average price target, which implies 10% returns over the next 12 months. Bedell's $120 PT would see Schwab shares return another 40% from current prices.

Jefferies also calls Schwab a "top pick" among brokers, asset managers and exchanges. "Areas where SCHW could flex its muscle on the competition include: options pricing, payment for order flow (PFOF) practices, deposit pricing as well as asset management products (both third party and advice services)," Jefferies' analyst team says.

Wall Street is plenty bullish in general, with eight of 10 covering analysts issuing Buy calls on SCHW over the past three months. See which other analysts are in the Schwab Buy camp on TipRanks.

• Market value: $141.8 billion
• TipRanks consensus price target: $175.84 (10% upside potential)
• TipRanks consensus rating: Strong Buy

A perfect storm materialized for the semiconductor industry over the past couple years: a digital transformation and ecommerce boom for electronics combined with shipping backlogs and work shortages.

Among the beneficiaries has been Applied Materials (AMAT, $159.64).

The California-based integrated circuit producer has been integral to the domestic tech industry, as the majority of chip manufacturing is located in Taiwan and elsewhere overseas. The boom in the importance of data centers, 5G, and the Internet of Things (IoT) has kept demand for AMAT's products strong.

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CFRA recently added Applied Materials to its favorite chip stocks to invest in, upgrading shares from Buy to Strong Buy.

"We see upside to estimates driven by two trends: 1) AMAT continuing to gain market share in process control, more specifically wafer inspection and e-beam technology with leading-edge customers, and 2) demand from foundry/ logic capacity expansions evident in Intel's higher capex guidance and Samsung's plans to triple its foundry capacity by 2026," says CFRA analyst Keven Young.

The analyst adds that demand also should be supported by the U.S. and Europe, which are "looking to boost their own chip manufacturing presences, which will likely be done via smaller and less efficient fabs, boosting WFE capital intensity and benefitting equipment suppliers."

A solid 12 of 15 analysts covering AMAT shares have called it a Strong Buy or Buy, versus just three Holds and no Sells of any kind. Hear what else the pros have to say about AMAT on TipRanks.

• Market value: $253.3 billion
• TipRanks consensus price target: $64.53 (10% upside potential)
• TipRanks consensus rating: Strong Buy

Coca-Cola (KO, $58.65) has been slower than most to recover from its COVID-recession losses, but it's primed to enter 2022 nipping at its previous all-time highs. The beverage maker has been experiencing strong momentum in sales of mini packs and Coke Zero Sugar, and expects significant growth from its recently acquired British coffee chain, Costa Coffee.

Evercore ISI analyst says that while KO would like to continue innovating on a meaningful level, the "vast majority of innovations don't work." The company is so well-entrenched in its consumers' interests that changes to formulas in its syrups and new flavor options are often shunned for classic offerings.

Furthermore, along with rebounding sales from households, the reopening of restaurants and other food purveying establishments should result in higher sales volumes of Coca-Cola products, as these end markets make up a sizeable portion of KO's profits.

Credit Suisse analysts (Outperform) believe KO is one of the best stocks to invest in among consumer staples picks, calling it a "top pick."

"With the pandemic's worst likely passed, we think Coke is now poised for a period of mid-single, maybe even double-digit topline growth and high-single digit bottom line growth (ahead of guidance)," says Credit Suisse (Outperform, equivalent of Buy). "In recent weeks, a series of meetings with management and industry participants affirmed this view."

Six of eight analysts surveyed by TipRanks categorize Coca-Cola stock as a Buy. Check out their price targets and analysis at TipRanks

• Market value: $170.9 billion
• TipRanks consensus price target: $280.44 (11% upside potential)
• TipRanks consensus rating: Strong Buy

Home improvement boomed during the depths of the pandemic while individuals were stuck at home. Do-it-yourself trends and design interest pushed stocks like Lowe's (LOW, $253.70) to new heights. Shares in the home improvement retailer have more than doubled from their pre-pandemic peak, and they could improve further still in 2022 as continued COVID flare-ups prompt homeowners to continue investing in their houses.

Wells Fargo Securities analyst Zachary Fadem is among 12 of 16 covering analysts who have said LOW stock is a Buy over the past three months.

"[The] LOW market delivery model is expanding nationwide in the next 18 months with long-term potential for higher conversion, margin expansion and higher inventory turns," says Fadem, who has a $295 price target on Lowe's stock, implying 16% upside across 2022.

"The key takeaway from LOW's investor event was that it's well positioned to gain market share next year independent of the macro backdrop," adds UBS analyst Michael Lasser (Buy). "Plus, it has several levers that it can pull to generate margin expansion in a variety of top-line scenarios."

Lasser also likes Lowe's valuation, which is cheaper than both the overall market and rival Home Depot (HD). Check out Wall Street's average, highest and lowest price targets for LOW on TipRanks.

• Market value: $446.7 billion
• TipRanks consensus price target: $189.83 (12% upside potential)
• TipRanks consensus rating: Strong Buy

Johnson & Johnson (JNJ, $169.67) could be set up as one of the best stocks to invest in well past 2022, forecasting high pharmaceutical sales growth through 2025 and limited impact from expiring patents.

Wells Fargo Securities analyst Larry Biegelsen (Overweight, equivalent of Buy) notes that J&J's 2025 target for pharmaceutical revenues backing out COVID vaccine sales is $60 billion, which implies 5.7% compound annual growth and is better than consensus expectations for $55 billion.

Biegelsen is also optimistic about the company's drug pipeline.

"Between now and 2025, JNJ expects roughly 50 approvals/filings, comprised of 36 line extensions of existing products and 14 novel therapies with $1 billion-plus peak sales potential each," he says. "While there is inherent clinical and regulatory risk in pharmaceutical development, we concur with JNJ's assessment that much of its Pharma growth through 2025 is de-risked because it's mostly driven by in-market products."

Of the seven analysts who have sounded off on J&J stock over the past three months, six are in the bull camp, according to TipRanks. TipRanks offers up a full analyst rundown of JNJ shares.

• Market value: $87.0 billion
• TipRanks consensus price target: $53.11 (12% upside potential)
• TipRanks consensus rating: Strong Buy

Although doctors have pooh-poohed cigarettes for some time, analysts still have no problem recommending Marlboro parent Altria Group (MO, $47.38) to investors. That said, Altria has expanded far past traditional tobacco products in recent years, investing nearly $13 billion in e-cigarette producer Juul, as well $1.8 billion in cannabis company Cronos Group (CRON).

It remains to be seen whether Altria will attempt a full takeover of Juul, a company that has resonated strongly with younger individuals. The e-cigarette industry is considered a threat to traditional cigarettes, and as such, Altria might benefit from fully owning one of the space's top names. (Juul boasts a 40%-plus e-cigarette market share.)

The potential upside in cannabis investing lies with regulators. It all depends on which companies will be poised to benefit if and when federal legalization is enacted. Jefferies analyst Owen Bennett believes Altria's exposure to the domestic cannabis industry is underappreciated, contending that "the stock is getting zero credit" in this field.

Bennett calls MO shares a Buy and sees shares hitting $53 over the next 12 months. Here's what other analysts have to say about MO shares.

• Market value: $228.5 billion
• TipRanks consensus price target: $135.06 (14% upside potential)
• TipRanks consensus rating: Strong Buy

For Chevron (CVX, $118.56), just like many other energy stocks, oil giveth, and oil taketh away.

Oil prices' collapse in 2020 amid travel restrictions and slumping demand slashed CVX prices by more than half. However, U.S. crude has since surpassed its pre-COVID peak, and Chevron shares have recovered in kind. No wonder then, that optimism about energy prices has Wall Street considering CVX among their top stocks to invest in as we head into 2022.

Even with new COVID-19 variants emerging, global governments are hesitant to lockdown their populations and thereby thrust their nations into economic recessions again. That bodes well for oil-price stability in the new year.

BMO Capital analyst Phillip Jungwirth is among 14 of 18 analysts covered by TipRanks who have issued a positive opinion on the stock over the past three months. He notes that CVX is generating robust free cash flow and is in a good position to raise its dividend and maintain its membership in the Dividend Aristocrats.

He also notes that Chevron recently elevated its stock buyback program, from $2 billion to $3 billion annually to $3 billion to $5 billion.

UBS upgraded CVX in November, to Buy from Neutral, lauding the company's financials. "We expect a continuing high quality dividend and share buybacks ready to step up further with the balance sheet already the lowest geared in the sector and set to fall further," says UBS analyst Jon Rigby. See what the rest of the Street has to say about CVX.

• Market value: $1.9 trillion
• TipRanks consensus price target: $3,368.75 (15% upside potential)
• TipRanks consensus rating: Strong Buy

Search leader Alphabet (GOOGL, $2,933.74) has benefitted handsomely from the accelerated digital transformation. That's allowing the technology conglomerate to invest its fortunes into a wide-ranging array of new innovations and initiatives.

In addition to its lucrative advertising business, the communication services stock deals in everything from cloud-based solutions to data centers to personal and home devices – and even autonomous driving systems via its Waymo subsidiary.

GOOGL is among the best stocks to invest in, according to most analysts who cover it. A whopping 25 of the 27 analysts to weigh in on shares of late call the stock a Buy.

Tigress Financial Partners' Ivan Feinseth goes a step further, calling GOOGL a Strong Buy and giving it a $3,540 price target (21% upside potential).

"[Alphabet's] increasing AI-first focus is driving greater product functionality and significant growth opportunities," says Feinseth, who notes that GOOGL is on his firm's Research Focus List and in its Focus Opportunity Portfolio. "GOOGL's strong balance sheet and cash flow enable the ongoing funding of key growth initiatives, strategic acquisitions and the further enhancement of shareholder returns through ongoing share repurchases."

Check out other analyst price targets on GOOGL at TipRanks.

• Market value: $29.4 billion
• TipRanks consensus price target: $354.38 (16% upside potential)
• TipRanks consensus rating: Strong Buy

One of the world's largest clinical laboratory network operators, Laboratory Corporation of America (LH, $306.81) – better known to some as just "LabCorp" – earns a solid Strong Buy consensus rating from the Street.

Among its many verticals, the lab network firm engages in drug development and various medical testing methods. Several of its laboratory provisions at the moment are in key areas, including genomic and polymerase chain reaction (PCR) testing.

Of late, the healthcare stock has made an impression on shareholders by lavishing them with cash. In early December, LabCorp authorized a $2.5 billion stock buyback plan and announced that it will initiate a dividend in Q2 2022, aiming for a dividend payout ratio of 15% to 20% of adjusted earnings.

Mizuho Securities' Ann Hynes (Buy) is bullish on the stock and the new dividend.

"We view the introduction of a dividend is positive as we believe a key reason for the historical valuation difference between LH and Quest Diagnostics (DGX, rated Buy) was the lack of a dividend at LH," she says. "We remain Buy-rated on LH and we are buyers on any weakness related to this announcement."

She's one of eight analysts who have included LabCorp in their top stocks to invest in over the past three months. No pros have offered up a Hold or Sell call during that stretch. See what other analysts have to say about LH on TipRanks.

• Market value: $41.7 billion
• TipRanks consensus price target: $95.10 (18% upside potential)
• TipRanks consensus rating: Strong Buy

An rising economic tide will typically lift most cyclical boats, and that includes materials stocks such as DuPont de Nemours (DD, $80.45). One of the largest chemical and specialty materials companies in the world, DuPont produces many of the most basic synthetic components that allow other industries to thrive.

It's also banking on some wheeling and dealing to move the needle in 2022.

With the $5 billion buyout of engineering materials maker Rogers Corp., announced in early December, "DuPont will become a faster-growing, higher-margin, and less cyclical company with increased exposure to high-growth secular end-markets including EVs, Advanced Driver Assistance Systems, 5G and clean energy," says Deutsche Bank analyst David Begleiter, who rates the stock at Buy with a $95 price target.

Meanwhile, Argus Research analyst Bill Selesky (Buy, $95 PT) has a "favorable view" of both the Rogers acquisition, as well as the planned divestiture of most of the Mobility & Materials segment.

"The divestiture will allow DuPont to focus on faster-growing, higher-margin businesses, while Rogers should help the company to expand its presence in the electric vehicle, 5G telecom, and clean energy markets," he says.

Begleiter and Selesky are part of a recently unanimous bull camp for DD shares.

• Market value: $91.6 billion
• TipRanks consensus price target: $209.29 (20% upside potential)
• TipRanks consensus rating: Strong Buy

Considered an advanced leader in the semiconductor space, Analog Devices (ADI, $174.38) has been mitigating the impacts from supply crunches and ramped up its output to meet the overwhelming demand for its high-capacity chips.

The overall semiconductor industry has seen an incredible period of growth, and many of its largest components are still poised for further upside as the global economy continues to transition toward digitalization. The biggest obstacle to growth, of course, is the rate at which semiconductor firms can produce their highly sought-after chips.

Nonetheless, more than a dozen analysts have ADI among their top stocks to invest in during 2022, believing the chipmaker up to the task.

"The team continues to see the sustaining of the demand/supply gap, strong bookings and backlog, continued lean channel and direct customer inventories, and extended but stable lead-times – all early-cycle indicators," says JPMorgan analyst Harlan Sur (Overweight). "Looking ahead, ADI continues to see a strong revenue growth profile in FY22 given the aforementioned trends combined with the team's ability to increase supply growth throughout the year and pricing tailwinds."

Sur adds that his team thinks the industry is only 40% through the current up-cycle, "which we believe should extend well into CY22 and possibly into CY23."

Sur's price target of $220 implies a 26% jump in ADI shares across 2022. Moreover, JPMorgan's Buy-equivalent call is one of 14 made over the past three months, countered by just three Hold calls. See what the rest of the Street has to say about Analog Devices.

• Market value: $36.4 billion
• TipRanks consensus price target: $31.67 (27% upside potential)
• TipRanks consensus rating: Strong Buy

Calgary-based integrated energy firm Suncor Energy (SU, $24.99) has performed entirely as expected as 2021 draws to a close, with a roughly 55% year-to-date performance more or less equaling the broader energy sector.

Suncor hasn't exactly had it easy. The pandemic not only weighed heavily on shares, but it also forced SU to cut its dividend from 46.5 cents per share to 21 cents. Things are getting better, however; the company recently announced it would double its dividend to 42 cents per share. Suncor also plans to repurchase shares and repay its debts at a faster rate.

Specializing in synthetic crude derived mainly from the Athabasca oil sands deposits in Alberta, Canada, the company expects higher energy prices in 2022 as more economies return to pre-pandemic output.

Eleven out of 13 analysts surveyed by TipRanks have recently released bullish notes on Suncor. That includes UBS's Lloyd Byrne, who calls the stock a Buy.

"Looking out, we see the opportunity to improve results and reduce the risk premium in the stock through strong operational performance, initiatives to improve brownfield ops, and incremental returns of excess cash to shareholders," Byrne says. Check out opinions and price targets for SU on TipRanks.

• Market value: $82.9 billion
• TipRanks consensus price target: $74.08 (30% upside potential)
• TipRanks consensus rating: Strong Buy

A couple of the industrial sector's representatives on this list of 2022's top stocks to invest in come from the automotive industry. That includes General Motors (GM, $57.11), which is one of several auto giants shifting away from internal combustion engine (ICE) vehicles and toward electric vehicles (EVs).

Indeed, GM has invested heavily in a robust pipeline that should see the automaker produce dozens of EVs by 2030, effectively making it a stalwart in the industry.

"We believe the GM EV transformation story heading into 2022 is starting to get recognized by the Street as we believe a EV driven re-rating is now in process," Wedbush analyst Daniel Ives (Outperform) said in November. "With the Tesla trillion-dollar valuation and growing EV appetite among investors for new innovative EV stories, the vertical integration capabilities of GM and conversion of its massive customer base to electric vehicles over the coming years represents a transformational opportunity for [CEO Mary] Barra & Co. looking ahead."

"We believe GM has a golden opportunity to lay the groundwork and ultimately convert 20% of its massive customer base to EVs by 2026 and north of 50% by 2030," adds Ives, who says GM shares could hit $100 over the next 12 to 18 months, or a 75% return from current levels.

He's not alone. Over the past three months, General Motors' stock has earned 11 Buy calls versus just two Holds. Here's what other analysts have to say about GM's future.

• Market value: $251.6 billion
• TipRanks consensus price target: $340.63 (33% upside potential)
• TipRanks consensus rating: Strong Buy

2021 was a year of continued economic acceleration, particularly in industries that involve cloud-based or digital transformation companies. One of the largest and most fundamentally sound of those companies is Salesforce.com (CRM, $255.45), which is highly rated by some of Wall Street's most accurate analysts.

Salesforce.com provides enterprise-level customer relations and general management software solutions, as well as data analytics and communications tools. The firm completed its massively expensive takeover of business communication platform Slack this past July – a development many analysts were ultimately bullish on.

After reporting its October earnings on Nov. 30, Wedbush's Ives opined that despite its in-line operating margin outlook, "Salesforce's customer diversification, product portfolio breadth, and ratable SaaS model is continuing to gain significant momentum in the field as the digital transformation spending cycle kicks into its next gear of growth."

Argus Research's Joseph Bonner is plenty bullish too, reaffirming a Buy rating in early December.

"Salesforce is well positioned to exploit the secular trends in enterprise software toward digital transformation focused on customer experience, software-as-a-service cloud solutions, data analytics, and platform software services, and away from higher-cost on-premise solutions," he says. "We think that Salesforce has seized the center of the converging enterprise cloud/customer relationship management universe."

Among TipRanks-surveyed analysts, 23 have called Salesforce.com a Buy over the past three months, versus just two Holds and no Sells. Find out what other analysts have to say about CRM.

• Market value: $3.5 billion
• TipRanks consensus price target: $32.50 (38% upside potential)
• TipRanks consensus rating: Strong Buy

Sometimes an industry can use a cleansing – even in beauty. Category-creating Beauty Health (SKIN, $23.52) has enjoyed firm reception of its flagship brand, the HydraFacial. This non-invasive treatment is paired by the company with its community of estheticians and partners, and considers itself to be a bridge between the "skin correction" and "skin care" realms.

After going public via a reverse SPAC merger in late November 2020, SKIN shares have more than doubled. Analysts remain bullish going into 2022, however, with four of the five pros who have weighed in on Beauty Health in the past three months calling it a Buy – this despite the company's CEO, Clint Carnell, announcing he would step down from the top spot effective the start of the new year. (Executive Chairman Brent Saunders will act as interim CEO until a permanent replacement is found.)

Jefferies analysts came away pleased after a November meetup with management and list SKIN among its stocks to invest in for 2022.

"The CEO transition pressured shares creating a degree of near-term uncertainty, but we left our hosted event with optimism that a new appointment will bring skills that will accelerate the growth thesis – multi-brand through M&A, amplified organic growth, new consumer product expansion, and un/undertapped international markets," Jefferies' team says. "The scope of the biz is changing to be quickly bigger and demands a CEO with scaled experience. This frees Mr. Carnell to do what he does best – finding small emerging brands, brokering capital & talent to drive growth, upsizing biz 2x-3x, and prepping it for sale.

SKIN shares have earned Buy ratings from four of the five analysts covering it. See what they have to say on TipRanks.

• Market value: $11.4 billion
• TipRanks consensus price target: $771.29 (46% upside potential)
• TipRanks consensus rating: Strong Buy

As mentioned in our discussion of Lowe's, the COVID-19 pandemic spurred homeowners to splurge on improving their homes. That wasn't just good for DIY companies – it also was a boon for home furnishing retailers such as RH (RH, $528.99), which most people know as Restoration Hardware.

RH shares are up a whopping 569% from the market's March 23, 2020, low – an impressive figure, but one that reflects some cooling-off of late. Shares had delivered as much as an 820% gain through August but have since lost more than a quarter of their peak value.

That's OK. RH has consistently beaten earnings estimates – an impressive feat considering rising shipping costs and ongoing supply-chain constraints. (RH imports much of its domestic product from Chinese manufacturers.) To deal with inflationary concerns, the company has hiked its prices several times, but RH's largely well-to-do consumers have digested them with little change in behavior.

That's why analysts largely see RH as one of the top stocks to invest in for 2022.

JPMorgan analyst Christopher Horvers (Overweight) highlights a laundry list of initiatives in store for 2022:

"RH reiterated that a number of new initiatives remain on track for FY22, including the launch of RH Contemporary (with a dedicated sourcebook, freestanding gallery, dedicated website and national advertising campaign), RH England gallery opening in spring/summer, RH Guesthouse in NYC, the unveiling of the World of RH web portal, the lift off of RH1 and RH2 charter planes, the sailing of RH3 the yacht, and the expansion of RH In-Your-Home service."

Horvers is one of seven analysts tracked by TipRanks who have sounded off on RH shares over the past three months. All seven have been Buys. Check out RH price targets at TipRanks.

• Market value: $46.2 billion
• TipRanks consensus price target: $421.76 (63% upside potential)
• TipRanks consensus rating: Strong Buy

Twilio (TWLO, $259.09) capitalized on the pandemic shift to digital and app-based commerce. The company provides a platform through which firms can better communicate with their customers, across multiple application channels.

As more companies switch to tech-centric operations, Twilio's communication APIs (application programming interfaces) are increasingly essential to reaching consumers and offering proper customer service. Moreover, the company has expanded beyond simple SMS and messaging platforms and now also offers voice and video products, which are becoming standard in the customer service realm.

As high-capacity software becomes more ubiquitous in business, the necessity of APIs grows in tandem with that standard.

Unsurprisingly, from the Feb. 19, 2020, start of the COVID bear market through the same time in 2021, TWLO shares returned 232% versus just 17% for the broader market. However, the market has since pivoted hard, away from COVID plays and toward reopening plays, and Twilio's stock has suffered a 40% decline since February as a result.

A rebound opportunity, then, is why many analysts have TWLO among their top stocks to invest in as we enter 2022.

"Every company is increasingly realizing technology is table stakes, serving as a strong tailwind to Twilio," say RBC Capital Markets analysts, who rate the stock at Outperform. "We believe Twilio plays a crucial role in allowing companies to communicate with customers across all channels."

RBC is among the 17 of 18 analysts producing Buy calls on TWLO over the past three months. Here's what those other analysts have to say about TWLO.

• Market value: $102.3 billion
• TipRanks consensus price target: $108.29 (64% upside potential)
• TipRanks consensus rating: Strong Buy

Chinese stocks, facing intense regulatory intervention, were a disaster in 2021. E-commerce giant Alibaba (BABA) lost more than half of its value. Private tutoring firm TAL Education Group (TAL) hemorrhaged a whopping 95% across the year.

Online retailer JD.com (JD, $65.87) has been relatively stable, shedding "just" 25% since the start of 2021. The online marketplace has invested heavily in robotics and drone tech to reach its billions of users. It's impressively vertically integrated across its logistics and storage network, and it's considered well-poised to continue capturing Chinese market share.

Analysts see more than 60% upside potential out of JD shares in 2022, making it potentially one of the best international stocks to invest in – but extreme caution is warranted. A late December note from Stifel's analysts, in response to Chinese internet giant Tencent (TCEHY) scything its stake in JD.com to 2.3% from 17%, shows the frustration bulls are constantly being subjected to.

"While there is no fundamental business impact to the ownership change, investors have viewed JD as being aligned with Tencent in its battle with Alibaba. For this reason, we view the change as a negative but also believe JD's business is performing very well," they say. "Given the changing operating conditions in China that never seem to end, it is difficult to have any conviction in shares of companies like JD at the moment. Just as you think the environment may be normalizing, you take the next punch to the face.

"We continue to believe conditions will improve at some point, but at the moment, that assessment has never seemed more wrong."

And yet, Stifel's analysts finished the note by reiterating their Buy rating. See what other analysts have to say about JD shares.

• Market value: $7.2 billion
• TipRanks consensus price target: $10.58 (65% upside potential)
• TipRanks consensus rating: Strong Buy

Once a social-media gaming giant known for titles like FarmVille and Words With Friends, Zynga (ZNGA, $6.40) eventually declined in relevance as promising sequels failed to find footing and connect with users. However, at the onset of the pandemic, as individuals were stuck at home on their phones and tablets, the game developer saw a hike in interest for its hyper-casual time-killing games.

These games are distinct for their minimalist and highly addictive nature, and are a part of a rapidly growing segment within the industry.

Zynga has been focusing on scaling its business and releasing exciting new titles. Moreover, the increased strategic direction placed on user acquisition and retention has helped in driving ad revenues.

ZNGA is highly rated by Wall Street's analysts, with 12 out of 13 ratings within the past three months categorized as Buys. Among them is Stifel, which has a $12 price target on ZNGA shares.

"The company made a subtle change to its outlook, now targeting bookings to increase by low double-digits, whereas prior commentary suggested this rate of growth would be organic," Stifel analysts wrote in November following the company's quarterly report. "Also, the company has made good progress around the integration of Chartboost, which should deliver $20 million-$30 million in synergies in '22."

• Market value: $4.8 billion
• TipRanks consensus price target: $27.00 (66% upside potential)
• TipRanks consensus rating: Strong Buy

The nascent electric vehicle industry is a popular place to look for growth. While many established automakers are transitioning their fleets to include electric options, pure-play EV maker Fisker (FSR, $16.28) has revived its brand and is focusing on the luxury SUV market.

The company is led by Henrik Fisker, a seasoned automotive veteran who has designed high-performance vehicles for multiple luxury manufacturers. Its hopes are currently resting on the Fisker Ocean, a mid-size premium SUV slated to hit the mass market during the second half of 2022.

"Using CATL's LFP batteries, the base Ocean comes with about 240 miles of ranger per charge and starts at $37,499. The vehicle also has two more expensive trims, the Extreme ($68,999) and Ultra ($49,999) variants, which use CATL's NMC battery chemistry and come with 350/340 miles of range, respectively," says Deutsche Bank. "The middle trim seemingly offers particularly good range and acceleration for the price, with 340 miles of range and 0-60 in just 3.9 seconds for just $49,999."

Fisker doesn't have a large analyst following at just seven pros currently, but 66% projected upside on average signals that they believe this moonshot could be one of 2022's top stocks to invest in. See what the pros have to say.

• Market value: $3.8 billion
• TipRanks consensus price target: $49.50 (67% upside potential)
• TipRanks consensus rating: Strong Buy

Sonos (SONO, $29.57) manufactures a scalable smart-speaker platform for homes and businesses. The company boasts a high rate of customer retention thanks to its options, which have expanded in variety over the years.

Jefferies analyst Brent Thill (Buy) notes that 46% of new Sonos product purchases in 2021 originated from existing users. "This is evidence that [Sonos'] approach is resonating with consumers" he says, "and gives us continued confidence that customers are willing to wait for products."

Thill also believes Sonos is underestimating its own potential in 2022.

"We believe SONO likely provided somewhat conservative FY22 guidance as it weighs the impacts of a challenging supply to its outlook," he says. "We note that in 2021, SONO was a beat-and-raise story, with original FY21 guidance calling for 13% growth at the high end of the range vs 29% actual growth."

The company also enjoyed an important intellectual-property victory in 2021, when a U.S. trade judge said Google had infringed upon five Sonos patents. These and other patents are expected to only become more relevant amid the rise of audio and voice recognition/command applications.

Just two analysts have weighed in on SONO shares of late, though both have called the stock a Buy, giving it a consensus Strong Buy rating. Here's what Sonos' recent analyst coverage looks like.

• Market value: $8.5 billion
• TipRanks consensus price target: $32.31 (82% upside potential)
• TipRanks consensus rating: Strong Buy

Consumer retail spending has picked up thanks in part to capital injections into the economy. That's good news for sports equipment and apparel retailer Under Armour (UAA, $17.77), which has been effectively rangebound over the past five years.

Deutsche Bank analyst Gabriella Carbone says UAA is "an attractive long-term story that is returning to consistent top-line growth with significantly improving flow-through and profitability."

"UAA has further runway to expand gross profit margin through SKU reductions, vendor negotiations, more premium pricing and fewer markdowns," adds Carbone, who rates Under Armour's shares at Buy with a $36 price target that implies the stock will double within the next year.

She's not alone. From a price-target standpoint, UAA is one of the best stocks to invest in for 2022; analysts' average price target issued over the past three months is more than $32, or 82% upside from current levels. Find out what other analysts think about UAA at TipRanks.

Despite a bumpy ride, many bitcoin investors are sitting on big gains, with the cryptocurrency reaching new highs in 2021. One way to avoid the tax bite that comes with selling appreciated crypto is to direct it to charity instead, and investors are taking notice. In 2021 through September, donors contributed $158 million in crypto to Fidelity Charitable donor-advised funds, a 464% increase from the same period in 2020.

With a donor-advised fund, you can contribute assets at any time and decide later what charities to support with grants from the fund. Contributions are eligible for an immediate charitable tax deduction for those who itemize and grow tax-free in an investment account. And when you donate appreciated assets (such as stocks or crypto) that you’ve held for more than a year, you avoid long-term capital gains tax of up to 20% (see Your Guide to Giving). If you want to contribute to a charity that doesn’t accept crypto, funneling your donation through a donor-advised fund that takes crypto can bypass that obstacle.

The largest donor-advised funds accept donations of cryptocurrency, and others are expected to follow suit as the investment’s popularity grows. Fidelity Charitable has no minimum asset contribution for its donor-advised funds, to which donors can add crypto at any time. Schwab Charitable (no minimum for a self-managed account; $250,000 minimum for an account managed by an investment adviser) takes crypto contributions on a case-by-case basis. Vanguard Charitable ($25,000 minimum to open an account) accepts bitcoin from existing donors on a case-by-case basis.

Donations of appreciated crypto investments that you’ve held for more than a year, which qualify for a tax deduction of their fair market value, make the most financial sense. If you’ve held an appreciated crypto­currency as an investment for a year or less, your tax deduction is limited to the cost basis—essentially, the original amount you paid. “It would be the same net effect, tax-wise, as selling it yourself and donating the proceeds,” says Tony Oommen, of Fidelity Charitable. And because cryptocurrency is considered property, donations of more than $5,000 in value require a qualified appraisal—which may run a few hundred dollars—to claim the tax deduction, says Oommen. Ask your tax adviser to recommend an appraiser, or use a service such as Charitable Solutions.

The brokerage industry saw historic growth and engagement among retail investors in 2020 and into 2021. Individual investors opened more than 10 million new brokerage accounts in 2020, according to JMP Securities estimates.

At Schwab, we've added more than 1 million new brokerage accounts for three consecutive quarters, and as we've seen across the industry, a vast majority of those new clients are millennial or even younger.

Some industry pundits have described these new investors as uniformed, shortsighted risk takers, suggesting that things will end badly for them compared to more experienced investors.

We could not disagree more.

Schwab recently surveyed this group of new investors – a group we're calling Generation Investor, or Gen I – and found that the majority of new investors are far more serious and sophisticated than they get credit for. If the financial services industry is going to serve these new investors and give them the support they need, we first need to cut through the noise and misconceptions.

Here are three myths that need busting:

3 Myths Around New Investors

Myth 1: They only want to invest using an app.

Having an easy-to-use platform and mobile app are table stakes among all investors, and particularly new and younger investors. At the same time, access to human financial professionals is critical to Gen I when it comes to other aspects of money management. Over half of those surveyed feel that professionals outshine technology when to comes to giving financial advice (64%) and understanding their entire financial situation (63%).

That's why we need to leverage and combine both the best of people and technology to offer engaging, efficient digital experiences and personalized service from a person – not one or the other. In fact, investor satisfaction doubles when both digital and human interactions are combined, according to the 2020 J.D. Power Full-Service Investor Satisfaction Survey.

If we don't meet this new wave of investors with great experiences wherever they are, while we have their attention, we risk missing out on an incredible opportunity to keep them engaged over the long term.

Myth 2: They're too focused on the short term and don't think about risk.

It is true Gen I is more interested in riskier investments such as cryptocurrencies than other investors, but that is not new. Given their average age and time horizon, taking on more risk often makes sense.

Moreover, over half of first-time investors in Schwab's survey say they understand how much risk they can handle from both a financial and emotional perspective. To counterbalance some of their more volatile investments, they say the hold more stable asset classes like bonds and other fixed-income investments, as well as some cash as part of their overall portfolios. And nearly three-quarters say they either rebalance annually or have an account that automatically rebalances.

One of the most compelling findings from our survey showed that 72% of first-time investors expect to buy and hold for the long term, and in fact see investing as a way to build wealth over time.

Myth 3: They get all their investing ideas from social media platforms and online forums.

It's true that some in Gen I have been drawn into the market by volatile meme stocks that caught fire on platforms such as Reddit and TikTok. But in a recent survey of Schwab clients, while almost half of those under age 40 traded meme stocks in recent months, the interest to continue is low: Only 8% are extremely interested in trading meme stocks in the next year.

The increase in attention to social media and online forums for investing guidance is more indicative of Gen I's ferocious appetite for education and insights than anything else. In fact, Schwab's survey showed that 94% of new investors want information and tools to do their own investing research, and 90% want educational content to improve their investing skills.

So rather than being fixated on making investing playful and entertaining, our industry should be focused on simplifying the investing experience and arming new investors with straightforward educational tools, resources and insights to help them develop the knowledge and skills to be financially confident, lifelong savers and investors.

The Industry's Job Is Never Done

As we think about this new generation of investors, I can't help but to reflect back on some of my early investing experiences during the internet boom of the late 1990s, and how far the industry has come in breaking down barriers since those days. You can now invest with no account minimums, pay zero commissions, buy fractional shares, invest in robo-portfolios and so much more.

It has been great to see Generation I take advantage of all those innovations, but accessibility and democratization aren't enough. As an industry, we must continue to innovate and give new investors the resources, insights, tools and live human support they are asking for to help them succeed over the long term.

Jonathan Craig is Managing Director, Head of Investor Services at Charles Schwab. Any opinions expressed in this article are those of the author and do not necessarily represent the opinions of Kiplinger. The information provided herein is for informational and educational purposes only and is not meant to be a solicitation for a specific security or service.

Any opinions expressed in this article are those of the author and do not necessarily represent the opinions of Kiplinger. The information provided herein is for informational and educational purposes only and is not meant to be a solicitation for a specific security or service.

We have all seen the ads from banks, discount brokers, mutual funds companies and insurers touting the benefits of rolling over your defined contribution plan balance to an IRA. Now a new contender for your plan assets is in the ring. Citing features such as low fees, access to institutional funds and the value of fiduciary oversight, employers are now encouraging participants to leave their money in their DC plan — even after leaving the company.

The choice: Stick with your employer-based retirement savings plan or shift to an IRA? Here are some tips for deciding which is the better option for you:

Evaluating plan features

Fees

A frequently made point to keeping your balances in an employer plan is that due to the large pools of assets, they can offer funds with lower investment fees than the versions available to retail investors. What is frequently left out of the discussion is that employer plans typically assess a separate record-keeping charge, either as a percentage of plan assets or as a flat fee. You need to compare the total costs — including both administrative and investment fees — to determine the less expensive choice.

Example: An employee has invested $100,000 through their employer plan in a fund tracking the performance of the S&P 500 index, Vanguard Institutional Index Plus Shares (ticker: VIIIX). The fund has a 0.02% gross expense ratio. In addition, the plan has an annual $40 record-keeping fee. The participant terminates employment and can do an IRA rollover to the Schwab® S&P 500 Index Fund (ticker: SWPPX). The IRA rollover account doesn’t carry any annual fees.

Here is a cost comparison:

Even though the employer plan shares have the same expense ratio as the retail alternative, the rollover IRA will always have lower annual expenses due to the lack of an annual account fee.

In doing this analysis, you also need to factor in other potential fees — such as annual account charges and commissions for a brokerage account, withdrawal charges, processing a domestic relations order — that may be assessed by your employer plan compared to a rollover IRA account.

Institutional funds

Compared to a pool of retail assets, employer-sponsored retirement plans have unique attributes, such as more investable assets and longer time horizons, which allow investment companies to offer customized products (i.e., institutional funds) not available to regular investors. But simply being offered institutional funds doesn’t mean it’s worth keeping your money in an employer plan without evaluating their specific benefits. Here is how you can evaluate some of the frequently cited advantages:

1. Lower fees: As referenced above, many institutional funds are simply lower-cost versions of retail funds as employer plans can get better pricing due to their large pool of assets. But you must examine a plan’s total administrative and investment fees to see if this really provides an advantage.
2. Unique portfolios: Particularly in the largest plans, the fiduciaries will work with an investment manager to customize a fund for use by participants. One example is customized target date funds. An investment manager will create a bespoke portfolio for the plan with greater manager diversification, lower expenses and the goal of enhanced returns using a plan’s core fund lineup compared to the mutual funds offered by larger providers, such as Vanguard, Fidelity and Blackrock. Of course, you must evaluate the long-term performance history (as well as the cost) of any fund against alternatives available from your IRA provider. And you must balance any institutional fund offering against the fact that an IRA can be invested in a wide range of financial assets while an employer plan will have a closed menu of core investment options. Even plans with a brokerage window will typically only allow additional mutual fund purchases; not the broader range of financial products available through an IRA.
3. Stable principal funds: One type of institutional fund that is truly unique to defined contribution plans is the stable principal asset class. Also known as stable value funds or fixed accounts, these funds offer intermediate bond returns with a guarantee of the principal invested (assuming the creditworthiness of the guarantor). And while certificates of deposit offer similar returns, they carry early withdrawal penalties, while stable principal funds typically have no withdrawal restrictions.

Fiduciary oversight

The core obligation of a fiduciary to an employer-sponsored retirement plan is to carry out his or her duties solely in the interest of plan participants, including ensuring plan expenses are reasonable and selecting a diversified menu of investment options to minimize risk of significant losses.

There has been a lot of talk recently about “fiduciary” services. What exactly does this mean to you? And how do you compare this to services outside the Plan? Some ideas below:

• Reasonable expenses are judged based on marketplace standards for your Plan compared to 401(k) plans with similar assets and participants, not to IRAs. So, you may be paying “reasonable” 401(k) fees that are still far higher than the costs of a comparable IRA vehicle.
• As for investments, the plan sponsor in their role as 401(k) fiduciary is responsible for selecting and monitoring the core fund menu, not making individual investment recommendations for your account. There are similar services also available outside the Plan: for example, you can obtain fund recommendations for your IRA using the evaluation tools available on most investing platforms (e.g., Schwab Mutual Fund OneSource Select List®) or from third-party services, such as Morningstar.
• If you want a third-party fiduciary to make investment decisions on your behalf, many plans offer a technology enabled service (commonly referred to as a managed account) where for an additional fee you can delegate investment management of your account. These services initially enjoyed a fee advantage compared to fiduciary advisers outside the Plan. But with the rise of so-called “robo-advisers,” such as Betterment and Wealthfront, there are now cost competitive fiduciary advisory tools for your IRA as well.

There is undoubtedly some value to a plan’s fiduciary oversight, particularly if you are uncomfortable investigating alternatives. But with a little research, it is possible to identify comparable services outside the Plan as well.

Other features

The rollover IRA vs. qualified plan discussion frequently omits differences in these tax-deferred accounts, which may be relevant to some participants. These include:

Hacking your rollover decision

We are all looking for life hacks: a trick, shortcut, skill or novelty method that increases productivity and efficiency. Here are a few ideas from industry insiders on how to hack your rollover decision:

Age 59.5 withdrawals

Most people don’t know you can start rolling over your account at age 59.5, even if you are still employed by the plan’s sponsor. So, if you find a lower-cost IRA alternative to your current plan, you can roll over your balances while continuing to contribute and receive matching contributions.

Partial withdrawals

If your plan permits it, it may make sense to only roll over a portion of your account while exploiting certain 401(k) benefits with the remaining balance. For instance, if you want to allocate some of your portfolio to a stable value fund unavailable outside the Plan, withdraw the other assets and keep the remaining balances in that fund. Alternatively, if you are continuing repayments on a plan loan even after terminating employment, your loan may be defaulted if you request a lump sum distribution. But you can roll over a portion of your account while continuing repayments.

State Income Tax Exclusion

Many states exclude some, and in a few cases all, of any retirement account distribution from state income tax. But not all states treat distributions from 401(k) plans and IRAs equally. For example, both Maryland and Rhode Island only apply their state income tax exclusion to 401(k) distributions but not rollover IRA withdrawals.

These laws are complex and subject to frequent change, so you should check your state’s laws and factor in any additional state tax as part of the rollover decision-making process.

Conclusion

Behavioral science has taught us the power of defaults, such as automatic enrollment, when people are faced with difficult discussions. If your plan’s default is to retain your account balance, that may seem attractive — particularly when sponsors are emphasizing their plan’s benefits. But given the consequences, don’t just stand there. Instead, use the points above to make an informed decision to stay or go.

*Both Qualified Plan and IRA assets are protected from creditors during bankruptcy proceedings. Alternatively, assets can be seized under a qualified domestic relations or medical child support order or by the federal government for back taxes or criminal/civil penalties.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Carrie Schwab-Pomerantz, the daughter of Charles Schwab, is board chair and president of the Charles Schwab Foundation; senior vice president of Charles Schwab & Co.; and board chair of Schwab Charitable, a donor-advised fund. She is also author of The Charles Schwab Guide to Finances After Fifty. She and I recently spoke about retirement-planning advice for women.

Do women face special circumstances when it comes to retirement planning? As you know, women tend to live longer than men, and they move in and out of the workforce to care for children and parents. So they tend to have less money saved for a longer retirement.

How can they overcome their disadvantages? The key is to have an investment strategy. It’s important for we women in particular to educate ourselves about investing and be engaged starting at a young age.

Do you think that’s happening? In 2018, Schwab surveyed young people between the ages of 16 and 25. We found that young women were doing all the right things. They were more driven than young men to achieve financial independence, and they see more value than men in creating a plan to achieve their goals. But on average, they had saved 40% less than young men. Also, twice as many young men versus young women had investment accounts, and twice as many men as women say they would invest spare cash.

What’s the solution? As parents, we have to step up and make sure our children—especially girls—are exposed to the financial world and investing. Our studies show that when it comes to money, parents talk differently to their sons and daughters. To their daughters, they emphasize saving and budgeting. With their sons, they are more likely to talk about investing and estate planning.

You are the mother of three young adults, two sons and a daughter. How did you educate them about investing? When they were about 13 years old, I had them come to Schwab and open a custodial investment account with money from their savings. When they were 16 and had earnings from a job, they opened Roth IRAs. It took me longer to get my daughter interested than my sons. She asked me if I would open the account for her, but I said no. It’s important to expose young people to the experience and demystify it.

Were you successful? Now they are all savers and investors, and they feel very comfortable with it. My daughter is 24, and her friends are asking me for help. They’re saving 10% and think they’re saving for retirement, but they forget the investing part. That’s where wealth is created, not just by putting money into a savings account.

Any other advice for women? Use all the retirement-savings vehicles that are available to you. That means 401(k)-type plans if you have one at work, IRAs, or spousal IRAs if you’re not in the workforce but your spouse is. If you decide to drop out of the workforce or cut back, you don’t want it to hurt you in the long run.

How has COVID impacted women’s retirement prospects? Women have been affected more than men because they often have service jobs or dropped out to take on child care responsibilities. For many people, this has been a wake-up call to make a plan (see Financial Planning and Investing: Women Closing the Confidence Gap). It doesn’t have to be super comprehensive, just taking steps to understand what you own, what you owe, your budget and cash flow. If you’re married or in a relationship, you should be involved in all financial decisions. That’s a matter of self-respect. And don’t be afraid to get help from an expert. There’s no such thing as a dumb question.

Stock trades are free these days at most online brokers. But where and how your trade is filled can impact your purchase price. And “it all happens in a flash,” says Jeff Chiappetta, vice president of trade and education at Schwab. It takes just 0.08 seconds, on average, at Schwab, from the time you submit your trade to validation of execution. Here’s a step-by-step look at what happens when you place a market-order stock trade.

Step 1: You click “buy”

After you submit a trade but before it is routed to the next step, your brokerage firm will review your trade for certain factors. The size of the company and the size of your trade can influence where and how the order is filled and the price you pay. Fractional orders or oversized orders (say, more than 10,000 shares), for instance, may be filled in multiple transactions. Some firms may scrutinize a trade for whether it could impact the stock’s trading price. An exceptionally large order “could drive the price of a stock up or down,” says Chiappetta, “and we don’t want that.” Some firms also check to see that you have the cash or margin in your account to cover the trade; others may give you leeway to fund the account over the next two business days.

Step 2: Routing

Your broker has a duty to deliver the best possible execution price to you for your trade, which means it must meet or beat the best price available in the market. To do so, it can choose to send your order to one of four venues:

■ Market makers, including firms such as Citadel and Virtu Financial, “act like car dealers” for buyers and sellers, says James Angel, a professor at Georgetown’s McDonough School of Business. These firms will pay a fraction of a penny for every share that your broker sends their way in a practice called payment for order flow. Although some brokers don’t accept payment for order flow, it’s not necessarily a bad thing: In exchange for the order flow, the market maker also promises to beat the best quoted price you see flashing on your quote page. Say the current market price for XYZ stock is $50. The market maker may fill your order at $49.98 a share. That’s price improvement.

Brokerages must disclose how much they receive in payment for order flow every year. Firms like to tout their price improvement. Fidelity “passed back $650 million in price improvement” in 2019, says Gregg Murphy, senior vice president of Fidelity’s retail brokerage division. This year, the figure may double. Schwab’s Chiappetta says the firm passes back $8 of price improvement for every $1 it receives for payment for order flow. “Net-net, our clients are saving money,” he says.

■ An exchange, such as Nasdaq or the New York Stock Exchange, can fill the order, too. But the exchanges charge your broker roughly 30 cents for every 100 shares traded, says Angel. “Doesn’t sound like a lot, but every penny adds up,” he adds.

■ Some brokers (but not all) may fill the trade from their own inventory. The broker makes money on the “spread”—the difference between the purchase price and the sale price.

■ Alternative trading systems are a last option. Most trades don’t end up here, says Chiappetta, but these systems match buyers with sellers. In some cases, there’s little transparency. “That’s why they’re called dark pools,” says Chiappetta.

Step 3: Confirmation

You’ll get a notification that the order was filled, at what price and what time. If the order was small (fractional, for example) or oversized (for more than 10,000 shares, say), you might see multiple executions, says Murphy.

Every year, following the publication of our brokerage rankings, we receive an in-boxful of e-mails asking the same question: Where’s Robinhood? This year, as in previous iterations of the Kiplinger ranking, we left Robinhood off the list because the mobile-first brokerage doesn’t offer trading of bonds or mutual funds—key investment vehicles for many of our readers.

That doesn’t mean that we haven’t understood the appeal. Robinhood offered free trades on stocks and exchange-traded funds when other brokerages were charging $10 a pop. And you can’t argue with the magnetism of their offering. Even as every other brokerage has shifted to commission-free trading, Robinhood’s attractive app and easy-to-use platform has continued to attract fans. Robinhood said it had 13 million accounts in May, putting it behind only Fidelity and Schwab among firms that participated in our survey.

But Robinhood’s stylish and intuitive platform can make trading feel like a game for customers, and that has led to controversy for the firm. The New York Times recently reported that in the first three months of 2020, Robinhood users traded nine times as many shares as E*Trade customers and 40 times as many as Schwab customers, with an even greater disparity of high-risk options trades. That kind of volume has created problems for the brokerage and its customers. Amid March’s most volatile trading days, Robinhood suffered a number of high-profile outages—up to 17 hours, in one case—drawing the ire of customers.

More troubling was the news in June of the death of a 20-year-old user of the site, who reportedly committed suicide after accruing what he thought was a negative $730,000 account balance trading options on the platform. He acknowledged his inexperience in this kind of trading in a note. Following the tragedy, a group of six members of Congress wrote a letter to Robinhood’s cofounders, questioning the firm’s functionalities and approval processes for options trading, among other things. As of this writing, the legislators say they haven’t received an answer from Robinhood. Robinhood execs say they are rolling out changes to their options-trading process and will work with legislators to address their questions and concerns.

If you're an investor looking for a deal, it's hard to go wrong with an online brokerage these days. Virtually all of firms in our brokerage rankings offer free trades on stocks and exchange-traded funds (ETFs), along with ample research and tools to help investors make educated financial decisions.

With so many reasonably priced offerings, however, investors might gravitate toward firms that offer a few additional features and freebies to sweeten the pot.

Here, we look at some of the most-overlooked broker promotions and perks.

For investors who can't afford sky-high share prices, Charles Schwab, Fidelity and Interactive Brokers have joined smaller, app-based brokers such as Robinhood and Stash in offering partial shares of stock to investors.

Schwab's feature allows investors to buy "slices" of stocks in the S&P 500 for as little $5 apiece.

Fidelity and Interactive Brokers let customers trade partial shares of virtually any stock for as little as $1.

Dividend-paying firms typically disburse cash every three months. If you invest for income, you might have a diverse portfolio of stocks – but if many of them pay out on the same schedule, you might find yourself going through long spells with little cash flowing in.

Four brokers – E*Trade, Interactive Brokers, Merrill Edge and TD Ameritrade – have income estimator tools that can help you keep on top of future payments. Each tool uses recent payout data to project the value and timing of your portfolio's dividend payments over the next 12 months.

TD's tool shows dividends from stocks, mutual funds and ETFs only. E*Trade, Interactive Brokers and Merrill Edge factor in income from bonds as well.

Fidelity brokerage customers have access to four mutual funds with no minimum investment and 0% expense ratios:

• Fidelity Zero Total Market Index (FZROX), which tracks the U.S. stock market
• Fidelity Zero Large Cap Index (FNILX), which tracks large-company U.S. stocks
• Fidelity Zero Extended Market Index (FZIPX), which tracks small- and midsize company stocks
• Fidelity Zero International Index (FZILX), which tracks foreign stocks

To avoid paying licensing fees to index makers such as Standard & Poor's, Fidelity's funds track indexes assembled in-house. That means the funds might outrun or lag ETFs that track traditional indexes. Still, it's easy to see the benefits of free funds with no investment minimum, especially when the savings are compounded over a lifetime of investing.

Including the four funds above, Fidelity offers 28 funds that have no investment minimum.

Nearly every brokerage tries to entice investors to open new accounts or add substantial sums to existing accounts by offering free trades or cash bonuses. Broker promotions come and go among the firms; here are some recent offers:

• Firstrade will reimburse up to $200 in transfer fees when you transfer money from another firm's account. You'll also get a free share of stock (chosen by an algorithm) if you refer a friend who opens an account – your friend gets a share as well.
• Interactive Brokers will give you a bonus of up to $200 if you refer a friend that opens an account and maintains a balance of at least $10,000 for one year.
• Schwab is running a referral promotion, too. However, the reward – between $100 and $500 – goes to the friend you refer, not to you.
• Merrill Edge will give you a bonus of up to $600 when you open a new self-directed investing account.
• TD Ameritrade will give you between $350 and $2,500 when you open a new account with a balance of at least $250,000.
• Depending on how much you deposit, new account holders at E*Trade can earn from $25 up to $2,500.
• Customers who sign up at Ally can earn from $50 to $3,500.
• New accountholders at TradeStation can get a cash bonus between $50 and $5,000.

Opening a credit account linked to your brokerage can help you earn cash back to beef up your investments. Here's a look at some current broker promotions tied to credit card rewards:

The Fidelity Rewards Visa Signature card comes with no annual fee, and all purchases earn 2% cash back, which can be divided and deposited into up to five Fidelity accounts whether they're your accounts or not.

All purchases on the TD Ameritrade Client Rewards Visa come with 1.5% cash back. Deposit your rewards into your TD Ameritrade brokerage account and you'll receive a 10% bonus on the cash-back.

The Schwab Investor Card from American Express offers a $100 credit if you spend $1,000 in the first three months. After that, you'll get 1.5% cash back automatically deposited into your Schwab account.

Merrill Edge customers who sign up for Bank of America's Preferred Rewards program receive a 25%, 50% or 75% boost on the cash-back reward from eligible Bank of America credit cards, depending on the combined assets in your accounts (the 25% level requires $20,000). Say you hold a Bank of America credit card, which offers 3% on a particular purchase. A $100 purchase would earn $3.75, $4.50 or $5.25, rather than $3. Similarly, a purchase that earns the buyer 100 points would actually earn 125, 150 or 175 points.

Whether you set up a cash-management account or just take out a debit card linked to the cash balances in your brokerage account, several brokers will reimburse your fees when you withdraw cash at any ATM.

Fidelity and TD Ameritrade will reimburse ATM fees nationwide. Schwab does that too, plus waives the 3% foreign transaction fee most debit issuers charge to make purchases abroad.

E*Trade and Ally offer more traditional banking services, such as checking and savings accounts. Ally accountholders can use more than 43,000 Allpoint ATMs for free, and the bank will reimburse up to $10 in ATM fees each statement cycle. E*Trade's Max Rate Checking Account comes with unlimited ATM reimbursements on charges that other financial institutions levy (though you may be subject to charges from the owner/operator of the ATM).

Merrill Edge investors who have $50,000 in assets (combined at Merrill Edge, Merrill Lynch and Bank of America) and who have joined the Preferred Rewards program can get 12 ATM-fee reimbursements per year at non-Bank of America ATMs in the U.S. (Bank of America ATMs are free).

Investors increasingly want to do brokerage business on the go. In response, all of the brokers in our survey offer mobile apps that you can use to do just about anything you could do on your desktop, such as trading stocks, accessing research, paying bills and transferring funds.

But tech-savvy investors will be pleased to know that some brokers' platforms extend beyond websites and mobile apps.

Investors can interact with their Fidelity, Interactive Brokers, Schwab and TD Ameritrade accounts by chatting with Alexa, Amazon's digital assistant. Schwab users, for instance, can ask Alexa for market information, stock quotes and updates on personalized watch lists.

TD Ameritrade customers can ask questions or even execute a trade through direct messages on Twitter, on Facebook Messenger or through the iPhone Messages app as well. If TD's computer-generated responses don't satisfy you, you'll be automatically connected with a live representative. TD Ameritrade customers can access broker information in their car through Apple Car Play, Android Auto and Echo Auto.

Interactive Brokers and TradeStation customers might be able to earn a little extra cash by authorizing that firm to lend stocks you hold to traders interested in paying you interest to borrow your shares and sell them short.

Each brokerage will pay cash they earn from lending your shares directly into your account. You'll earn more money on long positions in thinly traded stocks than you will holding widely available names. Each firm will give you half of whatever income they earn on your stocks.

You'll need $25,000 or one year of trading experience to get into the program at TradeStation. At Interactive Brokers, you'll need approval for a margin account or $50,000 to enroll.

After a years-long race among online brokers to slash investor costs to the minimum, in the end it only took a few days for a handful of major firms to cross the proverbial finish line. In October, Charles Schwab announced it would eliminate its $4.95 commission on all online stock, exchange-traded fund and options trades. Within a week, several big-name online brokers rolled out similar commission-free deals, including Ally Invest, E*Trade, Fidelity, TD Ameritrade and Trade­Station. Some trading fees still apply: Options traders at these firms must still pay contract fees, for instance. But those have been lowered in some cases, too.

Schwab isn't the first firm to offer free trading. Interactive Brokers launched IBKR Lite, a new online platform with free stock and ETF trades, just days before Schwab cut its commissions. And even before that, Firstrade, Robinhood and TradeZero America all offered free stock and ETF trading to customers.

A win for investors—mostly. Overall, the commission-free trend is a win for individual investors, especially those with small accounts for whom trading fees make up a larger percentage of their overall costs. But investors should resist the urge to get trigger-happy. Even with commissions at zero, "the behavioral costs"of investing aren't going to go away, says Charles Rotblut, vice president of the American Association of Individual Investors, a nonprofit investor education group. Investors who use free trades as an excuse to make frequent, emotional trades will likely erode their long-term returns, he says.

Be wary, too, of other ways that brokerage firms may try to get money from you. Brokerages hope the move to zero commissions will allow them to attract and retain more customers and charge them for other services, such as banking, asset management, advisory services and estate planning, says Rotblut. In many cases, the service may be a good fit. Just be watchful of the fees, what you're getting in exchange for them and how they compare with what other firms charge.

Brokers will continue to charge you in ways you can't see, too. One such way is through your cash. Every brokerage firm moves your uninvested cash into low-yielding accounts called sweep accounts, the default for investor cash balances. The brokerage firms plunk those balances in short-term investments and pay clients far less interest than the firms earn on the money. Ask your broker about the yield on your default sweep account; you may be able to choose a higher-yielding account. Fidelity’s zero-commission rollout included an announcement that the firm will automatically direct investor cash into its highest-yielding sweep accounts.

There’s also a potential cost to you with market makers—the businesses (dealers or securities exchanges) that actually execute your trades. Many brokerages accept payments for routing trade orders through certain market makers. Generally, when a broker accepts payment for order flow from a third party, it’s thought to cost you on your execution price, whether you’re buying or selling shares. A number of brokerages, such as Robinhood and TD Ameritrade, do this, and the practice could increase as brokers look for ways to fill the gap left by departing commission revenues. Notably, Fidelity says it does not accept payment for order flow.

The zero-commission news wasn’t a win for the brokers’ shareholders, at least initially. Schwab shares fell 10% on the day the firm announced its zero-commission policy, E*Trade stock sank 16%, and TD Ameritrade tumbled 26%. Credit Suisse analysts say firms such as Schwab that offer more-robust services are best equipped to withstand the commission cut. But firms that logged a chunk of total revenue in commissions, such as E*Trade and TD Ameritrade, could see significant hits to earnings.

Commissions on stocks and exchange-traded funds (ETFs) now come to a big fat zero if you use one of the four biggest online brokerages.

On Oct. 1, Charles Schwab (SCHW) announced commission-free trading on stocks, ETFs and options trades. Online-broker rivals E*Trade (ETFC) and TD Ameritrade (AMTD) followed suit within 24 hours, and Fidelity fell in line within a week.

Online trades were already incredibly cheap: Schwab and Fidelity charged $4.95 for each trade. It was only a little more expensive ($6.95) at E*Trade and TD Ameritrade. Still, money is money. So isn’t a zero-dollar trade a clear win for individual investors?

I don’t think so.

In fact, I think many investors are going to end up paying through the nose for these “free trades” in a way they didn’t expect.

The Cost of No-Commission Trading

Over the years, I’ve heard from several clients who have had trouble disciplining themselves from trading too frequently. That was in a low-cost world.

Now that trades are no-cost, it’s going to get a lot worse.

It’s difficult enough to match, much less beat, stock indexes without the drag of frequent trading. Frequent traders, from my experience, rarely do well in the stock market.

Terrance Odean – the Rudd Family Foundation Professor and Chair of the Finance Group at the Haas School of Business, University of California, Berkeley – performed several studies earlier this decade using trading data from a discount brokerage.

In one study, he found that trading costs did indeed weigh on the performance of investors who traded more frequently – a problem that no-commission accounts will render obsolete.

But no-commission trades won’t do anything about the results garnered from another study. Odean found that, “on average, the stocks that these investors bought went on to underperform the stocks they sold.”

Speculative trading (trades that didn’t seem driven by, say, tax purposes or rebalancing concerns) was even worse. Across all trades, stocks that investors bought underperformed those they sold by three percentage points – but that disparity widened to five percentage points when considering only speculative trades.

The zero-commission trade is bound to amplify the low-cost proposition of exchange-traded funds, accelerating the huge migration of investor dollars away from actively managed mutual funds. At TD Ameritrade, for instance, it still costs $49.99 to buy or sell some no-load mutual funds. And that doesn’t include the funds’ annual expense ratios. Who’s going to want to buy them when many ETFs’ management expenses are cheaper and are free to enter?

Now, if investors simply stuck to buying broad-based index ETFs and holding them, that actually would be a good thing.

But what’s far more likely is that a big swath of these investors will trade more – and try to pick ETFs and stocks that will beat the market over short time periods. After all, the trade is free – why not make it?

“Free trading doesn’t help investors. It only encourages bad behavior,” says Daniel Wiener, editor of The Independent Adviser for Vanguard Investors newsletter. “As someone who’s been managing client assets for more than 25 years, we talk about ‘time in the market, not market timing’ because long-term investing works.”

I couldn’t agree more.

Pressure Mounts on Brokerages

Then there’s the question of how these brokerages are going to make a buck. That’s not my problem or yours – yet. But it will be if it leads brokerages to increase their profits through hidden charges on investments, which it could well do.

In recent years, bid/ask spreads – the difference in price between what you can buy and a sell a stock for – have narrowed substantially to a penny or two on most trades. What some investors don’t realize is that those spreads represent the compensation that market makers take for facilitating the trades. Those spreads could widen as brokerages seek to fly in new revenue-generating methods under the radar.

Brokerages also make meaningful profits on idle cash in investor accounts. They pay too little on money market funds and they make it cumbersome to move your cash into and out of them. Fidelity, however, plans to automatically sweep idle investor cash into a government money market fund, thus forgoing much of the profit on money markets.

Margin accounts – where traders borrow against their existing holdings to invest more – are another big source of brokerage profits. And brokerages might need to lean on them more, potentially raising rates, to fill this new gap.

Brokerages also squeeze money out of mutual funds. They charge the funds an ongoing fee for offering funds on their platform, including much higher fees for offering them commission-free. Pay close attention to these fees; over time, they can cost you big money. Often, you are better off paying the small upfront commission when buying a fund.

The stocks of all three publicly traded brokerages that cut their commissions to zero cratered after the announcements. TD Ameritrade suffered the most because it’s seen as more dependent on trading income than the others. While their stocks have recovered somewhat since then, there’s no question that their businesses will take a hit. They’ll try to recover what revenues they can.

The trick for individual investors: Instead of trading more, use this sea change in the industry as an opportunity to trade even less.

If you continue to find yourself trading too much, it’s probably time to hire an investment advisor. Having the knowledge to be a good investor doesn’t make you one. The emotional side of investing is every bit as important.

Steve Goldberg is an investment adviser in the Washington, D.C., area.

Charles Schwab (SCHW) sent shock waves through the online broker space on Tuesday, announcing that, effective Oct. 7, it would eliminate commissions for stocks, exchange-traded funds (ETFs) and options listed on U.S. and Canadian exchanges.

In fact, that statement may have opened the flood gates. Rivals TD Ameritrade (AMTD) and E*Trade (ETFC) made similar commitments shortly thereafter, and Fidelity jumped in a week later.

Schwab, which currently charges a $4.95 commission on U.S. stock, ETF and options trades made online, says in its release that the move to zero “across all mobile and web trading channels” is here to stay.

“This is our price. Not a promotion. No catches. Period,” founder and Chairman Charles Schwab said in a news release. “Price should never be a barrier to investing for anyone, whether an experienced investor or someone just starting on the investing path.”

Options traders, who currently pay an additional 65 cents per contract on top of the $4.95, will continue to pay that fee.

“This move will put pressure on other brokerage firms to respond – especially when it comes to commission-free ETF trading,” Christian Magoon, CEO of Amplify ETFs, told Kiplinger in response to Schwab’s move. “It will ultimately reduce costs for most investors.”

Indeed, later Tuesday evening, TD Ameritrade announced that it too would go commission-free, yanking its $6.95-per-trade charge on U.S. stocks, ETFs and options trades effective Oct. 3, presumably to get out in front of the Schwab rush. Then on Wednesday, E*Trade, which also charges $6.95 per trade, announced its own switch to a $0 base-rate commission, effective effective Oct. 7. Additionally, E*Trade lowered its options fees from 65 cents per contract to 50 cents; TD Ameritrade’s options fees remained at 65 cents.

Fidelity toppled last, announcing Oct. 10 that it would knock all commissions to zero, effective immediately. It added a couple of perks, too: Fidelity will “automatically direct retail investors’ cash into higher yielding alternatives available for new brokerage and retirement accounts, and provide industry-leading best execution practices with zero payment for order flow for stock and ETF trades.”

All four previously offered a select number of exchange-traded funds commission-free, but widening the exception to all ETFs is a clear win for consumers.

“From an ETF standpoint, many brokerage firms have been promoting commission-free ETF trading, but only on a small subset of ETFs,” Magoon says. “This system was bad for investors as it limited their ability to access the majority of ETFs commission-free.”

Schwab, which has no minimum account size to open a brokerage account, says the new pricing scheme will apply to any current web or mobile client, without requiring a new deposit or creating a new account.

While investors who stand to benefit from Schwab’s and TD Ameritrade’s changes may have been celebrating on Tuesday, investors in SCHW and other online brokerage companies headed toward the exits. Schwab’s stock finished 9.7% lower, while AMTD plunged 26% and ETFC declined more than 16%.

TD Ameritrade CFO Steve Boyle put a number to the pain in the company’s evening press release. “We expect this decision to have a revenue impact of approximately $220-240 million per quarter, or approximately 15-16 percent of net revenues, based on June Quarter fiscal 2019 revenue,” he wrote.

Schwab has less to lose on that front, says Brent Weiss, Chief Evangelist at Facet Wealth.

“Trading commissions account for less than 5% of Schwab’s revenue,” he says. “The war to zero was already occurring, and this is a smart move to put Schwab at the forefront of this story. Schwab makes the majority of its revenue from their net interest income, their cash holdings, and their managed investment vehicles, mutual funds and ETFs.

“This is a play for more market share so they can drive more revenue from other channels, which will easily make up for the revenue loss of eliminating trading commissions.”

Schwab isn’t the first to the zero-fee game, however.

Indeed, its announcement actually comes several days after Interactive Brokers Group (IBKR) unveiled its upcoming no-fee offering. In October, the company will launch IBKR Lite, which will provide commission-free trading on U.S. exchange-listed stocks and ETFs. However, unlike Schwab and TD Ameritrade, Interactive Brokers won’t offer the benefit through its legacy product.

And Robinhood, a Silicon Valley upstart that launched in 2012, has offered no-commission trading for years. In fact, its growing popularity, especially among millennials, has led market watchers to wonder when the larger brokerage companies would finally follow suit.

“The changes taking place across the brokerage industry reflect a focus on the customer that’s been inherent to Robinhood since the beginning,” Robinhood spokesperson Jack Randall says.

Fly Me to the Moon is a love song, the Frank Sinatra version of which was actually played on the moon by Apollo 11 astronauts. But these days, it might as well be the anthem for investors in exchange-traded funds. Assets in ETFs are growing at an astronomical rate, closing in on $4 trillion in the U.S. That’s still less than the $18 trillion that sits in U.S. mutual funds. But it’s clear that investors are now choosing ETFs over mutual funds. The ETF share of total assets at investment firms has grown to nearly 16% from 8% at the start of the decade, while mutual funds have lost market share.

That’s in part because ETFs are agile. These funds, which are baskets of assets that trade like stocks, are typically index-based and, therefore, low-cost. They offer an efficient way to invest in a broad swath of the market or to zero in on a targeted area. As ETFs evolve, investors are getting smarter about how they use ETFs in their portfolios. “After a decade of market gains, ETFs now play a unique role for investors as the foundation of a portfolio and also as vehicles that enable investors to be nimble,” says Kari Droller, who oversees third-party mutual funds and ETFs at Charles Schwab.

According to a recent Schwab survey, investors are using ETFs to fortify the core of their portfolios. But they’re also using these funds to build satellite holdings that revolve around the core. These bets are more strategic: Short-term bond ETFs offer ballast in an uncertain interest rate environment; dividend-stock funds provide income and stability; a health care stock ETF can goose growth.

We follow the same approach with the Kiplinger ETF 20, the list of our favorite ETFs. The roster is diverse. Some are core holdings, and others might satisfy specific needs, such as ballast, income or growth. Some are traditional index funds, which means they track benchmarks that weight holdings by market value (the bigger a stock’s market capitalization, the bigger its position in the index and the ETF portfolio). Others are so-called smart-beta ETFs, which typically track a designer index that is built to do better than a particular pocket of the market. And some of our ETF picks are actively managed. Not all of the Kip ETF 20 are going to be right for you, but the list can come in handy as you build, or round out, your portfolio.

The stock market has had a topsy-turvy ride over the past 12 months, but we’re pleased with the performance of our Kip ETF 20 stock funds. Two of our smart-beta ETFs beat Standard & Poor’s 500-stock index: Vanguard Dividend Appreciation and Schwab US Dividend Equity.

The traditional index ETFs did their job, too. They performed in line with their benchmark, minus expenses. Over the past 12 months, for instance, iShares Core S&P 500, with an expense ratio of 0.04%, returned 9.91%, slightly ahead of the S&P 500’s 9.89% gain.

Our fixed-income ETFs for the most part came through, too. Two of the intermediate-term core bond funds are actively managed, but only one—Pimco Active Bond (symbol BOND)—beat the Bloomberg Barclays U.S. Aggregate Bond index. SPDR DoubleLine Total Return Tactical (TOTL) trailed the Agg by 0.6 percentage point.

We’re making some changes to the roster this year. Some of the newcomers are meant to cushion your port­folio in a market downturn. One new entrant is simply a better strategy for investing in small-company stocks; another is a way to buy into some of the most innovative trends of our time. Read on for details on which ETFs are moving in, and which ones are moving out to make room. Also, we share our tips for trading ETFs below. Returns and data are through July 12.

Switching gears

What’s in: iShares Edge MSCI Min Vol USA ETF (USMV), an ETF that holds up well in rocky markets (Min Vol stands for minimum volatility). The ETF tilts toward stocks of steadier large and midsize U.S. companies. “By reducing overall volatility, the fund delivers market-like returns with lower risk,” says Holly Framsted, head of smart-beta ETFs for BlackRock’s iShares. Over the past five years, iShares Edge MSCI Min Vol was 22% less jumpy than the S&P 500, and it beat the benchmark by an average of 2.2 percentage points per year with a 13.4% annualized return.

Low-volatility funds tend to lag the market in good times but lose less in tough times. In 2017, when the S&P 500 gained 21.8%, iShares Edge MSCI Min Vol trailed, but only by a bit, with an 18.9% return. But in late 2018, when the broad market index sank 19.4%, iShares Edge MSCI Min Vol lost only 12.6%. The ETF rebalances twice a year to stay in line with its index. Recently, the fund’s top holdings included Newmont Goldcorp, Waste Management and Visa.

What’s out: iShares Edge MSCI USA Momentum (MTUM). This ETF emphasizes companies with rapidly rising share prices. Specifically, it homes in on stocks that have notched the biggest price gains over the past six and 12 months. That worked fine in the thick of a bull market. We added Edge MSCI USA Momentum to the Kip ETF 20 in mid 2018, and since then, the ETF has gained 12.8%, which beats the S&P 500.

But momentum funds can struggle in volatile markets. As prices flip-flop quickly, there are fewer meaningful trends to follow. In the roughly three-month stretch between late September and December 24 of last year, Edge USA Momentum slid 21.1% in price, compared with a 19.4% loss in the S&P 500. “Momentum tends to work best in the belly of an economic cycle, when there are established trends in the market,” says Framsted. “It does less well when there is greater uncertainty.”

Smoother ride

What’s in: Invesco S&P SmallCap Low Volatility ETF (XSLV). Small-company stocks tend to produce bumpy returns. Over the past decade, the Russell 2000 small-company stock index has been 37% more volatile than the S&P 500. Invesco S&P SmallCap Low Volatility is designed to smooth out the ride. So far, so good: Since this ETF launched in early 2013, it has outpaced two small-company stock benchmarks—the Russell 2000 and the S&P Small Cap 600—on an annualized basis, with less volatility.

There are cheaper options, but none as steady. Over the past five years, the ETF has outperformed its peers—other low-volatility and traditional small-company stock ETFs—with less volatility in both up and down markets. We view this ETF as a core small-company stock holding.

The stock-picking process is simple. The ETF tracks a subset of the S&P Small Cap 600 small-company stock index that comprises 120 of the least volatile stocks, measured over the past 250 trading days. Stocks with the lowest volatility scores have a heftier rank in the portfolio regardless of market value. The ETF is nimbler than some of its peers because it recalculates the portfolio’s constituents and rankings every three months, instead of twice a year.

But it’s worth noting that exposures to certain sectors in the ETF can get lopsided; the fund doesn’t employ any constraints to stay in line with its parent index, the S&P Small Cap 600. These days, the ETF has almost 70% of assets invested in financial services and real estate stocks combined, more than twice the exposure of the S&P Small Cap 600. The high concentration in dividend-rich sectors gives the fund a yield of 3.37%. Two real estate investment trusts, Apollo Commercial Real Estate Finance and Redwood Trust, and a commercial mortgage lender, Granite Point Mortgage Trust, are among the ETF’s top holdings.

What’s out: Vanguard Russell 2000 Value ETF (VTVW). It’s been a rough couple of years for bargain-priced, small-company stocks. In 2017, value shares in the Russell 2000 index of small-company stocks lagged their growth-oriented counterparts, which gained a whopping 22.2%, by 14.4 percentage points. Then, in 2018, small-company value stocks declined 12.9%—more than the 9.3% loss in shares of small fast-growing firms. Value investing (buying stocks that are underpriced relative to sales, earnings or other measures) will come back eventually, as market underdogs tend to do, but we’re ousting this ETF in favor of one that offers a smoother ride.

Path to the future

What’s in: Ark Innovation ETF (ARKK) offers investors an efficient way to get in on some of the biggest groundbreaking advancements changing lives today. The actively managed ETF invests in stocks set to benefit from one of five future trends: DNA sequencing and the gene therapies that are born from it; robotics; energy storage (think electric cars); artificial intelligence; and blockchain technology (the algorithms behind digital currencies). Electric automaker Tesla is the ETF’s biggest holding, followed by 3-D printer firm Stratasys and Invitae, a gene diagnostic and research company.

This is a shoot-the-moon investment, not a core holding. The ETF holds 37 stocks, which represent what ETF manager Catherine Wood of Ark Invest calls the money-management firm’s “best ideas.” Ark Invest also steers four additional active ETFs that target a single “disruptive innovation” theme, including Ark Web x.0 ETF and Ark Genomic Revolution. Wood has a team of 20-odd analysts and traders working on those and on Ark Innovation ETF, which spans all of the themes. “We believe each stock in the portfolio will deliver a minimum 15% annualized return over the next five years,” says Wood, though she concedes they may not be right about every single holding.

Over the past three years, Ark Innovation has returned an annualized 35.3%, which pummels the S&P 500 by more than twofold. But buckle up, because the ride has been extremely uneven. Over that period, the ETF was more than twice as volatile as the S&P 500.

Wood uses the turbulence to the fund’s advantage. Consider Tesla, whose stock price bounces around a lot. In August 2018, shares hit $380. The stock dropped to $250 months later and then rocketed to $377 in early December 2018. In June 2019, shares were down to $223. “Innovation is controversial, so we lie in wait for controversy in order to build our positions,” says Wood. “We buy shares at the lows and sell at the highs.” The trimming and padding of holdings adds to turnover, which at 89% is typical for a fund that focuses on tech stocks. But Wood is generally a buy-and-hold investor. Based on changes in holdings that shift in and out of the portfolio entirely, she says, the fund’s turnover is closer to 15%.

What’s out: Vanguard FTSE All-World ex-US Small Cap ETF (VSS). Small foreign firms are more connected to their local markets than their larger counterparts and thus offer better exposure to a home country’s fast-growing domestic economy. But in recent years, Vanguard FTSE All-World ex-US Small Cap ETF has been high on risk and low on returns. International stock markets have lagged U.S. stocks for five of the past seven years, hampered recently by a stronger dollar, higher U.S. interest rates and trade-tariff tensions. For aggressive investors, we think Ark Innovation holds more promise. Investors who still want to play foreign markets should explore Vanguard Total International Stock (VXUS), which has been a member of the Kip ETF 20 since the list was inaugurated four years ago. The fund offers comprehensive exposure to stocks in foreign companies of all sizes in developed and emerging markets.

Socially conscious

What’s in: iShares MSCI USA ESG Select ETF (SUSA), which focuses on environmental, social and corporate governance characteristics to pick stocks. If you think ESG investing involves some tree-hugging, you’re right. But it is more than that. The best firms based on ESG criteria are mindful of their environmental impact but also treat employees, customers and their community well and have a diverse pool of ethical managers who are aligned with shareholder interests. All of these characteristics (and more) add up to well-run firms that perform better over time, the thinking goes. In other words, ESG tenets make

good business sense and thus good investment sense.

ESG ratings can help identify a firm’s problems before they come to light and snarl the stock. MSCI, a data provider that rates firms on ESG factors, flagged data and privacy issues at Equifax and downgraded the company’s ESG score to the lowest possible rating a full year before hackers breached the credit-reporting agency’s database. (MSCI’s ESG ratings resemble bond credit ratings and range from the best, triple-A, to the worst, triple-C.) Analyzing companies through an ESG lens can “catch problems in advance,” says Todd Rosenbluth, a CFRA mutual fund and ETF analyst.

Investors are clamoring for ESG-focused funds. Assets in this category more than doubled in 2018, says Rosenbluth. That’s more than the 24% asset growth overall in smart-beta ETFs. Not surprisingly, dozens of promising, socially conscious ETFs have launched over the past two years. But we’re wary of recommending funds with such short track records. However, iShares MSCI USA ESG Select has been around since 2005 and boasts one of the longest track records in socially responsible investing.

What’s more, its index tracks the best of the MSCI ESG-rated com­panies. After eliminating companies that make tobacco products, weapons, alcohol or nuclear power, or are involved with gambling, the index targets firms with the highest MSCI ESG ratings. According to BlackRock, 73% of the holdings in the index and the ETF have a triple-A or double-A MSCI ESG rating, the two highest ratings. The 100 stocks in the ETF are ranked by their ESG rating (the better the rating, the bigger the firm’s representation in the fund), and the portfolio is rebalanced four times a year. Microsoft, Ecolab and Apple are top holdings. Over the past five years, iShares MSCI USA ESG Select has returned 10.2% annualized, shy of the S&P 500’s annual average gain of 11.2%.

What’s out: Invesco Dynamic Large Cap Value (PWV). Though value investing has been out of favor for much of the bull market, we have no doubt it will come back. But this ETF has an above-average, 0.56% expense ratio, an above-average turnover ratio of 128% (which implies a typical holding period of nine months) and, as Morningstar analyst Alex Bryan notes, “uneven performance” relative to its value-oriented peers. With market and economic uncertainty at a high, we prefer to round out our roster with a focus on high-quality ESG standouts.

Smart ways to invest in ETFs

Exchange-traded funds are quirky. Like stocks, they trade throughout the day, but similar to mutual funds, they hold baskets of assets. In the early days, ETFs were mostly straightforward index funds, but over the years they have grown more complicated. Some ETFs are actively managed; others follow specially designed proprietary indexes. Be smart about how you invest in ETFs, and keep these tips in mind before you buy one.

Buy commission-free. Because ETFs trade like stocks, ostensibly you pay a commission when you buy and sell shares. But gobs of ETFs trade for no charge at major online brokers. Fidelity and Schwab each offer more than 500 ETFs with no sales charge. TD Ameritrade has more than 500, and Vanguard offers a whopping 1,800 funds. Commission-free trading makes dollar-cost averaging (investing small dollar amounts at regular intervals) a no-brainer. That’s a boon to investors who are starting out or who may not be sure about a particular strategy. “A mutual fund minimum of $3,000 may be out of reach for an investor just getting started,” says Rich Powers, head of ETF products at Vanguard. “But the minimum amount for an ETF is the share price. So if the net asset value of an international stock ETF is $100, all investors need to come up with is $100 to globally diversify their portfolio with one trade.”

Use limit orders. When you buy shares in a mutual fund, your trade is executed at the end of the day, at the fund’s prevailing net asset value, or share price. ETFs work differently. Like stocks, ETFs have a bid price (the highest price a buyer will pay) and an ask price (the lowest price a seller will accept). Many popular ETFs have narrow bid-ask spreads. But less-frequently traded ETFs may sport wide spreads, conferring some uncertainty about the price you’ll end up getting. A limit order allows you to specify the price at which you are willing to buy or sell shares. If the spread is wide, set the limit order at a price that falls between the bid and the ask.

Consider expense ratios carefully. Three zero-fee ETFs launched this year: SoFi Select 500 ETF, SoFi Next 500 and Salt Low truBeta US Market ETF. But don’t let the 0% expense ratio draw you in too quickly. Do your homework. These zero fees are not set in stone. For instance, SoFi says its zero fees will stay in place for at least the first year but doesn’t guarantee they will always be zero. In addition, many firms view no-fee products as a way to lure investors into pricier offerings, such as a money market fund. Remember, too, that you may have to pay a commission to buy shares in an ETF.

Know exactly what you’re buying. As we’ve said, ETFs have become complicated as the market for them has grown. Consider one of the free ETFs we mentioned earlier, the SoFi Select 500 ETF. Although it has “500” in its name, the ETF is not tied to Standard & Poor’s 500-stock index. Rather, it tracks a proprietary index of large U.S. companies that are ranked by a combination of measures, including sales growth for the past 12 months and earnings-growth expectations for the next 12 months. “It has more of a growth tilt, and it won’t perform like an S&P 500-based product because it’s not based on the S&P 500,” says Todd Rosenbluth, who analyzes mutual funds and ETFs for investment research firm CFRA.

Until a few years ago, the American Funds family of mutual funds was available to individual investors only through intermediaries such as brokers and advisors. But now they’re available to anyone through online brokers, such as Fidelity and Schwab.

That’s a huge deal because, in my view, the best American Funds are among the top actively managed, large-company funds you can find anywhere. The funds haven’t attracted much attention from individual investors because they had been marketed solely through intermediaries and because the “American” name is shared by at least two other fund firms.

But these mutual funds demand your attention. American Funds’ products aren’t flashy, but they have provided long-term, index-beating results. What’s more, the funds have held up especially well during bear markets, which is critical to retirement investors. All of American Funds’ U.S. stock mutual funds lost substantially less than the Standard & Poor’s 500-stock index in the 2007-09 meltdown. “All 11 funds with at least a 20-year track record are ahead of their most relevant benchmark over that time period, which included two severe bear markets,” says Alec Lucas, a senior analyst at Morningstar who covers a dozen American Funds products.

American Funds aren’t perfect. The company’s mutual funds are too big to invest meaningfully in stocks of small companies. Returns on the firm’s bond funds have been uninspiring, although the firm has made several new hires designed to remedy that problem. But for large-cap stocks, both here and abroad, they’re hard to beat.

Today, we’ll look at five of the best American Funds for retirees – and teach you more about what the fund provider does best.

Data is as of May 28, unless otherwise noted. Three- and five-year returns are annualized. Yields represent the trailing 12-month yield, which is a standard measure for equity funds. American’s no-load F1 shares can be bought through online brokerages such as Fidelity and Schwab.

• Market value: $96.5 billion
• Yield: 1.5%
• Expenses: 0.67%

One key to American Funds’ continued success – even as it has grown into one of the largest fund firms in the country – is its unique multi-manager system. Each fund is guided by several managers, each of whom is assigned a portion of the fund’s assets to manage independently. Much of his or her compensation depends on how well that slice of the pie performs over rolling periods of one, three, five and eight years – with the emphasis on five and eight years.

• Fundamental Investors F1 (AFIFX, $57.09), for instance, uses six managers to provide investors with growth and income … albeit “with an emphasis on growth over income,” as the fund’s page states.

AFIFX is often the most aggressive of the American funds, yet it’s still slightly less volatile than the S&P 500. The fund has topped the index by an average of 76 basis points (a basis point is one one-hundredth of a percent) per year over the past 15 years.

It currently has 5% of assets in cash and 16% in foreign stocks, both of which have muted recent returns. As a result, the fund’s 10.4% year-to-date performance is more than three percentage points worse than the S&P 500. However, retirees will appreciate that the fund did hold up better than the S&P 500 during both of 2018’s market selloffs.

The fund has a flexible mandate, but it has an unmistakable growth tilt. Technology stocks, at 21% of assets, are the fund’s biggest weighting by a lot. And its top four holdings – Microsoft (MSFT), Broadcom (AVGO), Facebook (FB) and Amazon.com (AMZN) – are either in the technology sector or are tech-heavy members of other sectors.

• Market value: $54.6 billion
• Yield: 1.9%
• Expenses: 0.67%

The best American Funds are also helped by relatively low expenses. F1 shares – the share class available without a sales charge to individual investors through online brokers – aren’t as cheap as Vanguard funds. But they typically charge less than most competitors’ actively managed funds.

• American Mutual F1 (AMFFX, $40.11) is just such a fund, with its 0.67% annual expense ratio well below the category average fee of 1.09%.

American Mutual also could win a prize for having the most boring fund name imaginable. That’s fitting, given that it’s one of the provider’s least volatile pure stock funds. It strives to keep risks low and focuses on not losing money – ideal for conservative investors.

Boring, after all, can be good when it comes to investing your hard-earned cash. Over the past 10 years, the fund has lagged the S&P 500 by an average of a little less than two percentage points per year. But it has been 20% less volatile, holding up better than the benchmark during crummy markets.

AMFFX invests primarily in undervalued dividend-paying stocks. When opportunities are scarce, the fund turns to cash and bonds – right now, 12% of assets are in the former, and just 1% in the latter. Health care is top dog at more than 15% of the fund’s assets, with AbbVie (ABBV), Amgen (AMGN), Abbott Laboratories (ABT) and Procter & Gamble (PG) all earning top-10 weights.

• Market value: $85.0 billion
• Yield: 0.9%
• Expenses: 0.82%

The corporate culture at American Funds is, in my view, a crucial ingredient in its success. Managers typically stay at the firm for their entire careers. The average manager has 27 years of industry experience, including 22 years at American Funds itself.

• New Perspective F1 (NPFFX, $42.12) isn’t just among the best American Funds – in my estimation, it’s at the top of the mountain. This is a global fund, meaning it invests in U.S. and foreign stocks. That gives the fund’s seven experienced managers – averaging 28 years of investment industry each – freedom to invest wherever they see opportunity.

When I think I’ve found a good manager or managers, I like to give them the ability to look anywhere for mispriced stocks.

This fund focuses on global trade patterns, making it about as timely as any fund you can find. The only constraint on the managers: Each holding must receive at least 25% of revenues from outside their home country. Right now, 52% of companies are domiciled in the U.S., 23% in Europe, 14.2% in Asia/Pacific Basin and 4.7% in “other.” Top holdings are a who’s who of big tech-minded companies including Amazon.com, Facebook, Microsoft and Taiwan Semiconductor (TSM).

Returns have been terrific. NPFFX beat the MSCI ACWI ex-USA Index (a major international benchmark) over the trailing 15-year period by three percentage points annually, the 10-year by 5.6 points and the five-year by 6.6 points. In fact, New Perspective F1 has beaten the index in every significant time period. And the fund has finished in the top half among its world stock competitors every year but one since 2009.

• Market value: $153.4 billion
• Yield: 1.1%
• Expenses: 0.85%

Can anyone run a $154 billion fund successfully?

Well, the nine managers at EuroPacific Growth F1 (AEGFX, $49.89) – each responsible for a portion of its assets – have put up sparkling numbers. Over the past 10 and 15 years, it has beaten the MSCI ACWI ex-USA Index by an average of more than one percentage point per year. It has also topped the benchmark in the trailing three- and five-year periods.

American Funds’ emphasis is always on long-term results, which is the name of the game in retirement. Stocks are typically held four or five years. The managers and analysts are patient investors, who spend most of their time picking good companies at attractive prices, rather than on the macro environment. No surprise, then, that stocks in AEGFX are typically held for about four years.

EuroPacific Growth F1, unsurprisingly, focuses on growth stocks – more than 17% of the portfolio is invested in financials such as pan-Asian life insurance company AIA Group (AAGIY) and Indian baking firm HDFC Bank (HDB), with another 14% in consumer discretionary and 12% in technology.

AEGFX isn’t afraid of emerging markets, either, allocating a third of its assets to EM stocks.

• Market value: $38.0 billion
• Yield: 0.82%
• Expenses: 1.01%
• New World F1 (NWFFX, $63.22) offers a unique approach to emerging markets investing – and one that’s been remarkably successful. You could call it a chicken’s approach to emerging markets, but that’s been best way to invest in this tricky sector for the past seven years, which have seen EM equities badly lag U.S. stocks.

New World invests in the stocks of EMs, but also developed countries. In fact, NWFFX is only required to have 35% of assets in pure emerging markets stocks. Other stocks can be selected, so long as they do a lot of business (“generally 20% or more,” according to the prospectus) in merging markets.

NWFFX currently has nearly 43% of its assets wrapped up in emerging markets, with more than 18% in the U.S. and another roughly 26% in other developed markets (the rest is in cash or invested in fixed income). Top holdings include American powerhouses such as Google parent Alphabet (GOOGL) and Mastercard (MA), but also India conglomerate Reliance Industries and Chinese e-commerce giant Alibaba (BABA).

Consider the record. Over the past 15 years, the fund has beaten the MSCI Emerging Markets Index, the MSCI ACWI ex-USA Index and the S&P 500. Over the past 10 years, New World has trailed the S&P 500 but topped the two foreign indexes. The same goes for the past one, three and five years.

Don’t expect this fund to beat its peers during a bull market in emerging markets stocks. But the rest of the time, this is one of the best American Funds offerings you can buy.

Steve Goldberg is an investment adviser in the Washington, D.C., area.

Question: Can you purchase Treasury securities for an IRA directly from the U.S. Treasury through TreasuryDirect? How can you add them to an IRA?

Answer: TreasuryDirect.gov is intended as a way for individuals to buy securities from the Treasury and manage them through an account with the website, so you can’t use it to buy Treasuries for an IRA, said Brad Benson, public affairs specialist with the Treasury Department’s Bureau of the Fiscal Service.

However, with the Commercial Book-Entry System, banks and brokerage companies can offer customers marketable securities — including bills, notes, bonds, Treasury Inflation-Protected Securities (TIPS) and floating-rate notes — to invest in an IRA.

Buying Treasury securities through your IRA brokerage

Check with the institution that operates your IRA to find out how you can buy Treasury securities and any fees that may be associated with it. With Charles Schwab and Fidelity Investments, for example, IRA customers can buy Treasuries through their online account with no transaction fee. If a representative purchases it for you, you will pay a fee: $19.95 with Fidelity and $25 with Schwab.

Vanguard charges no commission to buy Treasuries online or over the phone. You may be able to place an order to buy bonds during regularly scheduled auctions — when the Treasury offers newly issued securities — or purchase securities already circulating in the secondary market.

Transferring Treasury securities to an IRA

You can transfer securities purchased and held in a TreasuryDirect account to an IRA or other account with a broker or bank; check with your institution for details, says Benson.

You can move Treasuries from TreasuryDirect into a Fidelity account, for example, but the process may require a lot of time and paperwork, said Richard Carter, vice president of fixed-income strategy for Fidelity.

Steps to execute the transfer

To transfer securities to a broker/dealer account request, also known as an external transfer, you should gather the following information:

Personal information: Full legal name, address, Social Security number and date of birth.

Account details: Account type (such as individual, joint, IRA) and account number at your current brokerage.

Transfer details: Name of the brokerage firm, wire name, routing number, agent/broker name, phone number and address. Whether you want a full or partial transfer and the specific securities to transfer for an "in-kind" transfer of your treasuries.

Contact your financial institution to get its routing number and wire name. This is not the type of information you will find in a typical correspondence from your broker.

• Step 1: Log in to your primary TreasuryDirect® account
• Step 2: Click the ManageDirect tab at the top of the page
• Step 3: Under the heading Manage My Securities, click "Transfer securities"
• Step 4: On the Transfer page, choose the button beside the security type you want to transfer and click "Submit"
• Step 5: On the Summary page, choose the securities to transfer and click "Submit"
• Step 6: On the Transfer Type page, choose External and click "Submit"

More about Step 6: A page will display with a link to a Transfer Request form (FS Form 5511), needed to complete your transaction. In this case, you must complete the paper form according to its instructions and submit it by mail for processing. The form must be signed in the presence of an authorized certifying official at a financial institution. Certification by a Notary Public will not satisfy the requirement.

A Medallion Signature Guarantee, sometimes referred to as a “Medallion Notary” or “Medallion Stamp,” is not a notarial act. It’s a special type of signature guarantee provided within the banking industry. The requirement makes it harder for people to steal your securities by forging your signature on your securities certificates and related documents.

You can obtain a medallion signature guarantee from a financial institution. However, most financial institutions limit this service to customers. That means your best source of a medallion signature guarantee is a bank, savings and loan association, brokerage firm, or credit union with which you do business.

When a request is entered, the securities will appear in a Pending Transfer status until the transfer is complete. Once the transfer is complete, TreasuryDirect will email you a confirmation, and a record of the activity will appear in your account's Security History.

I bonds can't be held in an IRA

I bonds must be registered to named individuals or entities such as corporations, trusts, or estates. In this regard, an IRA falls short because it is not a named individual or a specifically recognized entity under the Treasury's regulations. This is clearly reflected in the bond registration process, which always requires the investor's name. You won't be able to transfer these securities into an IRA properly.

Similar to I bonds, TIPS are issued by the U.S. government, providing them with a high degree of safety and inflation protection. Unlike I bonds, the U.S. Treasury permits the inclusion of TIPS in an IRA. This allows IRA holders to benefit from the inflation adjustment and avoid paying the annual tax.

Securities you can manage with a TreasuryDirect account

With a TreasuryDirect account, you can purchase and manage marketable securities as well as savings bonds (Series EE and Series I bonds), and you won’t pay commissions. But you can’t buy or sell securities in the secondary market; you must go through a bank or broker.

At TreasuryDirect, you choose the type of security you want to buy, then select the combination of maturity, auction date and issue date (the day the Treasury delivers auctioned-off securities to bidders). You can have proceeds automatically reinvested into a new Treasury of the same type when the one you purchased matures. Your financial institution may offer this option through an IRA or brokerage account, too.

Related Content

• Treasury Bills vs. Treasury Bonds: Know the Difference
• Why Treasury Bills Are a Good Bet
• TIPS vs I-Bonds

The race to the bottom for fund fees has finally hit, well, bottom. Two exchange-traded funds that launched at the beginning of April charge 0% in expense ratios—at least for the first 14 months. Another ETF, awaiting Securities and Exchange Commission review, could initially cost less than zero.

The just-launched free ETFs come from online lender SoFi. The firm will waive each of the funds’ 0.19% annual expense ratio until at least June 2020. SoFi Select 500 (symbol SFY) focuses on growing, large-company U.S. stocks; SoFi Next 500 (SFYX) homes in on shares of midsize and smaller U.S. firms. CFRA analyst Todd Rosenbluth thinks the funds will remain free for more than one year. “Either the funds will be successful and the 0% fee will be extended, or they won’t and the products will shut down,” he says.

Meanwhile, relative newcomer Salt Financial is awaiting SEC approval of a low-volatility U.S. stock ETF that would essentially pay its shareholders to invest, at least for a while. Through April 30, 2020, the adviser says it will waive its 0.29% fee and contribute the annualized equivalent of 0.05% on assets, up to $50,000 per year, to the assets of the fund. That means that for every $10,000 invested in the fund, Salt would put in another $5 to boost the value of the fund’s shares.

Both Salt and SoFi have come late to the ETF party, so they are hungry for business as ETFs become more popular in investor portfolios. According to Charles Schwab, ETFs made up 33.5% of investors’ portfolios in 2018, up from 20.8% in 2015. “Firms are eager to participate in this growing market, and they are willing to waive fees to do so,” says Rosenbluth.

Investors should note that fees in the new ETFs are waived only temporarily. More important, fees (or the lack thereof) aren’t everything. Before investors buy in, they should examine a fund’s strategy, its underlying index and how it fits with the rest of their portfolio. Additional no-fee ETFs may come along, but they won’t become the norm, says Rosenbluth.

Our defensive picks shine. Kiplinger ETF 20 funds did their job, tracking their indexes through a choppy market over the past 12 months. Vanguard Total Stock Market, even with its 0.03% expense ratio, edged the 8.6% return of its benchmark, CRSP US Total Market index, with a 9.2% gain.

Other bright spots include two defensive U.S. stock funds, Vanguard Dividend Appreciation (symbol VIG) and Schwab US Dividend Equity (SCHD), both of which beat Standard & Poor’s 500-stock index over the past 12 months. Two of our actively managed Kip ETF 20 bond funds, Pimco Active Bond (BOND) and Pimco Enhanced Low Duration Active (LDUR), also beat their bogeys. Foreign stock funds fared poorly due to trade tensions and slower economic growth overseas.

Don't let your broker sweep your cash yield into the basement.

Many major brokerage firms in recent years have eliminated higher-yielding money-market funds as a sweep option, pushing customers into lower-yielding bank sweep accounts. Often, the cash is routed to banks affiliated with the brokerage firm, plumping up the firm’s profits.

Brokerage firm Edward Jones eliminated its money-fund sweep option for new brokerage customers in February. Merrill Lynch removed money-fund sweep options for most new accounts last September, and most existing money-fund balances have been moved to deposit accounts at Bank of America, Merrill’s parent-company bank. Charles Schwab eliminated money-market funds as a brokerage sweep option for most new accounts in 2016.

Such moves can seriously crimp customers’ yields. The 100 largest taxable money funds yield 2.25% on average, according to Crane Data, while the average brokerage sweep account now yields just 0.25% for balances up to $100,000. Schwab’s sweep options currently yield 0.33% for balances below $1 million, while the yield on Merrill’s bank sweep ranges from 0.14% to 0.75%, depending on the level of account assets.

The firms say they’re still offering competitive cash options. “Our approach allows clients to choose from among an attractive set of cash-management options while Schwab earns returns on the net interest income,” says Schwab spokesman Mike Peterson. “Those returns are then reinvested in serving clients and returning value to the firm’s stockholders.”

Brokerage firms are trying to squeeze more profits out of customers’ cash as their earnings from trading commissions have taken a hit. An industry price war has driven commissions down to just a few dollars—or even zero, in some cases. By flocking to brokerage firms offering low-cost trades, consumers “have voted with their dollars, and they want $4.95 trades instead of reasonable-paying cash,” says Peter Crane, president of Crane Data, which tracks money funds and other cash vehicles. “It’s like consumers in effect want fees they can’t see.”

Hunt for High Yields

For retirees holding significant amounts of cash, of course, maximizing cash yields may well be a top priority. If your only sweep options are low-yielding bank accounts, you can always move that cash into a money-market mutual fund.

The top-yielding money funds available to individual investors now yield north of 2.5%. Investors looking for the safest cash options may want to stick with money funds holding Treasuries and other government securities. Top government money funds yield roughly 0.2 percentage point less than top “prime” money funds, which hold corporate debt.

A few firms have retained money-market funds as sweep options. At Vanguard, for example, the only sweep option is the Vanguard Federal Money Market Fund (symbol VMFXX), a government money fund that yields about 2.3%.

Another option: Shift your cash to a high-yield bank account. Goldman Sachs’s online bank Marcus, for example, offers a 2.25% yield. Pay attention to fees and other fine print. High-yield savings accounts may require a minimum balance to avoid fees or earn the best yield. If you want some help chasing the highest yields, MaxMyInterest will spread your money among various online savings accounts and regularly reallocate the cash to capture the highest rates, for a fee of 0.08% annually.

Question: What are the benefits of giving appreciated stock to a donor-advised fund if I don't plan to itemize my deductions this year?

Answer: Giving appreciated stock to a donor-advised fund -- or directly to a charity -- gives you a tax benefit even if you don't itemize. By doing so, you avoid having to pay taxes on the capital gains that have accumulated through the years. But if you sell the stock and write a check to the charity instead, you'll have to pay capital gains taxes. (If the stock has lost money, however, it's usually better to sell it first and then write a check to the fund or charity, so you can benefit from the capital loss.)

Giving appreciated securities to a donor-advised fund rather than directly to a charity will make it easier to spread your contributions to more charities over a longer time period. You can make your contribution now, then have an unlimited amount of time to decide which charities to support. You technically "recommend" that the donor-advised fund makes the grants to the charities, but grant recommendations are generally approved as long as the charity is an eligible 501c3 organization (the IRS designation for a tax-exempt charitable organization). You can usually make grants to charities that are as little as $50 or as large as your account balance.

The money remains in investing pools (there are usually several portfolios of mutual funds to choose from) until you give it to charity. Some families keep the money in the account for the long term and use the donor-advised fund to teach their children and grandchildren about charitable giving (see Smart Strategies for Giving to Charities).

Fewer people are expected to itemize since the new tax law nearly doubled the standard deduction. But a donor-advised fund can also help you make a few years' worth of contributions in a single year, so you can cross the threshold that makes filing an itemized return worthwhile. You'll be able to deduct the contribution in the year you give the stock or other money to the donor-advised fund, even if you don't grant the money to the charities for several years. The size of the deduction will be the value of the stock on the day you make the contribution, as long as you've held the stock for longer than a year.

Be aware that some small charities aren't set up to accept appreciated securities, but donor-advised funds help in that case, too. Donor-advised funds are offered by many brokerage firms and community foundations (you can find community foundations at the Community Foundation Locator). If you already have an account at the brokerage firm, it may be very easy to give stock or mutual funds. Schwab customers, for example, can go online and click a few buttons to move the money from their brokerage account to their donor-advised fund. Many donor-advised funds also accept other kinds of appreciated assets that some charities may not be set up to accept. Schwab and Fidelity, for example, accept privately held stock, real estate and other complex investments on a case-by-case basis.

Schwab and Fidelity require a minimum contribution of $5,000 to open a donor-advised fund. Vanguard requires $25,000 to get started.

As the world of online brokers continues to evolve, it has become increasingly difficult for firms to stand apart from one another. In this year's ranking, TD Ameritrade beat Charles Schwab by less than a nose, with Fidelity and then E*Trade close behind. But zoom in, and you’ll find that each firm, along with the four others we surveyed, has something different to offer—a niche that lets it shine in one way or another.

With commissions about $7 or less at most firms, we gave that category less weight this year. But because the firms we surveyed told us that investors increasingly interact with them on smartphones or tablets, we gave more importance to mobile apps. The biggest, best-known firms, you’ll notice, score better overall in our survey. But almost all of the firms let you trade stocks, exchange-traded funds, mutual funds and individual bonds online, as well as offer some online advisory services.

Read on to find out how each of these eight firms scored—and which would be best match for you.

With additional reporting by Kyle Woodley

Category weighting for overall score: commissions and fees, 10%; investment choices, 20%, mobile app, 20%; user experience, 20%; ease of use, 15%; mobile, 10%; advisory services, 15%; and tools, research and advisory services, roughly 12% each.

Since our story went to press, Firstrade announced it would offer free online trading for stocks, ETFs, options and mutual funds (down from $2.95 per trade). Also, Ally Invest announced it would offer more than 100 exchange-traded funds commission-free (in other words, there is no sales charge to buy or sell shares) to customers on its online trading platform. (Previously, all ETFs purchased on the Ally Invest platform incurred a $4.95 commission; $3.95 for active traders or customers with high balance.)

TD Ameritrade distinguishes itself with its commitment to investor education. The website’s education center is a treasure trove of short explanatory videos on everything from the basics of money market accounts to the ins and outs of cryptocurrency. Longer and more detailed online courses are also available, with titles such as “Trading Options” and “Fundamental Analysis.” The firm held nearly 6,000 webinars on online-trading education in 2017 alone.

TD Ameritrade also scores points in user experience for meeting clients where they spend their time—texting on their smartphones or browsing Twitter or Facebook on a computer, tablet or smartphone. Anyone can contact TD through direct messages on Twitter, on Facebook Messenger, through the iPhone Messages app or by talking to their Amazon Alexa–equipped device.

For example, you might use Facebook’s messaging feature to ask a broad investing question, get a stock quote, or even buy or sell shares—all without leaving the Facebook app. TD uses artificial intelligence to generate automated responses to your query; if that doesn’t satisfy you, TD will automatically connect you with a live representative.

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Schwab’s advisory service stands out for the breadth, quality and price of its offerings. Schwab’s robo adviser, Intelligent Portfolios, does not charge an asset-management fee, which sets it apart from others. You need $5,000 to open an account at Intelligent Portfolios, which is on the high end of minimums (but not the highest). But once funded, Intelligent Portfolios use low-cost ETFs to tailor dozens of portfolios (43 in all) tailored to your goals, tolerance for risk and stage in life.

Intelligent Portfolios has a couple of downsides: It requires $5,000 or more to start, and its most aggressive portfolio currently holds a hefty 7% cash position, a potential drag on returns. But according to The Robo Report, which tracks the performance of digital advisory portfolios, Schwab has achieved good results over time.

Schwab also offers more no-fee mutual funds than any other broker: at last count, 4,121.

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Plenty of brokerages offer reasonable fees and commissions, thanks to the decades-long brokerage price wars. The latest salvo from Fidelity eliminated all account fees, including fees to wire money domestically, among others. The firm offers more than 4,000 mutual funds with no sales load and no fee, and is now also offering index funds with a 0% expense ratio.

Fidelity’s mobile app wins the highest marks for checking all the essential boxes. You can buy or sell stocks, ETFs, mutual funds and bonds on Fidelity’s app—no other firm in our survey can say the same. But Fidelity also excels in this category because its app offers virtually all of the other conveniences that brokerage clients now expect, such as mobile bill pay and check deposit, as well as the ability to set up watch lists and view educational videos.

Fidelity is the best choice for investors who want access to initial public offerings. Over the past two calendar years, Fidelity has made 397 IPOs available to customers, compared with 64 for E*Trade and 48 for TD Ameritrade. In each case, gaining access to shares comes with eligibility requirements.

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E*Trade has made it a priority to teach and inform customers about investing. “Our goal is to make investing easier for people,” says E*Trade’s Rich Messina. E*Trade caters to beginner investors with “All Star” lists of recommended ETFs, stocks and mutual funds, plus ready-to-go ETF portfolios.

Bond traders will appreciate E*Trade's access to tens of thousands of corporate and municipal bonds.

We knocked E*Trade for its sprawling and sometimes lumbering website, including the way graphics show up (or don’t) on E*Trade’s site.

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Customers with deep pockets can pay $0 in commissions at Merrill Edge. If you have an active Bank of America checking account and a three-month average balance of $50,000 at Bank of America, Merrill Edge or Merrill Lynch investment accounts (singly or in combination), you can join a rewards program and qualify for no commissions on up to 30 stock and ETF trades per month. Investors with a $100,000 average balance can get 100 free trades every month.

Merrill’s platform transforms the sometimes-daunting work of analyzing your portfolio and researching stocks into an engaging experience. In “Portfolio Story” mode, the site poses eight questions that investors should ask about their portfolio, from “How is my portfolio performing?” to “What could I potentially earn?” It even examines how your investments rank on certain environmental, social and corporate governance measures. You'll find the same approach for stock research with “Stock Story,” a similarly engaging tool that investors can use to work through four essential questions of stock analysis.

Merrill Edge’s app is also worth a mention. Its intuitive interface, particularly when it comes to stock research, makes it one of the most engaging apps on our list. The app lost a few points, however, because it doesn’t offer bond trading or let you transfer money electronically between other banks. (Transfers between Bank of America and Merrill Edge, however, are instantaneous.)

Firstrade slays the competition in our survey with its roster of 703 commission-free exchange-traded funds. It includes 15 of the Kiplinger ETF 20, our favorite ETFs, including iShares Core S&P 500 (symbol IVV), Vanguard Dividend Appreciation (VIG) and Pimco Active Bond (BOND).

Firstrade also offers access to more corporate and municipal bonds than any broker in our survey, but trades them on a “net yield” basis. That means the price of the bond includes a mark-up that represents the dealer’s profit. This pricing model is generally more expensive and is certainly less transparent than the flat fees others offer.

Currently the firm offers no advisory services whatsoever, though it is considering launching an online robo advisor later this year.

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Ally Invest offers a digital advisory service, Advisors Managed Portfolio. It charges a 0.30% management fee and requires just $2,500 to get started. But the firm suffers in this category ranking because it doesn’t offer as hearty an array of planning advice (estate planning specialists, for example) as other firms.

Ally Invest also fell behind in our mobile app judging, lacking mutual fund or bond trading, mobile check deposits, or bill pay.

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At WellsTrade, which is affiliated with Wells Fargo, you can get a break on stock and ETF commissions if you have money in a checking or savings account at the associated bank. For instance, WellsTrade customers who link their brokerage account with a Portfolio by Wells Fargo checking account can get their stock commissions knocked down to $2.95 from the typical $5.95 charge.

We were unable to get a demo account to test Wells Fargo's user experience.

When Secretariat won the Belmont Stakes in 1973, securing his place in racing history as a Triple Crown champion, he beat the competition by a whopping 31 lengths, or about 248 feet. The results of this year’s online broker survey aren’t as clear-cut. In a photo finish, TD Ameritrade beat Charles Schwab by less than a nose, with Fidelity and then E*Trade fast on their heels.

As the world of online brokers continues to evolve, it has become increasingly difficult for firms to stand apart from one another. Their fees and commissions are generally low, their online tools are plentiful, they provide generous access to low-cost investments, and the firms’ websites and mobile apps are crammed with research reports, charts and videos. Overall, the contest for best online broker is a neck-and-neck horse race.

But zoom in, and you’ll find that each firm has something different to offer—a niche that lets it shine in one way or another. This year, we surveyed eight firms: Ally Invest, Charles Schwab, E*Trade, Fidelity, Firstrade, Merrill Edge, TD Ameritrade and WellsTrade. With commissions about $7 or less at most firms this year, that category carries less weight. Because the firms we surveyed told us that investors increasingly interact with them on smartphones or tablets, we assigned more importance to mobile apps. The biggest, best-known firms, you’ll notice, score better overall in our survey. But almost all of the firms let you trade stocks, exchange-traded funds, mutual funds and individual bonds online, as well as offer some online advisory services.

There are a couple of exceptions: Firstrade’s online robo adviser may launch later this year. And although WellsTrade offers individual bond investing, which we factored into its ranking, trades must be made over the phone. Finally, we approached T. Rowe Price and Vanguard, but both firms declined to participate in our survey this year. Read on to find out which brokers did best­—and why—in each category.

Commissions & fees

Plenty of brokerages offer reasonable fees and commissions, thanks to the decades-long brokerage price wars. The latest salvo from Fidelity eliminated all account fees, including fees to wire money domestically, among others. The final scores in this category, which are based mostly on fees to trade stocks, mutual funds, bonds and options, fall within a narrow range. Five firms earn three stars out of five, but E*Trade, Firstrade and Merrill Edge top the others by super-slim margins. In the end, the best low-cost firm for you may depend on what you invest in, how actively you trade, and in some cases, how much money you have in your account.

Consider stock and ETF commissions, for example. Firstrade leads the way among firms that charge a fixed rate, at $2.95 per trade, followed by Fidelity and Schwab ($4.95) and TD Ameritrade ($6.95). The rest of the firms employ variable pricing that depends on how often you trade or on the size of your average monthly balance. E*Trade’s standard $6.95 commission drops to $4.95 for clients who make 30 or more trades per quarter. Ally Invest shaves a dollar off its fee, to $3.95, for investors with a daily balance of $100,000 or more or who trade at least 30 times per quarter.

At WellsTrade, which is affiliated with Wells Fargo, and Merrill Edge, which is the brokerage arm of Bank of America, you can get a break on stock and ETF commissions if you have money in a checking or savings account at the associated bank. For instance, WellsTrade customers who link their brokerage account with a Portfolio by Wells Fargo checking account can get their stock commissions knocked down to $2.95 from the typical $5.95 charge. At Merrill Edge, the deal is even better: The firm’s standard $6.95 commission falls to $0 for up to 30 stock and ETF trades per month for investors who have $50,000 in combined assets at Merrill and parent company Bank of America and who join the bank’s Preferred Rewards program. Nearly half of all Merrill Edge customers have snagged that bonus, and as a result, “about 80% of trades on our platform are commission-free,” says Merrill Edge’s David Poole.

Fees to trade bonds have become more transparent in recent years. Most of the firms in our survey charge $1 per security to buy and sell corporate and municipal bonds. So if you, say, buy 10 General Electric bonds, you’ll pay a $10 commission at those firms, with a maximum fee of $250. The exceptions are WellsTrade, which charges a flat $50 for bond trades, and Firstrade, which trades bonds on a “net yield” basis. That means the price of the bond includes a mark-up that represents the dealer’s profit. This pricing model is generally more expensive and is certainly less transparent.

Investment choices

Every broker in our survey gives investors access to thousands of stocks, bonds, mutual funds and ETFs. To top the list in this category, firms had to offer not only a wide variety of investments but also deep rosters of ETFs that trade commission-free and no-load or load-waived mutual funds that trade with no transaction fees.

When it comes to the breadth of investment options, Firstrade reigns supreme. That doesn’t mean it offers more of everything compared with other firms in the survey, however. Firstrade’s lineup of no-transaction-fee mutual funds falls several hundred funds short of Schwab, TD Ameritrade and Fidelity, all of which surpass 4,000. But Firstrade wins on the ETF front. It offers 703 ETFs commission-free. The number of ETFs offered with no sales charge at Fidelity, E*Trade, Schwab and TD Ameritrade ranges from 265 to 313. (It’s worth noting that Vanguard now charges nothing to buy and sell 1,800 ETFs on its platform.) Firstrade also offers access to more corporate and municipal bonds than any broker in our survey, with E*Trade close behind.

Fidelity is the best choice for investors who want access to initial public offerings. Over the past two calendar years, Fidelity has made 397 IPOs available to customers, compared with 64 for E*Trade and 48 for TD Ameritrade. In each case, gaining access to shares comes with eligibility requirements. TD Ameritrade customers, for instance, must have $250,000 in assets in their account, place 30 trades per quarter, or be a customer of the firm’s private client services.

Mobile apps

Investors increasingly want to manage their brokerage business on the go. In response, brokers have rolled out mobile apps for smartphones and tablets that allow clients to make trades, read analyst reports on stocks, pay bills, transfer money to outside accounts, and even check on how they are doing with regard to their retirement savings with the touch of a button (or in some cases, after a facial recognition scan).

Fidelity’s mobile app wins the highest marks for checking all the essential boxes. You can buy or sell stocks, ETFs, mutual funds and bonds on Fidelity’s app. No other firm in our survey can say the same. But Fidelity also excels in this category because its app offers virtually all of the other conveniences that brokerage clients now expect, such as mobile bill pay and check deposit, as well as the ability to set up watch lists and view educational videos.

Schwab, TD Ameritrade and E*Trade score well in this category, too. Active traders may appreciate the stock charts available on the mobile apps of E*Trade and TD Ameritrade. The charts can be customized with dozens of indicators used in technical analysis—for example, those based on price momentum. The apps of both E*Trade and TD also allow investors to scan product barcodes and instantly receive stock information on their smartphone about the product’s manufacturer (assuming the company has a publicly traded stock). But TD Ameritrade, unlike Schwab and E*Trade, doesn’t allow mobile users to pay bills from brokerage accounts.

Finally, Merrill Edge’s app is worth a mention. Its intuitive interface, particularly when it comes to stock research, makes it one of the most engaging apps on our list. The app lost a few points, however, because it doesn’t offer bond trading or let you transfer money electronically between other banks. (Transfers between Bank of America and Merrill Edge, however, are instantaneous.)

On the whole, most of the apps we checked out allow investors to easily trade, deposit money and transfer funds. Ally Invest and Firstrade, the laggards in the mobile app category, fell behind because their apps don’t offer mutual fund or bond trading, mobile check deposits, or bill pay. Firstrade’s mobile users can’t make electronic fund transfers in the app, either.

User experience

To evaluate our only truly subjective category, three Kiplinger investing staffers test-drove the brokers’ websites and mobile apps in search of the most in­tuitive and user-friendly platforms for all types of investors. Wells­Trade was unable to provide us with a test account. But among the others, two firms stand out: Merrill Edge and TD Ameritrade.

Merrill’s platform transforms the sometimes-daunting work of analyzing your portfolio and researching stocks into an engaging experience. In “Portfolio Story” mode, the site poses eight questions that investors should ask about their portfolio, from “How is my portfolio performing?” to “What could I potentially earn?” It even examines how your investments rank on certain environmental, social and corporate governance measures. “We wanted Portfolio Story to feel like sitting down with an expert, with users learning what questions they should ask about their portfolio,” says Merrill Edge’s Steve Lucas.

As you work through each step, you’re presented with colorful graphics and digestible data that you can act on. If the tool tells you that a particular stock makes up an outsize portion of your portfolio, for instance, you can sell some shares with just a few clicks. Merrill’s platform uses the same approach for stock research with “Stock Story,” a similarly engaging tool that investors can use to work through four essential questions of stock analysis.

TD Ameritrade scores points for meeting clients where they spend their time—texting on their smartphones or browsing Twitter or Facebook on a computer, tablet or smartphone. Anyone can contact TD through direct messages on Twitter, on Facebook Messenger, through the iPhone Messages app or by talking to their Amazon Alexa–equipped device. “We want the brokerage experience to be part of the existing tapestry of your life,” says TD’s Sunayna Tuteja. For example, you might use Facebook’s messaging feature to ask a broad investing question, get a stock quote, or even buy or sell shares—all without leaving the Facebook app. TD uses artificial intelligence to generate automated responses to your query; if that doesn’t satisfy you, TD will automatically connect you with a live representative.

Most of the firms score well for their easy-to-navigate platforms. Both E*Trade and Fidelity lose points for their sprawling and sometimes lumbering websites. We found inconsistencies, for example, in the way the trade window pops up on different pages on Fidelity’s site and the way graphics show up (or don’t) on E*Trade’s site.

Ally Invest’s platform is almost too basic, with what seems like acres of white space that makes the site feel sparse. And although Firstrade’s website is zippy when it comes to loading pages, its retirement-and-planning section isn’t as robust as others. And the site offers limited research on stocks, funds and bonds.

Tools

Are you on track to retire when you want? Are you getting the steady payments you need from your income portfolio? Ideally, brokerages should make it easy to find promising investments, but they should also provide you with the tools to help with life’s other financial issues.

TD Ameritrade distinguishes itself with its commitment to investor education. The website’s education center is a treasure trove of short explanatory videos on everything from the basics of money market accounts to the ins and outs of cryptocurrency. Longer and more detailed online courses are also available, with titles such as “Trading Options” and “Fundamental Analysis.” The firm held nearly 6,000 webinars on online-trading education in 2017 alone. TD is one of two brokers, along with Fidelity, to offer some form of virtual trading. Fidelity allows users to see how a hypothetical trade might affect their portfolio’s asset allocation, among other things. TD’s version is available on its downloadable trading software and lets investors practice trading with virtual money on the platform before diving in with the real thing.

Other standouts at TD include a tool that breaks down the fees you pay in your 401(k) account and another that charts your portfolio’s expected dividends for the next 12 months. Merrill Edge and E*Trade offer tools that track future dividend payouts, too.

Kudos go to Merrill Edge and Schwab in this category for an abundance of offerings. Calculators abound in Merrill’s toolbox. Retirement planners, for example, can get help figuring out annuity payouts, 401(k) contributions, Roth IRA conversions and estimated required minimum distributions in retirement. Schwab stands out for its robust collection of investing screens for stocks, options, ETFs and mutual funds. Users can search for investments based on their own criteria, select from the firm’s list of predefined strategies, or pick stocks from rosters from CFRA and S&P Capital IQ, including CFRA’s recommended “Five-Star” stocks and those screened for exceptional earnings growth.

Research

These days, investors don’t have to look very hard to find basic information about stocks and mutual funds online. Brokers that score well in this category go the extra mile to keep their clients informed, offering investment information that goes beyond summaries and snapshots.

With the exception of Firstrade, every broker on our list provides some form of bond market commentary or analysis. But research on individual stocks, mutual funds and ETFs varies from broker to broker. Fidelity earns high marks for the range of research available on its site. The firm boasts more independent sources of investment research than any other broker in our survey, and indeed, its stock pages are packed with reports from the likes of Thomson Reuters and Zacks Investment Research. But much of Fidelity’s research is quantitatively focused and lacks in-depth analysis of individual stocks, mutual funds or ETFs. Fidelity lost points for that, but the sheer number of sources it offers, combined with the mix of broad stock and bond market commentary, lifted it to the top in this category.

TD Ameritrade and Merrill Edge end up in a virtual tie with Fidelity for research, with Schwab posting strong results, too. Each provides individual stock reports from investment research firm CFRA. TD Ameritrade and Merrill also offer breakdowns of individual funds and ETFs by Morningstar analysts. All three include input from analysts at major financial institutions. Merrill Edge provides reports from Bank of America Merrill Lynch; TD Ameritrade and Schwab (as well as E*Trade and WellsTrade) feature individual stock reports from analysts at investment bank Credit Suisse. Fidelity, Firstrade and Ally Invest lack research from a big bank.

Advisory services

All of the brokers in our survey except Firstrade offer clients some level of financial guidance, from computer-generated robo advice to access to ded­icated financial planners. Depending on the size of your account, you can get help with calibrating your investment mix, creating a retirement plan or even doing some estate planning.

Schwab’s advisory service stands out for the breadth, quality and price of its offerings. Schwab’s robo adviser, Intelligent Portfolios, does not charge an asset-management fee, which sets it apart from others. You need $5,000 to open an account at Intelligent Portfolios, which is on the high end of minimums (but not the highest). Clients can start investing with just $10 at Fidelity’s “Fidelity Go” digital adviser, for instance. But once funded, Schwab’s Intelligent Portfolios use low-cost ETFs to tailor dozens of portfolios. One caveat: Schwab’s most aggressive Intelligent Portfolio holds 7% in cash. Such a large cash position could hamper returns. But according to The Robo Report, which tracks the performance of digital advisory portfolios, Schwab’s portfolios don’t disappoint. Over the past two years, a moderate-risk portfolio at Schwab that held 62% of assets in stocks, 23% in bonds, 10% in cash and 5% in other assets returned 13.6% annualized through June 30. That beat the nearly 10% return of a hypothetical portfolio of broad-market indexes held in similar proportions over the same period.

TD Ameritrade and Fidelity also post high scores thanks to their digital advisory services. Each keeps investor expenses to a minimum: TD charges 0.30% of assets, and Fidelity charges 0.35%. At Fidelity, that includes the expenses of the portfolios’ underlying investments. Among firms dinged in our survey for high-cost robos: Merrill Edge, which charges a management fee of 0.45% of assets, and WellsTrade, which levies a 0.50% fee (although that is lowered to 0.40% for clients who link a Portfolio by Wells Fargo checking account). But the biggest knock on WellsTrade’s digital offering, Intuitive Investor, is its $10,000 minimum to open an account.

Schwab and TD Ameritrade both offer a hybrid service that combines algorithm-based advice with help from a human adviser for clients with more than $25,000 in assets. Fees on such an account will run you 0.28% of assets at Schwab, and they range from 1.25% to 0.75% at TD Ameritrade. Investors looking for professionally managed accounts will find the most-robust services at Schwab, Fidelity, TD Ameritrade and WellsTrade. Each offers access to specialists in trading, options and estate planning.

Finally, a word about Ally Invest. Its digital advisory service, Advisors Managed Portfolios, charges a 0.30% management fee and requires just $2,500 to get started. But the firm suffers in this category ranking because it doesn’t offer as hearty an array of planning advice (estate planning specialists, for example) as other firms.

Find the right broker for you

All types of investors can find standouts in a niche they care about.

Best for exchange-traded fund investors. Firstrade slays the competition in our survey with its roster of 703 commission-free exchange-traded funds. It includes 15 of the Kiplinger ETF 20, our favorite ETFs, including iShares Core S&P 500 (symbol IVV), Vanguard Dividend Appreciation (VIG) and Pimco Active Bond (BOND). Vanguard, which opted not to participate in our survey, charges nothing to buy or sell 1,800 ETFs on its platform.

Best for mutual fund investors. Fidelity, Schwab and TD Ameritrade all offer customers access to more than 4,000 no-fee mutual funds on their no-transaction-fee networks. That means you pay no sales load and no fee to trade. Schwab, as it has in past years, topped the list, with 4,121 no-fee funds. It’s worth noting that Fidelity has debuted the first index funds with a 0% expense ratio.

Best for bond investors. Firstrade wins by a nose, followed by E*Trade. These firms offer their clients access to tens of thousands of corporate and municipal bonds, leading their peers in both categories.

Best robo adviser services. Schwab’s Intelligent Portfolios wins. The service is free, and it offers more portfolios than any other firm. There are 43 in all, tailored to your goals, tolerance for risk and stage in life. Intelligent Portfolios has a couple of downsides: It requires $5,000 or more to start, and its most aggressive portfolio currently holds a hefty 7% cash position, a potential drag on returns. But according to The Robo Report, which tracks the performance of digital advisory portfolios, Schwab has achieved good results over time.

Best for active traders with high balances. Customers with deep pockets can pay $0 in commissions at Merrill Edge. If you have an active Bank of America checking account and a three-month average balance of $50,000 at Bank of America, Merrill Edge or Merrill Lynch investment accounts (singly or in combination), you can join a rewards program and qualify for no commissions on up to 30 stock and ETF trades per month. Investors with a $100,000 average balance can get 100 free trades every month.

Best for students of investing. E*Trade and TD Ameritrade have made it a priority to teach and inform customers about investing, each in its own way. “Our goal is to make investing easier for people,” says E*Trade’s Rich Messina. E*Trade caters to beginner investors with “All Star” lists of recommended ETFs, stocks and mutual funds, plus ready-to-go ETF portfolios. TD Ameritrade’s website is chock full of short videos and longer online courses for investors of all experience levels. The firm also does a good job of defining and explaining key investing terms on its site, from “earnings per share” to “annual dividend yield.”

Update: Since our story went to press, Firstrade announced it would offer free online trading for stocks, ETFs, options and mutual funds (down from $2.95 per trade). Also, Ally Invest announced it would offer more than 100 exchange-traded funds commission-free (in other words, there is no sales charge to buy or sell shares) to customers on its online trading platform. (Previously, all ETFs purchased on the Ally Invest platform incurred a $4.95 commission; $3.95 for active traders or customers with high balance.)

With additional reporting by Kyle Woodley

The end of summer, when job and school routines kick back in, is a great time to kick your financial life into gear, too.

We’ve made it easy with our roster of quick financial tips designed to save you money, get you on track to reach a goal or simplify your life. The suggestions run the gamut from automating investments to setting up a budget to thwarting identity thieves. Each tip will take only 15 or 30 or — max — 60 minutes.

After years of bull-market gains, you might have more of your assets in stocks than you should. Find out by visiting Personal Capital (www.personalcapital.com), an online advisory firm that will manage your portfolio for a fee but also provides free tools for do-it-yourselfers. Link your investment, bank and credit accounts and the site will give you a broad view of your finances. Under the Planning tab, click on “Investment Checkup.” After you answer some simple questions about your investing goals, the site will suggest a target allocation, which you can compare with what you currently have.

Once you’ve linked your accounts on Personal Capital, go back to the Investment Checkup tool and click “Costs.” You’ll see what you pay in fund fees as a percentage of assets, broken down by investment account (at any firm) or for your entire portfolio. For comparison, the average expense ratio for a typical diversified U.S. stock ETF is 0.38%, and it’s 1.10% for the typical actively managed diversified U.S. stock fund.

Dividend-paying companies often disburse payments every three months—which can lead to dry spells for income investors when different stocks pay out on the same schedule. Some brokerages, including E-Trade, Merrill Edge and Schwab, have a tool that maps out your next 12 months of dividends. Otherwise, go to www.nasdaq.com and enter your stock holdings. If you want to add stocks that pay out in months that look sparse, see 7 Top Monthly Dividend Stocks and Funds to Buy. You can check payout dates for most U.S. stocks at www.nasdaq.com/dividend-stocks/dividend-calendar.aspx.

Investing app Acorns helps you reach your financial goals using the money you would otherwise toss in your coin jar. Link a credit or debit account, and every time you make a purchase on that card, Acorns will round your purchase up to the next dollar and invest the difference in a portfolio of ETFs consistent with your investing style and needs. You can also make automatic contributions from linked bank accounts. A typical user invests $50 to $60 per month, including rounded-up and automatic investments, says CEO Noah Kerner. Acorns charges $1 per month but waives the fee for students who set up an account with an “edu” e-mail address.

Keep up with the day’s stock market moves at Finviz. You’ll see a heat map of stocks in Standard & Poor’s 500-stock index, arranged by sector. Green stocks are up, red are down, with the ticker symbol and percentage change displayed. You can also choose to view world stock markets or exchange-traded funds. Click on “News” to see the latest business news and selected blogs, too.

With the bull market in its 10th year, the market is rife with attractive stocks—if only their shares were a bit cheaper. But investors looking to “buy the dip” needn’t eye the market constantly. Most major brokerages will allow you to create watch lists and set alerts for your favorite stocks. Fidelity investors, for instance, can receive alerts via e-mail or text when a stock on their watch list moves up or down by a certain percentage or advances above or falls below a certain price. If you’re looking to lighten up rather than buy, take some profits when a stock hits your target price.

Even if you can spare only a small amount of cash each month, having regular, automatic transfers from your checking account to your investment account will put you on the path to achieving your goals. Plus, you’ll hardly miss the money if you pay yourself first—that is, shave it from the top of your paycheck. Log in to your brokerage firm’s website and look for instructions on setting up transfers; you’ll need to enter your bank’s routing number, your checking account number, and the amount and frequency of each transfer. (You can also go to your checking account to set up the transfer—but watch out for fees the bank may charge for external transfers.)

You should hold on to your tax returns indefinitely, but you can shred W-2 and 1099 forms plus canceled checks and receipts for charitable contributions after three years. If you’re self-employed, you can shred receipts for business income and expenses after six years. Keep home purchase documents for three years after you’ve sold your home. To convert paper documents to electronic files, use a scanner; the IRS accepts digital copies. And while you’re getting organized, track down documents you may need later, such as Form 5498 from your financial institution, which shows nondeductible contributions to your IRA. Otherwise, you could end up paying taxes on those contributions when you take withdrawals.

Thanks to the new tax law, the amount of money your employer withholds from your paycheck may no longer line up with how much you owe the IRS. You could be paying more than you should now, or you could be paying too little and end up with an unexpected tax bill next spring. Gather your most recent pay stub and your 2017 tax return and run your numbers through the withholding calculator at www.irs.gov. If you need to make adjustments to your withholding, file a new W-4 form with your employer.

Couples can budget as a team using You Need a Budget ($84 per year). Start by syncing your bank and credit accounts (or entering the balances manually) and deciding how to allocate your dollars over the course of the month using YNAB’s categories or your own. YNAB aims to distribute all of your income between monthly expenses and longer-term goals (including savings), so you can handle large, unexpected expenses more easily. Or link all your financial accounts to Mint (free) to track both your budget and upcoming bills. Your bank or credit union may also offer free budgeting tools.

To ensure that you have enough in the bank to cover your monthly bills—and to avoid cluttering your calendar with multiple due dates—call each biller and ask whether you can change the due date to best align with your cash flow.

Whether you want assistance with a specific task or a full-fledged strategy for your money, a financial planner can help you get on track. At www.napfa.org, you can search for fee-only advisers in your area and filter by specialty, such as high-net-worth clients or tax planning. If you want a one-time checkup, look for fee-only certified financial planners at www.garrettplanningnetwork.com, whose members charge by the hour. Choose three or four planners and make appointments with each so you find the best fit.

Loading your payment cards onto a digital wallet will lighten your leather one—or provide a handy backup if you accidentally leave your plastic cards at home. Tap and pay at the store with apps such as Apple Pay, Google Pay and Samsung Pay. With Apple Pay or Google Pay, the payment terminal must have near field communication (NFC) technology, but Samsung Pay works with most magnetic-stripe readers as well as NFC terminals. You can also use Google Pay, Samsung Pay and Apple’s Wallet apps to store and use loyalty cards, or try a separate app such as Stocard or Key Ring.

At MissingMoney.com, see whether assets such as old bank accounts, stocks and bonds, utility deposits, or insurance policies have been turned over to the state. (If your state does not participate with MissingMoney.com, go to www.unclaimed.org for a link to your state’s web page for unclaimed property.) Search in states where you’ve previously resided and under former surnames, too, as well as for the names and states of your family members.

Recheck the beneficiaries on your retirement, savings and investing accounts, life insurance policies, and health savings accounts to make sure your assets go where you want them to. With most accounts, you can accomplish this online: Log in to your account provider’s website and poke around to find the beneficiaries tab (most likely in the account settings or profile section). For your brokerage account, you may need to search for a “transfer on death” form to print and sign. If your spouse isn’t your retirement account beneficiary, he or she may need to sign a consent waiver. If you’re updating beneficiaries for a pension or group life insurance policy, ask the human resources department if this info can be updated online.

A living will lets your medical providers—and your loved ones—know your wishes at the end of your life, and a health care proxy designates the family member or friend who can make decisions in a medical emergency if you aren’t able to. These two documents go hand in hand. The American Bar Association has resources to help with a health care proxy, and so does www.caringinfo.org, which has state-specific forms. Sign the health care proxy and living will and give the documents to your health care providers.

Ask all of the banks you do business with whether they will redeem your savings bonds; many banks require you to be a customer for at least six months. Or you can mail them to the Treasury Retail Securities Site, P.O. Box 214, Minneapolis, MN 55480 (see the factsheet at TreasuryDirect.gov for information about the procedures). To make the process easier in the future, convert your savings bonds to electronic bonds. That way you can redeem them online when you’re ready.

Head off haggling over who owes what after dinners out with friends. With Splitwise (free online or as an app for Apple and Android phones), you can split expenses, track IOUs and balances, and settle up anytime using PayPal or Venmo (you can also record cash payments). Create a group, enter a bill and select the people involved; Splitwise will do the math. It keeps a running total, so you can pay what you owe in one big payment instead of several small ones.

If your bank covers a checking-account overdraft, you could pay a fee of $35 or more. Instead, set up an automatic transfer from a linked savings account to your checking account in case you overdraw. If you must pay a transfer fee, it’ll likely be $5 to $15. And rather than pay up to $3 to transfer money from your account to an account outside the bank, sign up for a free peer-to-peer payment app. With Zelle, for example, you can send money from your bank account to recipients at other banks in minutes. (At least one member of the transaction must have an account with a bank or credit union that is a Zelle participant.)

If you have a high-deductible health insurance policy, you can likely tap the triple tax benefits of a health savings account: Your contributions are tax-deductible (or pretax if made through your employer), the money grows tax-deferred, and it can be used tax-free for out-of-pocket medical expenses—now or in the future. If your policy has a deductible of at least $1,350 for self-only coverage or $2,700 for family coverage, you can contribute up to $3,450 a year to an HSA for individual coverage or $6,900 for family coverage in 2018, plus an extra $1,000 if you’re 55 or older. You can’t contribute after you’re on Medicare, but you can use the HSA money tax-free to pay Medicare Part B, Part D and Medicare Advantage premiums after age 65, in addition to other medical expenses. If your employer doesn’t offer a plan, check HSASearch.com for a list of HSA administrators. Look for a plan that has low fees and lets you invest HSA money in mutual funds for the long run, which will give you the biggest tax benefits.

Your credit card issuer may provide a free credit score (see 10 Little-Known Perks). Or you can use a free online tool such as CreditKarma.com or FreeCreditScore.com. To help nudge that number upward, reduce your credit utilization ratio—the amount you owe on your credit cards compared with the total limit. Ask your credit card issuer to raise your limit (either by phone or by filling out a request form on the issuer’s website). You may need to supply your income and other details, such as your occupation or your monthly housing payment. Most decisions are instantaneous.

Retrieve your credit reports from the three major credit agencies (Equifax, Experian and TransUnion) free once per year at www.annualcreditreport.com. Review each report for errors or signs of identity theft, such as a loan you never opened. Then sign up for services that regularly scan your credit reports for changes that may indicate identity theft and that send you alerts of those changes through a mobile app or e-mail. Among free services, Credit Karma monitors your Equifax and Trans­Union reports, and Experian’s tool at www.freecreditscore.com keeps tabs on your Experian report. For paid services that offer more-robust monitoring, see These Services Alert You to Identity Theft. Are They Worth It?

Rather than accept a late-payment penalty or fee, call your credit card issuer and ask for forgiveness. A 2018 poll from CreditCards.com found that 84% of those surveyed who asked for a break had a late fee waived, 70% had an annual fee waived or lowered, and 56% received a lower interest rate when they asked their issuer. Point out your consistent payment history, frequent use of the card or anything else that may help your case.

You could be missing out on lucrative rewards and initial bonuses. A couple of our favorites: Citi Double Cash offers 2% cash back on all purchases (1% when you buy and 1% when you pay the bill), and Chase Sapphire Preferred ($95 annual fee, waived the first year) pays back two points per dollar spent on travel and dining and one point on everything else, with flexible options to redeem points for travel and other Purchases. (For more top picks, go to The Best Rewards Credit Cards, 2018.)

Log in to your online credit card account to turn on payment reminders via text or e-mail so you don’t miss your due date. While you’re at it, look for other alerts that may be useful to track your activity and curb overspending, such as notifications when your balance exceeds a certain amount or a purchase goes through.

Run a checkup on your home wireless network to keep hackers at bay; consult the router’s manual or go to the manufacturer’s website to get instructions. Turn on network encryption and the firewall, and change the router’s default network name and password. If you use a smart device—say, an Amazon Echo or Google Home speaker or a Wi-Fi-connected home-security system—create a second network for it that’s separate from the one you use for your PCs and laptops. If snoops crack into the device on the second network, they’ll have a harder time seeing activity on your computers.

Review the settings and security pages for each of your social media accounts to limit how widely you share your information with friends, the public and advertisers. On Facebook, you can use options on the settings menu to share information only with specific people, exclude your profile from search engine results outside of Facebook, opt out of facial recognition and put the kibosh on ads served up based on your online activity. For more on how to protect your Facebook data, see Take Steps to Protect Your Facebook Data.

On the AwardWallet app or at www.awardwallet.com, enter your log-in information for each account, including credit cards, retail stores, hotels, airlines and other travel carriers. (With Delta Air Lines, United Airlines or Southwest Airlines, you can only have e-mail statements from the programs automatically forwarded to AwardWallet.) You can view your points or miles balance for each program at a glance on the Accounts screen. AwardWallet alerts you when rewards are about to expire or when balances change.

A credit freeze, which blocks new lenders from viewing your credit reports, is the most effective way to prevent thieves from opening new credit accounts in your name. And by September 21, the credit agencies must allow you to place and lift a freeze free. You have to contact each agency to set up a freeze; for step-by-step instructions, see Freeze Your Credit in 3 Steps.

Now that its merger with Time Warner is complete, AT&T is offering unlimited wireless plans that include free access to more than 30 channels of live TV, including CNN, TBS and AMC, as well as 15,000 shows and movies on demand. Customers with other wireless plans can pay for the service, called WatchTV, for $15 a month, which makes it the cheapest streaming service available.

If web pages load at a crawl and videos keep buffering, measure your internet connection’s download and upload speeds at www.speedtest.net. If you aren’t getting the speed you pay for, contact your service provider to troubleshoot the connection. While you’re on the line, ask whether you qualify for any promotional deals.

End the frustrating cycle of resetting forgotten passwords—and foil ID thieves—by setting up a password manager, such as LastPass. The service will help you create strong, unique passwords for each account, then store them behind a single, ultra-secure master password. When you’re browsing the web, LastPass will automatically fill in your credentials. The service’s free version works across multiple devices, but the premium offering ($24 a year) adds multifactor authentication and 1 gigabyte of encrypted storage.

Sign into accounts that you no longer use (check old e-mail messages to jog your memory), then visit AccountKiller.com and Backgroundchecks.org for instructions on how to remove accounts from popular sites, including AOL, Facebook, HotMail and MySpace.

To protect your photos and videos from hackers, a virus, a technical glitch or other mishap, redundancy is key. Keep photos on your phone or PC if you’d like, but store backup copies on an external hard drive or “gold” quality CDs—as well as in the cloud with a service such as Google Drive or iCloud Drive. If you use your smartphone to snap pictures that you don’t want to lose, check your phone’s settings to make sure you’ve scheduled automatic cloud backups that include your images.

Instead of spending $10 to $15 a month to rent an all-in-one modem and router from your internet service provider, buy your own setup. You’ll generally spend $100 to $200 and recoup the cost in one to two years. Look for a combination modem and router that’s on your provider’s list of approved devices (usually on its website). After setting up your new device, contact your internet provider and ask how to return the modem and router you rented.

Start by checking the property record card at your assessor’s office, which may be available online. If you find an obvious error, such as the wrong number of bathrooms, your assessor may agree to reduce your assessment—and your tax bill—immediately. If there isn’t an obvious error but you still believe your assessed value is too high, you can appeal. The process typically takes a couple of months, and you’ll need evidence to back up your case, such as data on comparable properties. But a lower assessment is worth the effort, especially if you live in an area with high property taxes.

Try an online home energy audit, such as the Home Energy Saver, developed by the Lawrence Berkeley National Laboratory. Provide your zip code and answer questions about your home—its features, heating and cooling system, appliances, and lighting—and current energy costs. You’ll receive recommendations for making home energy upgrades that are ranked by payback time.

Use your smartphone to photograph every room in your home, as well as the contents of closets and drawers, then upload the photos for safekeeping with the free UPHelp Home Inventory App, developed by consumer advocate United Policyholders. You’ll have a visual record of your belongings to jog your memory if you have to itemize possessions for an insurance claim. You can also add detailed information, such as receipts, appraisals and serial numbers.

Plug your address into the Solar Calculator at www.energysage.com and it will use a satellite view of your roof and property to estimate your potential savings and break-even point for installing a solar power system. (The actual results will vary with your roof’s characteristics and the hardware and financing that you choose.) You can also get competing, apples-to-apples estimates from participating local solar installers.

Visit SavingforCollege.com and use the World’s Simplest College Cost Calculator to estimate the future cost of a private or public college or a specific school. Enter your child’s age, the type of college, your income and your current savings. The calculator estimates the grants and scholarships your future student will receive and shows the gap between the cost of attendance and your current savings. Revise your monthly savings goal to see how saving more will help close the gap.

If your state offers a tax deduction for 529 contributions, it generally makes sense to invest in your state’s plan. But if your state doesn’t offer a tax break—or you live in Arizona, Kansas, Missouri, Montana or Pennsylvania, which offer a tax break no matter where you invest—look for a plan with no or low annual maintenance fees and an array of investment choices with low expenses, such as New York’s 529 College Savings Program. Contributions will grow tax-free, and the earnings escape tax completely if you use the withdrawals for qualified education expenses.

The Free Application for Federal Student Aid is the ticket to financial aid for college, and filing season begins October 1 for the 2019–20 academic year. To apply, go to FAFSA.gov. You’ll need your 2017 tax return and other financial information.

To pick a federal student-loan repayment plan that fits your budget, visit Studentloans.gov and click on “Use the Repayment Estimator.” Enter the balance and interest rates of each of your federal loans and your income information to see what your monthly payments would be for each repayment plan. The longer the repayment period, the more you will pay in interest, so you’ll usually want to pick the plan with the highest payment you can afford.

Even if you’re years from retirement, registering yourself with Social Security will prevent identity thieves from creating a fraudulent account and applying for benefits in your name. In addition, you can make sure your earnings record, which is used to calculate your benefits, is accurate.

If you’ve put a credit freeze on your credit records, you’ll need to lift the freeze before you apply online, because Social Security uses your credit reports to confirm your identity. Or you can apply in person at a Social Security office.

You contribute after-tax money, which grows tax-free, and withdrawals in retirement are tax-free, too. A Roth is a great idea for young workers and kids with part-time or summer jobs because the longer investments in the account grow, the bigger the tax advantage. You can contribute up to the amount of your earnings from work, or a maximum of $5,500 for 2018 (or $6,500 if you’re 50 or older), as long as your modified adjusted gross income is less than $135,000 for singles or $199,000 for married joint filers. Fidelity and TD Ameritrade offer Roth accounts with no minimum investment or maintenance fees. (For a minor child, you’ll need to open a custodial Roth account.) Charles Schwab has a $100 minimum investment for a custodial IRA but no maintenance fees.

You can put in up to $18,500 in 2018 ($24,500 if you’re 50 or older), plus as much as 20% of your net self-employment income, up to a total of $55,000 (or $61,000 if you are 50 or older)—or the amount of freelance income for the year, whichever is less. Your contributions are tax-deductible, and they grow tax-deferred until you take withdrawals in retirement. Fidelity, Schwab and several other financial institutions offer low-cost solo 401(k)s.

Run your numbers at www.immediateannuities.com. The site can calculate the income you’d receive from a lump sum or what you’d have to invest to get the income you need.

You can get a breakdown of the fees you pay by using Ameritrade’s free 401(k) Fee Analyzer. You’ll need to type in your fund information or provide your 401(k) account login credentials to allow read-only access to your account.

It’s a good idea to reshop your coverage every few years, especially if you are adding teen drivers or have major life changes, such as retirement. Ask your insurer or agent for a list of discounts, and make sure you’re getting all the breaks you deserve. See if you can reduce your rate some more by bundling auto with home or renters insurance, signing up for a data-tracking program or taking a defensive-driving course. Raising your deductible to $500 or $1,000 will trim your premiums and deter you from filing small claims that could lead to a rate hike.

See whether the coverage in your policy has kept up with the cost of labor and materials so you’ll be able to rebuild your home and replace your possessions should disaster strike. The insurer should calculate the rebuilding cost based on the square footage of your home and the current, local per-square-foot cost to rebuild. Mention any home improvements that might boost the replacement cost. Ask about gaps in coverage you could fill—such as by adding an inexpensive sewage backup rider or getting special coverage for valuables.

On the TV game show The Price is Right, contestants try to guess the correct price of an everyday item. Players whose estimates are closest to the right price go on to compete for valuable prizes. It’s harder than it looks.

The challenge would be even greater if the contest centered on the price of investment advice. You might guess 0.30% of assets for a digital investment plan with a robo adviser, or $2,000 for one year with a certified financial planner. How about $900 for an investment-allocation strategy to implement on your own? A fee based on assets for ongoing portfolio supervision with a money manager might be 0.50%, 0.75% or 1.0%.

Turns out, there’s no single right answer because of the many kinds of advisory services available; there’s an adviser for almost everyone at nearly any price point. It’s nice to have options, but that can make it hard to choose. And what’s the right price? The key is to figure out your needs and find the adviser who best meets them. We’ll help you do that in this story, and give you an idea of what you should pay.

The motley mix of advisory fees and providers points to shifts under way in the financial advice industry. Intense competition from robo advisers, which use computer algorithms to offer portfolio management at bargain prices, has been pushing down fees for years. And the U.S. Department of Labor’s fiduciary rule, which took effect in June, is nudging advisers to be more transparent about charges. “The industry is moving away from fees for products, toward fee-for-service planning,” says Michael Kitces, a certified financial planner at Pinnacle Advisory Group, in Columbia, Md.

That’s all the more reason to pay only for what you need. Whether you just need advice about your investment portfolio or want help with financial issues beyond investing (or both), defining what services you need will help guide you to the right kind of adviser. These days, there are generally four types: robos, brokers, investment advisers and financial planners, in order of the breadth of services offered. There is crossover among all groups, and many financial professionals hold multiple credentials. Some firms—Charles Schwab and Fidelity Investments, for instance—offer access to all four types of advice. But typically, what—and how—you’ll pay varies by adviser.

For each type of adviser, we list the range of fees you should expect, what you’ll get for your money and what kind of customer the adviser is best suited for.

Robo advisers

Who they are:

Robos are virtual advisers. Answer a few questions online, and computer programs match you with an appropriate, diversified portfolio of low-fee exchange-traded funds tailored to your time horizon and tolerance for risk. The “robots” monitor and rebalance your investments in tax-efficient ways throughout the year, and you never have to talk to a human being. You’ll find robos at dozens of firms, such as Betterment and Wealthfront, as well as discount brokers such as Schwab, TD Ameritrade and E*Trade. Somewhere along the way, many people who use robo advisers yearned for a bit of human interaction. Some firms, such as Personal Capital and Vanguard, were already offering access to a certified financial planner or investment adviser in addition to their digital service. Now others, including Betterment and Schwab, offer access to a human, too.

What they offer:

Robos deliver investment advice in a few mouse clicks. Robo-only services won’t give advice on your 401(k) plan, how to save more for retirement or how to afford college. But hybrid, robo–human services can provide some assistance. At most hybrids, when you need to talk to an adviser, you get the next available person on the phone line. One exception is Personal Capital, where you work with a dedicated adviser.

The fees:

The newfangled services charge clients the old-fashioned way—a percentage of assets under management. The typical robo rate hovers around 0.25% per year, but it can go as high as 0.50%. In most cases, that doesn’t include the expense ratios of underlying holdings. Hybrid services tend to cost a little more: between 0.30% and 0.91% of assets per year.

Best for:

Robos appeal to investors who are looking only for portfolio advice and who are happy with index funds. Robos initially appealed to investors with small accounts, but many firms now have clients with seven-figure portfolios.

Brokers

Who they are:

These professionals work for broker-dealers—firms in the business of buying and selling securities (stocks, bonds, mutual funds and other investment products) for customers. We’re talking Schwab, Fidelity, Bank of America Merrill Lynch, Raymond James Financial and the like. Some banks also have broker-dealer businesses, such as Wells Fargo and JPMorgan Chase. Depending on the firm, brokers are also called registered representatives, financial consultants, stockbrokers, investment consultants or financial advisers.

What they offer:

Ongoing management of your portfolio, shifting your money among assets over time to meet your goals or in response to market moves. With a dedicated adviser, you’ll be able to call anytime you have a question. And clients who have deep pockets can generally get access to more-sophisticated investments, such as private equity, real estate and hedge funds. In addition, many investment advisers offer advice on other financial issues, including insurance and estate planning. Investment advisers are required by law to put your interests ahead of theirs.

The fees:

Advisory fees are usually charged based on assets under management, and the bigger your account, the lower the rate you’ll pay. The typical fee, says Rhoades, is about 1%, though some charge as much as 2% per year and others charge less. At bigger banks and trusts that provide services such as succession planning for small-business owners, fees go up to 3%, says Wei Ke, an analyst with consulting firm Simon-Kucher & Partners. Very high-net-worth clients can often negotiate advisory fees, he adds.

Best for:

Those who want to build a relationship with an active manager of their portfolio. At regional banks, planning, goal-setting or “get me on the right track” help is available, too. At bigger trust firms, the white-glove service includes estate planning, charitable-giving advice and hand-holding for all aspects of your financial life.

Financial planners

Who they are:

Anyone can claim the title “financial planner,” so look for one who has been credentialed by the Certified Financial Planner Board of Standards. Planners with the CFP designation are required to put their clients’ interests ahead of their own. Many are also registered investment advisers.

What they offer:

Planners can give you advice on investments, and some may offer to manage your portfolio, but they also work with clients to develop a long-term financial plan. That can include strategies for buying a car or a house, how much life insurance to buy, and how to save for retirement and college at the same time. “It’s life coaching,” says Sheryl Garrett, who founded the Garrett Planning Network, a nationwide group of planners who charge by the hour. It’s also about having an adviser always on hand for help with financial questions. “Clients can call anytime,” says Jeremy Brenn, a College­ville, Pa., certified financial planner.

The fees:

Most CFPs are fee-only and don’t earn commissions. Some charge by the hour, typically between $200 and $400, depending on where you live and the complexity of your finances. Or you might pay a one-time fee for a single project—a budget, for example, or an asset-allocation plan. Other planners charge a fixed annual fee—often called a retainer or subscription—paid monthly or quarterly. Planners working on retainer typically cost between $3,500 and $7,500 per year, depending on the client’s financial situation and needs, according to SEI Advisor Network, an advisory group based in Oaks, Pa. The going rate for planners who charge a percentage based on assets is roughly 1%, but it may be higher or lower depending on the firm and how much money you have.

Sheila Padden, a CFP in Chicago, charges between $2,000 and $20,000 a year. Her $2,000 clients are typically professionals with student loans and about $100,000 in net worth; her $20,000 clients may have $5 million or more and need estate-planning help. Fees are calculated based on multiple factors, including income, net worth and the complexity of a client’s finances.

Best for:

Investors who need financial guidance beyond investing, on everything from budgeting help and debt management to when to start drawing Social Security. For help with a single issue—say, sorting out pension payment options—find a planner who charges by the hour. The catch with an hourly planner, however, is that you execute strategies on your own. If you want some­one to do the work for you, or you have more complex needs, build a long-term relationship with a planner. In that case, a retainer model or a fee based on assets under management is more appropriate.

Wherever you go for advice, the right price may boil down to whether you want the lowest cost or better service and more attention. Rapport counts, too—and it’s difficult to put a price on that.

Ask the right questions

Finding the right adviser can feel a little like dating. You’re looking for that magic blend of mutual interests and rapport. And of course, there’s always the small matter of his or her credentials.

A proper interview process can help you address those issues. There are “15 to 20 questions you need to ask,” says Ron Rhoades, a certified financial planner. Checking to see that an adviser has a blemish-free record is a vital step and should be done before you meet. Go to Finra’s BrokerCheck website, www.finra.org/brokercheck. For advisers, search by firm name at www.adviserinfo.sec.gov for disciplinary information.

The North American Securities Administrators Association, which is made up of state securities regulators and works to protect investors, has a list of seven questions you should ask yourself before the interview, and nine you should pose to the adviser. Among the more important questions: Are you required by law to always act in my best interests? Will you put that commitment in writing? How do you charge for your services? Do you receive compensation from other sources if you recommend that I buy a particular investment product? Will you break out all fees and commissions? “Have the adviser write out all of the fees in contract form or on a piece of paper,” says Sheryl Garrett, a certified financial planner and founder of the Garrett Planning Network.

Professional associations can help with the hunt, says Rhoades. Find a fee-only investment adviser through the Alliance of Comprehensive Planners, or the National Association of Personal Financial Advisers. Most of the advisers associated with these groups are certified financial planners and offer all-encompassing financial planning. But you can hire them just to help you with your portfolio. Ask for examples of how the planner or adviser has changed clients’ lives. Make sure you feel comfortable with his or her investing philosophy and strategy.

Finally, plan to meet with at least three (and up to five) advisers. Many advisers offer a free get-acquainted meeting. “People should take advantage of that,” says Garrett. Face-to-face get-togethers help, of course, but younger investors may find a video chat sufficient. And don’t hire someone at the first meeting. “Don’t make a decision while you are emotional about the person you’re meeting with or the money issues you’re confronted with,” says Rhoades. Instead, take notes during the interview and review them a week later. If you have more questions, set up a second meeting. “This is a big decision,” he says, so take your time.

However you invest, it’s a great time to shop for an online broker. Firms have been trimming commissions, expanding their online tools, offering more transaction-free mutual funds and enhancing their mobile apps. Eager to win your business, brokers are also offering signing bonuses, such as a $1,000 bounty from TD Ameritrade, and up to 500 free trades for two years at Fidelity Investments and Charles Schwab.

To help you choose the best broker, we surveyed seven major firms: Ally Invest (which acquired TradeKing last year), E*Trade Financial, Fidelity, Merrill Edge, Schwab, TD Ameritrade and Vanguard. Why this lineup? To be included in our survey, brokers had to offer online trading of stocks, exchange-traded funds, mutual funds and individual bonds, as well as provide some retirement-planning tools and advisory services. We excluded brokers that primarily focus on active traders—those catering to day traders, for instance. T. Rowe Price declined to participate. Scottrade wasn’t included because TD Ameritrade recently purchased the firm (and is in the process of absorbing Scottrade’s clients).

And the winners are…

In a tight contest, Fidelity and Merrill Edge tie for first place, squeaking past Schwab. All three firms rank high in key categories, such as commissions and fees, tools, and customer service. But we found some important differences. For example, Merrill ranks best for research, but Fidelity and Schwab offer many more mutual funds that can be bought without transaction fees, along with a larger selection of corporate and municipal bonds. Fidelity and Schwab also rack up points for their wide range of advisory and financial-planning services.

Of course, the right broker for you may not be one of our top-ranked firms. If you like to trade stocks, particularly on a mobile device, E*Trade may be your best bet, thanks to excellent screening tools and charts, as well as comprehensive information about individual stocks, all available on its app. TD Ameritrade ranks high for its research offerings and ample lineup of no-transaction-fee (NTF) mutual funds and ETFs, many of which can be purchased without trading commissions. Ally may appeal to young investors who want a low-cost, no-frills broker joined to an online bank with competitive interest rates on certificates of deposit and savings accounts.

Vanguard falls behind the leaders in almost every category, losing points for its bare-bones website, its basic mobile app and its lack of stock research. But these drawbacks don’t make the fund giant a bad choice for investors who buy and hold for the long term. Vanguard brokerage customers don’t pay a penny in commissions to access the firm’s low-cost mutual funds and ETFs, many of which can save you money over the long run compared with funds that have higher ongoing fees.

For a deeper dive, check out the results in each category below. To find the best broker for you, see the box on the facing page, where we name the winners for several types of investors.

Commissions and fees

Fidelity launched a price war early this year when it cut its stock commissions to $4.95 per trade. The move prompted Schwab to match Fidelity’s rate, and it led other brokers, such as E*Trade and TD Ameritrade, to lower commissions, too. The upshot: You shouldn’t pay more than a few bucks to trade stocks or ETFs, and you can get lower prices and even free trades at some brokers. E*Trade, for instance, trims its commission from $6.95 to $4.95 for clients who make at least 30 trades a quarter.

Merrill’s base rate of $6.95 for stock trades looks pricey at first glance. But customers who have at least $50,000 in combined balances at the brokerage firm and Bank of America (Merrill’s parent) qualify for up to 30 free trades a month, and they also receive such perks as a cash-back bonus on credit cards and discounted rates on auto loans. Stash at least $100,000 with Merrill and BofA (combined) and you’ll earn up to 100 free trades per month and higher levels of “preferred rewards.” “Most of our clients aren’t paying for stock trades,” says David Poole, head of Merrill Edge Advisory & Client Services.

At Schwab, customers with a gripe can get a refund on all fees, if they ask. The firm recently expanded its “satisfaction guarantee” to cover all commissions, advisory fees and other charges. “If a client does any business with us and isn’t satisfied, we’ll refund the fees, no questions asked,” says Terri Kallsen, head of Schwab Investor Services.

Ally’s base rate of $4.95 lands it on the leader board for stock trades, and the firm trims that rate to $3.95 for clients who make at least 30 trades a quarter. Ally also charges a relatively low $9.95 to buy or sell mutual funds. Those fees are much less than what Schwab levies for trading funds outside its NTF network ($76 to buy but no charge to sell). Fidelity and TD Ameritrade both charge about $50 to buy mutual funds outside their NTF networks (no charge to sell at Fidelity), while E*Trade, Merrill and Vanguard levy $20 per transaction. But Ally doesn’t offer any NTF mutual funds or ETFs—a big drawback that could cost you quite a bit in fees if you buy and sell a lot of funds. “No-fee funds are something we’re starting to look at,” says Rich Hagen, president of Ally Invest.

Unlike the other brokers, Vanguard’s commission structure doesn’t encourage trading. The firm charges $7 for the first 25 stock trades per calendar year and a steep $20 after that. Transaction-fee funds also cost $20 per trade. But customers can load up on all Vanguard mutual funds and ETFs without having to pay sales charges—a good deal if you invest mainly in low-cost index funds. One small nuisance: Customers must hold at least $10,000 in Vanguard mutual funds or ETFs or sign up for electronic statements to avoid a $20 annual account “service” fee.

Investment choices

Aside from Ally, every broker surveyed here offers thousands of funds without a transaction fee. Schwab tops the list with 3,976 no-transaction-fee funds, all with minimum investments below $50,000 (our cutoff to be included in this category). Schwab also offers 231 commission-free ETFs, the most of any broker in our survey. The lineup includes many low-fee index funds sponsored by Schwab, along with ETFs from such firms as Guggenheim, PowerShares, State Street and Wisdom­Tree. Schwab’s vast number of no-fee mutual funds and ETFs vaulted it to first place in this category.

E*Trade also scores high for its substantial roster of no-fee funds (3,887), as does TD Ameritrade (3,749). Both firms also offer more than 100 commission-free ETFs. But TD’s lineup includes more low-cost funds from sponsors such as iShares and Vanguard; E*Trade emphasizes higher-fee ETFs in niche investment areas, such as Global X S&P 500 Catholic Values (CATH)and WisdomTree Managed Futures Strategy (WDTI).

Fidelity ranks competitively, too, with 3,532 NTF mutual funds and 85 commission-free ETFs, including dozens of iShares ETFs with low-to-minuscule expense ratios. Investors at Merrill have fewer choices in NTF funds (2,251). Vanguard also looks weak in this arena, with just 2,531 NTF mutual funds, although that includes all of the firm’s proprietary funds (whose expense ratios undercut those of most of its rivals). The firm also offers its 70 Vanguard ETFs without commissions.

Beyond funds and ETFs, each broker sells individual bonds, including Treasuries, municipal and corporate issues, and high-yield “junk” bonds. TD’s lineup of more than 28,000 corporate IOUs exceeds the others’ offerings. But if you want bonds issued by giants such as AT&T or General Electric, you can find them anywhere.

One note: Bonds don’t trade on an open market, and prices tend to be opaque. Most brokerage firms charge commissions of $1 per bond with a $1,000 face value, passing on the same prices that they get when they acquire the bonds from other dealers (which include the dealer’s markup). Merrill and TD, however, sell bonds on a “net yield” basis, with the broker’s profit built into the prices. Some studies have found that customers tend to pay more for these net-yield bonds than they would with a flat-rate commission.

Research

With commissions at rock bottom these days, a big distinguishing feature among brokers is the breadth and quality of research they furnish. Every firm provides snapshot reports on stocks, including basic data such as revenues and earnings. Most brokers also offer reports on bonds from ratings agencies, such as Moody’s and Standard & Poor’s. But a few firms go further, supplying in-depth market analysis and research on companies, along with all sorts of investing ideas.

Scoring best in this category, largely for its stock research, is Merrill Edge. Customers can see detailed research on more than 1,300 companies covered by Bank of America Merrill Lynch analysts, including missives on giants such as Microsoft and Wal-Mart Stores, as well as a slew of smaller companies, real estate investment trusts and master limited partnerships. Merrill also includes more than a dozen lists of recommended stocks, including “Warren Buffett Stocks” and “Earnings Turnarounds.” And the firm produces pieces on big themes, such as a recent report titled “Uberfication: Global Sharing Economy Primer Picks.”

Schwab, E*Trade and TD Ameritrade earn high scores, too, supplying stock research from well-established firms such as Credit Suisse and CFRA. Schwab throws in 1,600 Morningstar stock reports, along with its own ratings, which gives its score in this category a slight bump.

For avid stock traders, though, E*Trade may be best. The firm jams its site with analyst recommendations, charts, data and investing ideas, including dozens of stock screens. Customers at TD Ameritrade and Schwab can find plenty of investing ideas, too, such as Credit Suisse’s U.S. stock “focus list,” available on both sites. If you want in-depth mutual fund research, though, you won’t find it on any broker’s site.

The other three outfits—Ally, Fidelity and Vanguard—don’t score well in this area. At Ally, CFRA provides the only in-depth stock research. Fidelity lists more than a dozen research reports for big companies, such as Apple. But most of them are just technical analysis—evaluating stocks based on trading patterns or other data—and lack detail about corporate business developments and industry trends.

Tools

Online calculators and tools can help you track your portfolio’s performance, screen for funds, plan for retirement and generally keep tabs on your financial life. Some sites get an edge in this category by supplying handier and more comprehensive tools than others.

Merrill earns the highest score, with Fidelity coming in a close second. Along with top-notch screeners for funds and stocks, Merrill provides Morningstar’s powerful Portfolio X-Ray, a tool that can dig into your fund holdings and individual stocks and, among other things, analyze areas of overlap and market factors influencing your returns. Most of these tools are easy to find, too, by using the drop-down menus on Merrill’s home page.

Finding tools on Fidelity’s site takes more poking around. But Fidelity’s portfolio-analysis tools are robust and easy to use, and you can configure them in multiple ways (to track your performance against not just traditional indexes but also blended market benchmarks, for example). Fidelity also provides top-notch budgeting and retirement-planning tools. And you can see a comprehensive picture of all your finances, including accounts held at other firms, your mortgage balance and your home’s market value.

As you might expect, E*Trade excels with tools for stocks, ETFs and options. TD Ameritrade offers a “Premier List” of top-rated mutual funds selected by Morningstar (all available without transaction fees). Schwab makes it easy to find tools, too. We especially like the firm’s preferred-stock screener, which includes credit ratings from Moody’s and S&P Capital IQ, as well as key data points, such as dividend yields and upcoming “call” dates, when issuers may redeem the securities.

Vanguard’s tools focus on nuts-and-bolts planning—things such as setting up an investment mix and creating a retirement plan. Customers won’t find targeted stock screens, though, and can only import outside account data if they’re customers of Vanguard’s advisory service. Ally furnishes a few stock screeners but doesn’t offer retirement-planning tools. Ally says it plans to roll out more screeners and tools over the next year.

Ease of use

Finding what you want on a broker’s site can feel like wandering through a maze of charts, data and jargon-filled reports.

Overall, Fidelity’s relatively intuitive site helps you avoid information overload. The firm recently redesigned its ETF research center, added voice recognition at its call centers to identify customers without a passcode, and enhanced its “quick quote bar” to facilitate trading. Fidelity also wins points for its 2% cash-back Visa card—with direct deposit of cash rebates into brokerage accounts—along with services such as FidSafe, a free online vault where customers can store valuable documents. (Merrill is the only other firm that offers a similar safe-like service.)

With access to Bank of America offices, Merrill provides the most branches (4,600) for its clients to meet with a financial adviser. Customers can easily transfer money to Bank of America with one-click convenience, and they can see all of their savings, checking and investment accounts at both the bank’s and the brokerage’s websites. Schwab also blends brokerage and banking services well, pro­viding high-yield checking and other bank services, as well as mortgages through Quicken Loans. One drawback: Schwab’s American Express cash-back card rebates just 1.5% of the amount of your purchases, and fewer merchants accept Amex.

Also competitive in this category is TD Ameritrade. The firm is ex­panding its branch network from about 100 locations to more than 400 (including Scottrade’s shops). New features on TD’s site include a revamped ETF research center and an upgraded “dock” with news from Yahoo Finance. E*Trade’s site, packed with technical tools, news and data, may not be as easy to navigate for novices. Cust­omers can do some banking through E*Trade, but the firm doesn’t provide a cash-back card or services such as a digital vault.

Because they are purely online brokers, Ally and Vanguard aren’t as convenient, losing points for their lack of physical branches. Ally’s cash-back Visa card, which rebates a base rate of 1%, isn’t as competitive as cards from Fidelity or Schwab. Also, Ally’s cash rewards aren’t automatically deposited into a brokerage account, and customers can’t import account data from other firms. Vanguard doesn’t offer a cash-back card or many banking services. Its site lacks real-time streaming quotes and other user-friendly tools to trade stocks and ETFs.

Mobile apps

Brokers’ apps are be­coming handy enough to allow customers to conduct almost all of their business via a mobile device, whether it’s buying stocks, trading options or depositing checks. E*Trade’s app scores best. It includes a full suite of trading features, as well as stock research reports, lists of “all-star” funds and multiple ways to screen for stocks, ETFs and funds.

Merrill’s app includes several calculators and tools for college savings and retirement planning, along with research from CFRA and Morningstar. Cust­omers can’t screen for stocks or funds, though. Fidelity and Schwab both win points for their apps’ user-friendliness: Trading, transferring money and depositing checks all work seamlessly. Fidelity customers can screen for ETFs, too, and Schwab supplies useful stock ratings, along with an “Idea Hub” for trading options.

Apps from Ally and TD fall short in one big area: They lack the ability to trade mutual funds. Vanguard’s app doesn’t let you buy and sell non-Vanguard funds—also a drawback. Customers can deposit checks, but they can’t transfer money on Vanguard’s app, limiting its usefulness.

Investment advice

Brokers are so keen to handle your money that most will set up a financial plan and review your portfolio at no charge. They can also manage your investments, for a fee, or help with things such as estate plans and insurance.

Taking the lead in this category are Fidelity, Schwab and Vanguard. Fidelity and Schwab score well for a wide array of planning services and managed accounts, such as a Fidelity portfolio dedicated to indi­vidual municipal bonds and one at Schwab focused on dividend-growth stocks. At Fidelity, fees for separately managed accounts start at 1.20% annually but are reduced by “credits” for some of the costs in the portfolios’ fund holdings. For clients with at least $25,000, Schwab offers tailored portfolios of ETFs, with an annual advisory fee of 0.28% (capped at $900 per quarter for high-value accounts).

Vanguard customers can get into a managed account with a $50,000 minimum investment. Annual fees are 0.30%, no matter what investing strategy you choose. These accounts hold Vanguard ETFs and the Admiral share class of its mutual funds, which charge some of the lowest expense ratios in the industry.

E*Trade, Merrill and TD offer managed portfolios, starting at 0.75% annually at TD, 0.85% at Merrill and 0.90% at E*Trade. All three firms provide plenty of choices, though, such as a “supplemental income” portfolio at TD and an aggressive-growth package at E*Trade.

If you don’t have much to invest, you could opt for a “robo” service, which should cost less and may be just as effective as brokers’ higher-fee accounts. These portfolios of ETFs and mutual funds are automatically adjusted to maintain a fixed mix of stocks and bonds. Investment minimums are as low as $2,500 at Ally but typically start at $5,000, with annual management fees of 0.30% at Ally, E*Trade and TD. Fidelity charges a bit more, 0.35% to 0.40%. But its fees include underlying fund expenses. Vanguard doesn’t offer a robo, but its Personal Advisor service is essentially the same thing. Plus, Vanguard will tailor the investment mix to your specific situation, following a consultation with a Vanguard adviser. (For more on automated investing services, see Robo Advisers Get the Human Touch.)

Schwab offers a similar service, charging a management fee of 0.28% for a personalized portfolio of ETFs, constructed with the help of a client’s dedicated financial adviser. Customers can also opt for Schwab’s Intelligent Portfolios—baskets of ETFs that the firm selects and rebalances without charging a separate management fee. The downside of these portfolios is that even the most aggressive ones—with hefty amounts of stock—hold 6.9% in cash (and much more in conservative portfolios). Maintaining that much cash can drag down returns in a strong market.

At the opposite end of the cost spectrum is Merrill, which charges a 0.45% management fee for its robo service. Merrill says that the accounts aren’t just based on algorithms, however, and that customers “have access to a human being whenever they need help.”

A Broker for Every Investor

Best for mutual fund investors: Schwab. Offering 3,976 funds with no loads, no transaction fees and investment minimums of less than $50,000, Schwab edges the competition. Need some help? Pick from Schwab’s “select list” of 168 no-transaction-fee mutual funds, a roster that includes many solid performers with reasonable expense ratios.

Best for ETF investors: Schwab. The firm’s 231 commission-free exchange-traded funds put it on top in this category. Many of these ETFs have wafer-thin expense ratios, enabling investors to build a low-cost portfolio without paying a penny in trading commissions.

Best for active stock traders: Merrill Edge. Investors can qualify for 30 free trades per month by having at least $50,000 in combined balances at Merrill and parent Bank of America. Maintain at least a $100,000 balance and you get 100 free trades per month. Runner-up: Ally Invest. The firm trims commissions from $4.95 to $3.95 for investors who make at least 30 trades a quarter, with no investment minimums.

Best for investors on the go: E*Trade. Packed with handy features, E*Trade’s app lets you buy or sell stocks, mutual funds and options, as well as run screens, deposit checks and pay bills. Stock research is also available, something most brokers exclude from their apps.

Best for managing cash: Fidelity. Customers can easily pay bills and see a complete picture of their financial life on Fidelity’s site, including mortgages and balances in non-Fidelity accounts. Fidelity’s Visa Rewards card, which pays back 2% on all purchases, beats the cash rebates from cards of most other brokers.

Best for retirees: Vanguard. Low fees throughout its lineup of mutual funds and ETFs make Vanguard a top choice for retirees (or anyone trying to save a few bucks). The firm charges 0.30% a year to manage accounts, one of the lowest fees in the business.

It often makes sense for job switchers and retirees to roll over their 401(k) to a traditional or Roth IRA (see Pros and Cons of Rolling Your 401(k) Into an IRA). A handful of discount brokerages, including five of our top-ranked online brokers, compete for your retirement dollars that you’ve saved with another company by offering cash incentives that range from $100 to $2,500, depending on how much you invest. Consider:

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E*Trade. Open a new IRA with $25,000 rolled over from an employer retirement account, and E*Trade will kick in a $200 bonus. For a rollover of $1 million or more, you’ll get $2,500.

Fidelity. Score a $100 bonus when you fund a new IRA with at least $25,000. Or roll over at least $50,000 from a 401(k) or IRA and Fidelity will award you a $200 bonus. You’ll earn a bonus of $2,500 if you roll over $1 million or more.

Merrill Edge. A rollover IRA funded with as a little as $20,000 will earn you a $100 bonus. For accounts funded with $200,000 or more, Merrill offers a $600 bonus.

Scottrade. Funding a new IRA with $25,000 from your old 401(k) will earn you a $100 bonus. You’ll earn a $2,500 bonus if you roll over $1 million or more to a new IRA.

TD Ameritrade. Roll over $25,000 or more to a new TD Ameritrade IRA and you’ll receive a $100 bonus. Rollovers of $1 million or more earn a $2,500 bonus.

Charles Schwab and Vanguard do not offer rollover incentives or bonuses.

Don’t let a signing bonus sway you completely. Low commissions to trade stocks or exchange-traded funds or low fees on your investments can save you money in the long run. And finding a firm that suits your needs is far more valuable than a bonus. To see how leading online brokers stack up, see our guide to the Best Online Brokers.

Some things never seem to grow old, including the love investors have for dividend stocks. There’s a good reason we love dividends. Between 1930 and 2012, they accounted for about 40% of the total return of Standard & Poor’s 500-stock index, according to a Morgan Stanley study. Here are our favorite dividend-stock mutual funds—two index funds and five actively managed portfolios. The list, with one exception (Vanguard High Dividend Yield Index Fund), is made up of funds that invest in so-called “dividend growers”—companies that consistently raise their payouts. All of the funds have one thing in common: They have been less volatile than the S&P 500 over the past one, three, five and 10 years.

All returns and data are through February 1. Click on ticker-symbol links for current prices and more.

• Symbol: AMFFX
• Expense ratio: 0.67%
• Total assets: $41.8 billion
• 1-year return: 19.1%
• 3-year return: 9.3%
• 5-year return: 11.9%
• 10-year return: 6.6%
• Yield: 2.1%

We haven’t recommended American funds much in the past, in part because they were only available through advisers. Not anymore. Now Capital Group, which sponsors and manages the American Funds portfolios, offers a share class with no sales charge or transaction fee for each of its funds at certain brokerage firms. You can buy the F1 shares of American Mutual at Fidelity, Schwab and Scottrade with a super-low minimum initial investment of $250 ($25 if you opt for monthly automatic deposits). That and the fund’s low expense ratio, are part of this fund’s draw.

But the best thing about American Mutual is its ability to hold steady in rocky markets. Since its 1950 inception, American Mutual has outperformed the S&P 500 in all 14 market declines of 15% of more, says Morningstar analyst Alec Lucas. Losing less has helped over time. The fund’s long-term returns have been above average, and its risk has been well below average. Its 15-year record, a total return of 7.2% annualized, outpaces the S&P 500 by a smidge , and the fund was 18% less volatile over that time.

American Mutual invests in attractively priced stocks of industry leaders that pay steady dividends. It has some leeway to hold preferred stocks, convertible bonds, U.S. government bonds and investment-grade corporate debt, too. About 90% of the fund’s assets are invested in stocks, plus 2% in bonds and the remainder in cash. Its top three holdings are Verizon Communications, Texas Instruments and Amgen.

• Symbol: WSHFX
• Expense ratio: 0.66%
• Total assets: $86.9 billion
• 1-year return: 19.7%
• 3-year return: 9.6%
• 5-year return: 12.8%
• 10-year return: 6.4%
• Yield: 1.9%

Washington Mutual managers must follow a strict set of rules for the kinds of stocks the fund owns. But those guidelines, which target characteristics that are common among blue-chip stocks, make this fund a good fit for conservative investors looking for dividend stocks. One rule, for example, requires a company to have paid a dividend in eight of the previous 10 years. (Up to 5% of the fund’s assets can be in non-dividend payers, but they must pass even stricter requirements.)

Over time, the unique stock-picking strategy has delivered above-average returns with below-average risk. The fund’s 10-year annualized return, 6.4%, doesn’t beat the S&P 500, but it’s better than 77% of similar funds that invest in bargain-priced, large-company stocks. And the ride was 13% less bumpy than that of its peers.

Don’t let the fund’s size worry you. American Funds and its sponsor, Capital Group, employ a multiple-manager approach that cuts unwieldy funds down to size. Washington Mutual has eight managers, with each one running part of the fund separately from the others.

• Symbol: BUFDX
• Expense ratio: 0.98%
• Total assets: $52 million
• 1-year return: 20.4%
• 3-year return: 12.3%
• 5-year return: --
• 10-year return: --
• Yield: 1.5%

Buffalo Dividend Focus launched in 2012, which makes it the youngest fund among our picks. But we’re drawn to its nimble size: It has just $52 million in assets. And so far, managers Paul Dlugosch and Scott Moore have performed well. The fund’s three-year record beats the S&P 500 by an average of 1.4 percentage points per year.

Dlugosch and Moore focus on generating income by investing mostly in dividend-paying stocks that have a history of increasing those payments. They start with stocks with a market value of $1 billion—the fund can invest in companies of any size but favors large firms—and a minimum yield of 2.0%. The managers then zero in on bargain-priced companies that are leaders in their industry and that generate enough cash to support and raise dividends over time. Apple, for instance, is its top holding.

• Symbol: PRDGX
• Expense ratio: 0.64%
• Total assets: $6.9 billion
• 1-year return: 18.0%
• 3-year return: 10.4%
• 5-year return: 13.1%
• 10-year return: 7.2%
• Yield: 1.5%

Manager Tom Huber calls Dividend Growth an “all weather” fund. Since he took over the fund in 2000, he has seen a few stormy periods. Throughout the aughts, for instance, the S&P 500 lost an annualized 1.0%; Dividend Growth, a Kiplinger 25 member, gained 2.8%. In 2008, the fund’s 33.3% loss was 3.7 percentage points better than the S&P 500 and beat 85% of similar funds. In good times, the fund has lagged the benchmark, but only by a little. Over the years, providing ballast in bad times—and largely keeping up in good times—has made for a good overall record. Since Huber stepped in as manager in March 2000, Dividend Growth has returned 6.8% annualized, ahead of the 4.5% return in the S&P 500.

• Huber focuses on large, sturdy firms that throw off lots of cash and thus have the capacity to consistently raise their dividends. “If companies are raising dividends, that means earnings and cash are growing, too,” says Huber. “These kinds of companies tend to be durable.” Top holdings are JPMorgan Chase, Microsoft and UnitedHealth Group.

• Symbol: VEIPX
• Expense ratio: 0.26%
• Total assets: $25.4 billion
• 1-year return: 19.0%
• 3-year return: 10.3%
• 5-year return: 13.1%
• 10-year return: 7.2%
• Yield: 2.8%

We recently added Vanguard Equity-Income to the Kiplinger 25. It is run by two outfits. Wellington Management’s Michael Reckmeyer manages two-thirds of the fund’s assets; Jim Stetler and Michael Roach of Vanguard’s in-house quantitative group, which uses computer models to pick stocks, run the remainder.

Both firms focus on generating income and share-price gains by investing in large, high-quality companies with above-average yields. But the managers go about picking stocks in different ways. Reckmeyer favors large firms with superior growth prospects and an ability to boost the dividend over time. And he likes to buy when stocks are out of favor or trading at low prices. Stetler and Roach employ computers to home in on companies with strong balance sheets, consistent earnings growth and managers who make shareholder-oriented decisions (such as raising dividends), among other factors.

The two teams have been working together for almost a decade (since August 2007). Since then, the fund has returned 7.8% annualized, which beats the 7.5% return of the S&P 500.

• Symbol: VDAIX
• Expense ratio: 0.19%
• Total assets: $22.6 billion
• 1-year return: 15.9%
• 3-year return: 8.7%
• 5-year return: 11.1%
• 10-year return: 6.7%
• Yield: 2.1%

There is no scarcity of choices when it comes to dividend-oriented index funds. But we favor Vanguard Dividend Appreciation because it focuses on companies that regularly boost their dividends.

The fund tracks the Nasdaq US Dividend Achievers index, but eligible stocks include any U.S. security listed on Nasdaq or the New York Stock Exchange. The main qualification is that a company must have increased payouts for at least 10 of the past consecutive years. Limited partnerships, real estate investment trusts and financially troubled firms are excluded. Currently, 186 stocks make the mark (other proprietary screens help to winnow the list). The securities are weighted by market value; the bigger the company in market capitalization (share price multiplied by shares outstanding), the bigger its position in the fund. The fund is recalibrated once a year in keeping with the index. Its top three holdings are Microsoft, Johnson & Johnson and PepsiCo.

• Symbol: VHDYX
• Expense ratio: 0.16%
• Total assets: $17.1 billion
• 1-year return: 20.0%
• 3-year return: 11.3%
• 5-year return: 13.6%
• 10-year return: 6.9%
• Yield: 3.0%

In general, we prefer companies that consistently raise dividends to firms that simply pay a high dividend yield. But Vanguard High Dividend Yield doesn’t sacrifice quality for yield. The index that the fund tracks focuses on projected dividends, and firms with no payout expected over the next 12 months don’t make the cut. While the index’s construction methodology starts with companies of all sizes, in the end it is made up mostly of large, established firms. Holdings in the fund have an average market value of $83 billion. All told, the fund holds more than 400 stocks that have been screened for yield and then weighted in the fund by market value.

• Over the long haul, the fund has delivered more return for the risk than its typical peer (funds that invest in large companies with growth and value characteristics). Its 10-year annualized return outpaces 89% of its peers.

What is an ETF and why are they so popular?

There's no question that exchange-traded funds have become a major part of the investor's toolkit. "ETFs are similar to mutual funds in that they hold a collection of stocks and bonds in a single fund," writes Kiplinger contributor Will Ashworth in his feature "How to Invest in ETFs for Beginners." However, unlike mutual funds, ETFs "are bought and sold on stock exchanges, can be traded anytime the exchange is open, and you can start your ETF investing even if all you have to invest is $50," Ashworth adds.

Assets in ETFs and similar exchange-traded products (ETPs) now exceed $7 trillion, more than four times what they were a decade ago, according to the Investment Company Institute (ICI), the fund industry's trade group.

And because ETFs have become so commonplace, you now have more than ever to choose from. According to the ICI, there are nearly 3,000 exchange-traded products to choose from on U.S. indices alone!

The variety has grown, too. Some ETFs try to enhance return by using leverage or by betting against the direction of the market. So-called exchange-traded notes (ETNs) don't invest in stocks or bonds at all; rather, they are bank-issued debt. Other exchange-traded products are actually trusts, which often buy physical commodities, such as gold or silver.

Knowing some of the basics of how exchange-traded products work will go a long way toward helping you select the best ETFs for your portfolio.

Cost is typically the best reason to buy an ETF over a mutual fund, but ETFs don't always hold an advantage.

According to the ICI, the average expense ratio for equity mutual funds was 0.44% in 2022, while the average expense ratio for bond mutual funds was 0.37%. On the other hand, equity ETFs averaged 0.16% in fees, while bond ETFs averaged 0.11%.

This disparity is largely because so many mutual funds are actively managed – a costlier way to run a fund. But consider this: The average expense ratio for an index equity mutual fund was just 0.05% in 2022. This is three times cheaper than index equity ETFs, which averaged 0.16% in annual fees.

However, even that doesn't tell the whole story. You see, what few index mutual funds there are track the simplest of indexes – the S&P 500, value and growth indexes, etc. Index ETFs, on the other hand, track not just broad, cheaply replicated indexes, but also niche, boutique indexes that follow everything from lithium producers to Vietnamese firms. That raises the average.

In reality, the cheapest low-cost ETFs can undercut the cheapest index mutual funds. Consider that even a pair of beginner index funds from Vanguard are priced differently by type: The Vanguard Total Stock Market ETF (VTI), among the best Vanguard ETFs, charges 0.03% annually, while its mutual fund version, the Vanguard Total Stock Market Admiral Shares (VTSAX), is a touch more expensive at 0.04%.

Also worth noting is that an ETF's structure helps to keep costs low. When you invest in a mutual fund, the manager has to buy securities with your cash, as well as keep records, all of which add to expenses. With ETFs, you buy existing shares that an institutional investor (known as an authorized participant) has already created, minimizing transaction costs since no one at the ETF has to register your order.

Start with a low tax bill. Like mutual funds, most exchange-traded products must distribute net realized capital gains to shareholders. Most index-tracking products tend to make few trades, but ETFs go one better because they don't always have to sell holdings when investors cash out. (Of course, if you invest through a tax-advantaged vehicle, such as an IRA, you don't have to worry about distributions.)

Other pros: You don't have to wait until the market's close to buy ETF shares, nor must you meet an investment minimum (sometimes in the tens or even hundreds of thousands!), as you would with a mutual fund. ETFs can be traded throughout the day, and you can buy as little as one share of an exchange-traded fund – heck, if your brokerage allows it, you can buy fractional shares of ETFs.

Exchange-traded funds that hold stocks, bonds or other income-producing assets don't just sit on the cash – they distribute it back to shareholders.

Given that equity ETFs hold dozens if not hundreds (or thousands!) of stocks, chances are that for each month of the year, at least a few of their holdings are distributing income. But equity ETFs typically pay quarterly, just like their portfolio stocks typically do.

Also, given changes in holdings' weight, as well as occasional increases and decreases in dividends, ETF dividends can fluctuate somewhat from period to period. So when calculating yield, it's often more accurate (if not a little conservative) to look at the trailing 12 months rather than annualize the most recent payout.

Bond ETFs sometimes pay quarterly, but they often distribute income monthly. Importantly, though, while bond ETFs receive interest income, they still pay dividends – however, they're typically not qualified dividends, and thus they're taxed like ordinary income. To measure bond ETFs' income, you use the SEC yield, which annualizes the income paid over the 30-day period ending on the last day of the previous month.

As mentioned before, the U.S. is teeming with ETFs – nearly 3,000, according to the ICI – and they cover every asset category, from emerging-markets stocks to junk bonds to physical platinum ETFs.

So you can build an all-ETF portfolio. In fact, the combination of a wide variety of interesting choices (from a K-POP ETF to an ETF that monitors social media) and extremely cheap fees makes ETFs one of the best investments for teenagers and younger investors generally.

But while you can do all of your investing through ETFs, whether you should is another matter.

Rick Ferri, founder of Portfolio Solutions, a Troy, Michigan-based money-management firm that relies mainly on index funds, says ETFs are suitable for a portfolio's core stock holdings, such as shares of large U.S. companies. Exchange-traded products can also let you target specific assets – say, Japanese stocks or the technology sector. But, Ferri says, you may be better off with an actively managed mutual fund for bonds, especially those that aren't widely traded, such as junk bonds and emerging-markets debt. Moreover, bond indexers have more trouble matching a benchmark than stock indexers do because the bond market consists of millions of issues. Stocks, in comparison, number only in the thousands.

That said: A growing number of actively managed ETFs have launched over the past few years, allowing you to gain this kind of human-manager experience within an ETF wrapper.

Investor demand for ETFs doesn't always match supply. When that occurs, the difference between the buy and sell prices – known as the bid-ask spread – widens. Lightly traded ETFs, which typically focus on obscure investments, are prone to big spreads. For example, the VanEck Egypt Index ETF (EGPT), an ETF that buys shares of Egyptian companies, recently had an average spread of 42 cents per share, according to ETF.com. In contrast, the spread for the widely held SPDR S&P 500 (SPY) was only a penny.

Similarly, supply-demand dynamics can affect whether ETF shares sell above or below the value of the fund's underlying assets. Certain mechanisms are designed to prevent ETFs from selling at noticeable premiums or discounts to net asset value (NAV), but things can get out of whack – often with funds that focus on a niche market, but sometimes even mainstream funds during times of market distress.

For instance, low liquidity in the bond market caused the Vanguard Total Bond Market ETF (BND) to trade at a more than 6% discount to its net asset value earlier in 2023. By contrast, shares of SPDR S&P 500 never traded for more than 0.1% above or below NAV.

You can look up an ETF's bid-ask spread, along with the premium or discount, at www.morningstar.com or www.etf.com. To minimize the risk of overpaying when you buy or getting underpaid when you sell, Ben Johnson, director of passive funds research at Morningstar, suggests using limit orders, which let you buy or sell shares for a set price.

These funds typically use derivatives to juice returns or try to profit when the market falls (or do a combination of both). But they usually deliver these results only on a daily or monthly basis, making them a bad choice for long-term investors (or really anyone without a crystal ball).

"They are an effective way to lose money," says Russell Wild, author of Exchange-Traded Funds for Dummies.

Consider the ProShares Short S&P 500 (SH), an inverse ETF that is supposed to return the opposite of the S&P 500. In recent years, investors may have bought into the fund as a way to hedge against the bear market. That would've worked on the way down, but given the market's recovery in 2023, investors who held for too long would've lost a significant amount.

We'll keep it brief: These should only be used by seasoned traders for short-term swing trades. Novice investors need not apply.

While most ETFs own a basket of stocks or bonds, ETNs are bank-issued debt that promise to deliver returns similar to those of a market benchmark. Some investors like ETNs for tax purposes: These products generally do not distribute capital gains, dividends or income, so all taxes are deferred until you cash out (currency ETNs are an exception).

But investors in ETNs have to contend with the risk that a note's issuer could default on its obligations. Should the issuer go bankrupt (as Lehman Brothers, which issued three ETNs, did in 2008), you may get little or no money back. So make sure you understand this added risk and choose an issuer with sterling credit quality. One good example: JPMorgan Alerian MLP Index ETN (AMJ), which tracks a basket of master limited partnerships (MLPs), is backed by JPMorgan Chase (JPM), whose debt earns AA- and A-tier ratings from the major credit bureaus.

ETFs started out investing in straightforward benchmarks, such as the S&P 500 and the Nasdaq-100. These traditional indexes weight companies by their stock market value. But today, many ETFs follow indexes that are constructed using so-called fundamental measures, such as a company's total earnings or its dividend history.

Moreover, a small but growing number of ETFs try to outperform an index through the use of active management. The JPMorgan Equity Premium Income ETF (JEPI) is the largest actively managed ETF. The fund, managed by Hamilton Reiner and Raffaele Zingone, aims to deliver monthly distributable income and equity market exposure with relatively low volatility.

We'll say about exchange-traded funds what we'd say about many types of investments:

ETFs can be a good investment, but not all ETFs are a good investment.

Exchange-traded funds offer a wide array of benefits. They can:

• Help you diversify your holdings with very little work on your part
• Get you exposure to assets (like physical gold or oil futures) that would be much more difficult to access otherwise
• Invest you in international stocks that aren't available on U.S. exchanges
• Let you be the kind of investor you want to be, whether that's building a portfolio of long-term buy-and-hold stocks or day-trading aggressive funds
• Do all of the above for exceedingly little coin out of your pocket

Do bad ETFs and ETNs exist? Sure. Some have flimsy investing premises. Some are trading instruments that are practically doomed to long-term floundering. And more of a gray area: Just like with good stocks, even good ETFs can struggle for any number of reasons outside of their control.

But broadly speaking, exchange-traded funds are versatile, easy-to-use instruments that have helped drag down costs and saved investors time. And that's why, year after year, investors keep plowing more and more of their money back into ETFs.

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• Kip ETF 20: The Best Cheap ETFs You Can Buy
• How to Buy Stocks

Good news for investors who use exchange-traded funds: Several of the cheapest ETFs on the market are getting even cheaper. On October 5, Blackrock announced fee cuts for 15 of its “core” iShares ETFs, looking to make up ground on Schwab, which had been the low-fee ETF champ. Two days later, Schwab trimmed expenses for five of its ETFs so that each undercut its corresponding iShares fund by one one-hundredth of a percentage point.

After all of the past week’s machinations, Schwab still takes the crown for the lowest-cost ETF in several major categories. Not only do fees for most Schwab ETFs edge charges for comparable Blackrock ETFs, they’re also among the cheapest ETFs on the market today. And if you’re a Schwab customer, you can buy all 21 of its ETFs without paying a brokerage commission. That’s especially helpful if you trade frequently.

The following six Schwab ETFs all look compelling for investors who want broad access to the stock and bond markets at unbeatable prices—as little as $3 per year for every $10,000 invested.

Returns are as of October 6; three- and five-year returns are annualized.

• Symbol: SCHB
• Expense ratio: 0.03%
• Dividend yield: 1.9%
• 1-year return: 10.9%
• 3-year return: 10.0%
• 5-year return: 15.5%
• SEE ALSO: Best ETFs for Dividend Investors

Holding about 2,000 stocks, Schwab U.S. Broad Market covers more than 95% of the U.S. market. The ETF tracks an index that ranks stocks by market capitalization, placing the biggest weight on large and mega-size companies, such as Apple (AAPL), Microsoft (MSFT) and ExxonMobil (XOM). Yet stocks of small and midsize companies still account for about 30% of the fund, giving it more exposure to smaller companies than a pure large-cap fund.

Overall, the ETF serves as a good proxy for the U.S. market. Returns have closely tracked the performance of Standard & Poor’s 500-stock index over the past five years. The fund’s fees can’t be beat, either. On a $10,000 investment, its $3 in annual costs is less than the price of a latte at Starbucks.

• Symbol: SCHA
• Expense ratio: 0.06%
• Dividend yield: 1.5%
• 1-year return: 10.9%
• 3-year return: 7.2%
• 5-year return: 15.6%

Schwab U.S. Small-Cap tracks a market-cap-weighted index of U.S. stocks with market values of about $125 million to just over $6 billion. Many of the holdings, such as Tangoe (TNGO), an information-technology services firm, are obscure. But the portfolio tilts a bit more toward mid-cap stocks than funds that track the Russell 2000 index, a more common small-cap benchmark. In fact, 16% of the Schwab fund’s assets are in midsize companies, according to Morningstar, compared with 3% for the iShares Russell 2000 ETF (IWM).

The tilt toward mid-cap stocks may help the Schwab fund fare a bit better in market downturns. For example, the ETF lost 3.1% in 2011, a mediocre year for stocks, compared with a loss of 4.4% for the iShares fund. Over the past five years, the Schwab ETF bested its rival iShares fund by an average of 0.8 percentage point per year.

The ETF invests most heavily in technology, industrial and financial-services firms, which account for a combined 46% of its assets. At last check, top holdings included computer distributor Ingram Micro (IM), commercial banker PacWest Bancorp (PACW) and ON Semiconductor (ON).

• Symbol: SCHF
• Expense ratio: 0.07%
• Dividend yield: 2.8%
• 1-year return: 2.8
• 3-year return: 0.4%
• 5-year return: 6.7%
• SEE ALSO: 3 New Funds Join the Kiplinger ETF 20

A solid choice for exposure to big companies based abroad, Schwab International Equity holds more than 1,100 stocks in 24 developed foreign countries. Top-10 stocks include multinational food giant Nestlé (NSRGY), Toyota Motor (TM) and Royal Dutch Shell (RDS.A). All in all, companies based in Japan and the United Kingdom make up the biggest slices of the fund’s assets, with 23% and 16% weightings, respectively, followed by France and Germany (at 8%).

Note that the fund doesn’t hedge exposure to foreign currencies. That can sting if the U.S. dollar keeps rising because the value of foreign-market returns would then be lower when converted to greenbacks. In fact, the fund lost 2.5% in 2015, compared with a return of 4.4% for iShares Currency Hedged MSCI EAFE ETF (HEFA), which tracks a similar index but hedges foreign currency exposure. Of course, the Schwab fund should perform better if the greenback sinks.

At any rate, returns of identical hedged and unhedged portfolios should, in theory, eventually even out, says Morningstar analyst Patricia Oey. One reason the Schwab ETF may beat its currency-hedged rivals, in fact, is its rock-bottom expense ratio of 0.07%, the lowest of any international ETF and well below the fees of funds that hedge currencies.

• Symbol: SCHD
• Expense ratio: 0.07%
• Dividend yield: 3.1%
• 1-year return: 16.0%
• 3-year return: 10.9%
• 5-year return: not available (fund is less than five years old)
• SEE ALSO: An ETF to Own 6,000 Foreign Stocks

A member of the Kiplinger ETF 20, Schwab U.S. Dividend Equity holds stocks of 100 large, high-quality companies that have paid dividends for at least the past 10 years. Based on the Dow Jones U.S. Dividend 100 Index, the ETF also screens for quality factors, such as dividend yield, dividend growth rate and return on equity (a measure of profitability). The result: a portfolio jammed with blue-chip stocks, such as Microsoft, Intel (INTC) and Procter & Gamble (PG).

The fund’s 3.1% yield isn’t as high as what you can earn in utilities, telecom or other high-yielding parts of the market. But 3.1% still trounces the 2.1% yield of the S&P 500. Over the past three years, the ETF and the S&P 500 have delivered nearly identical returns, but the ETF has fared better lately. It returned 16.0% over the past year, compared with 11.6% for the S&P 500. Moreover, the ETF should be a bit more stable than a fund that invests in the broad market, says Morningstar analyst Ben Johnson, who views it as one of the highest-quality portfolios among all dividend ETFs.

• Symbol: SCHH
• Expense ratio: 0.07%
• Dividend yield: 3.0%
• 1-year return: 8.5%
• 3-year return: 12.3%
• 5-year return: 14.0%

Until bond yields started to rise over the summer, REITs had been on a tear. On the heels of seven consecutive calendar years of positive returns, the S&P United States REIT index returned 18.3% in the first seven months of 2016. But since August 1, the index has surrendered 10.7%, underscoring the vulnerability of REITs to rising interest rates as income investors shift money from dividend-paying stocks to fixed-income securities. But unlike bonds, which generally pay fixed rates of interest, REITs can raise their dividends as they raise rents and develop more properties. Their yields, averaging 3.9%, vastly exceed the market average, making them a good way to pocket a rising tide of income.

If you want broad exposure to real- estate stocks, you can’t beat Schwab U.S. REIT ETF. The fund’s expense ratio of 0.07% undercuts all rivals, including the biggest one on the market, SPDR Dow Jones REIT ETF (RWR), which charges 0.25% in annual fees. The fees are essentially the only difference between these funds. Both load up on big-name REITS, such as Simon Property Group (SPG), Public Storage (PSA) and Prologis (PLD). But the Schwab ETF has edged the SPDR fund over the past three years, thanks mainly to its lower annual fees.

• Symbol: SCHZ
• Expense ratio: 0.04%
• Yield:Yield: 1.8%
• 1-year return: 4.3%
• 3-year return: 3.8%
• 5-year return: 2.9%
• SEE ALSO: 9 Great Vanguard Funds for Retirement Savers

The Bloomberg Barclay’s Aggregate Bond index is the gold standard of bond market benchmarks. Legions of funds and ETFs track their performance against “the Agg,” which represents the broad universe of investment-grade U.S. government and corporate bonds—amounting to some 8,000 issues.

Schwab U.S. Aggregate Bond ETF tracks this index and does it cheaper than any other fund on the market. Investors get broad bond market exposure, with 35% of the portfolio in U.S. Treasuries, 26% in corporate debt, and 27% in mortgage-backed securities (the remainder is in cash and cash-equivalent securities). Because the ETF tilts heavily toward intermediate-term U.S. government bonds, which don’t provide much interest income these days, the yield amounts to just 1.8%.

Despite that meager payout, the ETF has been a solid performer, thanks to gains in its share price in recent years. Returns, including interest payments, have averaged 3.8% in the past three years, including a 4.3% gain so far in 2016. With its high-quality portfolio, the fund should also fare well if investors decide to flee riskier investments, such as stocks or high-yield “junk” bonds.

Buying this ETF today does pose risks, however. The portfolio’s average duration (a measure of interest-rate sensitivity) is 5.3 years. That means its share price would decline by roughly 5.3% if interest rates were to rise by one percentage point.

Longer-term rates have been edging up lately, and the fund could lose value quickly if rates continue to climb. Stick with the ETF long enough and you’ll eventually recoup losses in the share price with interest payments. But at this juncture, it would take nearly three years for your returns to rebound from a one-point increase in market rates. Buying this fund now, in other words, may require quite a bit of patience for a payoff.

Good news. Capital Research and Management, sponsor of the American funds—in my view, the best large shop for actively managed funds—just opened its doors for the first time to individuals who prefer to invest on their own and want to avoid sales charges. “They’ve been very good for a very long time,” says Alec Lucas, a Morningstar analyst who covers 18 American funds.

Since the American funds began operations in the early 1930s, the firm has sold its funds exclusively through investment advisers and brokers. Individual investors were turned away, and those who bought American funds through an intermediary often paid front-end sales charges of up to 5.75%.

That’s all changed. The F1 share class of all American funds is now available commission-free on the Fidelity and Schwab online brokerage sites. Presumably, American will eventually offer its funds through other discount brokerages.

This is a big deal. The American funds offer a wide lineup of good funds. What’s more, their expense ratios tend to be lower than almost any other large fund firm’s except Vanguard’s. Those low expense ratios should bring added pressure on other fund companies to lower their prices to remain competitive.

The American funds’ assets under management total $1.3 trillion, second only to Vanguard’s $2.7 trillion.

The American funds move comes as most traditional fund firms have been losing assets to Vanguard’s low-cost index and actively managed funds and, increasingly, to low-cost exchange-traded funds from Vanguard, BlackRock (sponsor of iShares ETFs) and other firms.

In contrast, more than half of the American funds’ assets are in mutual funds that charge up-front commissions. Those sales loads will likely soon be history thanks to the Labor Department’s new fiduciary rule, which will require advisers and brokers to put the interest of retirement-account clients first. The rule will make it difficult to justify buying funds that levy sales charges or high annual fees when cheaper funds are available.

Many investors have barely heard of the American funds. That’s because the funds have been targeted solely at advisers, brokers, institutional investors and other third parties, such as 401(k) plans and 529 college-savings plans. Until I became an adviser a decade ago, I never heard from the American funds. Since becoming an adviser, I hear from them all the time.

What’s to like about the American funds? Consider.

Solid long-term results. Most of the American funds boast first-rate long-term returns. The average returns of 15 American stock and hybrid (stock and bond) F1 share-class funds with records of at least five years topped the average return of the benchmark index assigned to each fund by Morningstar over the five-, 10- and 15-year periods through September 30. The average amount by which those funds outpaced their benchmarks was 0.6, 0.4 and 0.8 percentage point per year over the past five, 10 and 15 years, respectively.

The American funds, for the most part, also exhibit relatively low volatility. All of its stock funds lost substantially less than Standard & Poor’s 500-stock index in the 2007-09 bear market. Consequently, Morningstar analysts have awarded gold, silver or bronze medals—the firm’s qualitative rating for superior funds—to 22 of the 27 American funds its analysts cover.

Low expenses. Compared with other actively managed funds, the American funds are a bargain. American Funds American Mutual F1 (more on this fund below), for instance, charges 0.66% annually. That’s no bargain compared with a Vanguard index fund or most ETFs, of course. Nor compared with the 0.41% annual expense ratio for the fund’s F2 share class, which advisers can tap. But it’s a lot cheaper than the average expense ratio of 1.15% for actively managed diversified domestic stock funds.

Exceptional corporate culture. The American funds are head and shoulders above most fund firms on this qualitative measure. Most fund managers and analysts hired by the American funds stay their entire careers. Fund managers typically invest heavily in their funds—a move that tends to go hand in hand with strong returns. Like other fund firms with admirable corporate cultures, such as T. Rowe Price and Vanguard, the American funds are steady, never flashy. American rarely introduces funds to benefit from the hot investment fad du jour.

The culture is so unique that Charles Ellis, best known as a proponent of indexing, in 2004 published a book about the firm called Capital: The Story of Long-Term Investment Excellence. Capital Research and Management firm has a collaborative culture in which decisions are arrived at by consensus, no one has a title, and no one has a corner office.

The multi-manager system. Asset bloat is a huge problem for actively managed funds. As funds put up strong numbers, they tend to attract huge inflows of cash. As funds get bigger, it becomes harder for them to duplicate the results they achieved when they were relative runts. The American funds solution: Assign multiple managers to each run a slice of a fund, and base most of each manager’s pay on how that slice performs relative to a fund’s benchmark over long periods of time. The system doesn’t always work. For example, I think the firm’s biggest fund, American Funds Growth Fund of America, with assets of $144 billion, is so enormous that even splitting the portfolio among 12 managers can’t overcome bloat. But for the most part, the multi-manager approach works well.

The company is far from perfect. It’s too big to do a good job with small-capitalization stocks—indeed, American doesn’t offer any pure small-cap funds. And it hasn’t done all that well with bonds. To the firm’s credit, it recently hired several senior bond fund managers from other firms in an effort to improve its fixed-income product line.

But for large-company stocks in the U.S. and overseas, Capital Research offers some terrific funds. Below are brief descriptions of my favorites:

American Funds American Mutual F1 (symbol AMFFX) is a moderately conservative fund. Over the past 10 years through October 13, it returned an annualized 6.6%. That trailed the S%P 500 slightly, by an average of 0.2 percentage point per year.. But the fund, by investing in steady dividend payers that trade at relatively low price-earnings ratios, was 17% less volatile than the S&P 500 over that stretch. It lost 48.3% in the 2007-09 bear market—compared with a 55.3% loss for the S&P.

American Funds New Perspective F1 (NPFFX) is a perfect vehicle for investors who want to stick a toe into foreign stocks—which are cheap based on such measures as P/Es but face big economic and political headwinds. New Perspective invests in both U.S. and foreign stocks; currently, its assets are about evenly split between domestic and foreign stocks. The managers focus on growing companies, trying to buy them when they’re underpriced. Over the past 10 years, the fund returned 6.3% annualized--an average of 4.6 percentage points per year better than the MSCI All-Country World index.

American Funds New World F1 (NWFFX) is my favorite emerging-markets stock fund that is open to new investors. The fund divides its investments roughly evenly between companies domiciled in emerging markets and firms that are based in developed lands but do a lot of business in emerging nations. Managers stretch that definition to the extreme: Holdings include Alphabet, the parent of Google, and Domino’s Pizza. The fund provides a much smoother ride than pure emerging-markets offerings. The fund returned 4.5% annualized over the past 10 years.

Steve Goldberg is an investment adviser in the Washington, D.C., area.

Investors can pocket a few hundred bucks just by opening an account with an online broker these days. But don’t let a signing bonus sway you. Low commissions to trade stocks or exchange-traded funds can save you more money in the long run. Whether you’re a stock jockey, a saver or a retiree, finding a firm that suits your needs is far more valuable than even a $600 bonus (Merrill Edge’s current inducement if you open an account with at least $200,000). So what makes for a first-rate broker? It depends on what you value. Low fees may be critical for active traders, but buy-and-hold types may want an array of no-transaction-fee mutual funds. Brokers with unbeatable prices may lack the retirement-planning tools or advisory services you need.

Research

On all sites, basic facts about stocks, bonds and funds abound. But only a few firms supplement the standard data with more information from major Wall Street investment banks. Schwab and TD Ameritrade provide comprehensive stock research from Credit Suisse to all brokerage clients. E*Trade customers can access Credit Suisse reports, too, but only if they maintain at least $100,000 in assets with the company. Fidelity doesn’t supply any comparable stock research, although it does offer reports from some small research firms, along with S&P Capital IQ. Scottrade and Vanguard provide minimal stock and fund research.

That leaves Merrill as the runaway winner in this category. Customers can see Bank of America Merrill Lynch stock reports on more than 1,400 companies, along with stock research from Morningstar and S&P Capital IQ. Merrill’s big economic reports and thematic pieces, such as

a recent report on stock picks for an aging global population, are also available. And customers get access to Merrill’s lists of recommended stocks.

If you want bond research, though, you’ll have to look elsewhere. Ratings reports on individual companies aren’t accessible on Merrill’s site. By contrast, E*Trade, Schwab, Scottrade and TD Ameritrade furnish company reports from credit-ratings agency Moody’s. One hot new tidbit: social-media signals. E*Trade shows bloggers’ sentiments on individual stocks. On Fidelity and TD, customers can see how a stock is trending on sites such as Twitter.

Ease of use

Brokers aim to make their sites user-friendly. But some are so convoluted—packed with news, charts and data—that they can strain your eyes. For overall ease of use, Fidelity racks up the highest marks. A horizontal task bar at the bottom of the site’s accounts page lets you place a trade with a few clicks, streamlining the process compared with other sites. Paying bills, researching funds and analyzing a portfolio are all relatively simple on Fidelity’s site. Investors can also personalize the site in a number of ways, such as tracking their portfolio’s performance against a custom set of market benchmarks (something Schwab doesn’t allow).

Fidelity does trail the competition in some areas. Merrill Edge customers can use Morningstar’s X-Ray tool to compare their portfolio’s asset mix against more market benchmarks than Fidelity’s analytical tool allows. Merrill customers can also see how closely stocks, bonds and funds in their portfolio move in sync with one another, and they can track their portfolio’s hypothetical growth against a wide variety of market benchmarks—features that Fidelity doesn’t offer.

One useful tool on E*Trade is a roundup of Wall Street analysts’ opinions and price targets for individual stocks, showing how the analysts’ recommendations rank (a feature unavailable on other sites). E*Trade also shows more details about stocks, such as how many shares are being purchased or sold by company insiders. Vanguard’s site looks sparse in comparison, with fewer trading and research tools. For its part, Scottrade packs scads of charts and data on its site, but it doesn’t offer as many planning tools or screeners.

One other element that’s part of this score: customer service and branch availability. Schwab and Merrill both report hold times for phone service averaging 31 seconds or less, beating Scottrade (42), Fidelity (58) and Vanguard (60). Scottrade scores well with 495 offices, more than every firm except Merrill, which provides brokerage services through 2,000 Bank of America branches. (Vanguard doesn’t have any branches.)

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Mobile apps

The brokers in our survey all offer apps to allow customers to trade and conduct other business on a mobile device. All except Vanguard let you log in with a fingerprint. And the apps can be handy for banking: Investors can pay bills, transfer funds and scan checks for deposit (though Vanguard enables mobile check deposit only for clients who hold exclusively Vanguard funds or ETFs).

E*Trade’s smartphone app scores best in this category. Along with standard trading and account tools, it’s the only one with a screening feature for stocks, funds and ETFs. The app also shows E*Trade’s “all star” roster of funds. And investors can scan a product barcode to pull up stock information (a feature TD provides, too).

Of course, smartphone apps can’t handle everything. None shows a detailed analysis of your portfolio or lets you trade bonds. Stock and fund research remains sparse on phone apps, too, although E*Trade and Merrill make some stock reports available.

Investment advice

The larger your account, the more customized and personal investing advice you’ll get. But aside from Scottrade, which doesn’t offer advice, every broker will help you figure out an investment mix, set up a retirement plan and steer you to a professionally managed account (functions that Scottrade farms out to external advisers). Fees for managed accounts typically start at 1% of assets annually, though they may be negotiable. Without prompting, a phone rep from E*Trade offered to knock 0.1 percentage point off the firm’s standard 1.25% fee for managed accounts when we called to inquire about them.

Fidelity and Vanguard earn the top spots in this category, trailed closely by Schwab. Fidelity racks up points for its menu of managed accounts, including one that focuses on muni bonds and another on income-oriented ETFs. Minimum investments start at $200,000 for most types of accounts, and management fees range from 1.7% to less than 0.6% for diversified portfolios with higher balances. Fidelity is also rolling out an automated (or “robo”) managed-account service that invests in ETFs; it requires a minimum investment of $5,000 and charges annual fees of 0.35% to 0.39%, including underlying fund fees. E*Trade and Schwab offer robo services, too. But E*Trade’s isn’t priced as competitively, and Schwab requires clients to hold sizable cash balances, which can drag down long-term returns.

At Schwab, customers need just $25,000 to get into a managed port­folio of mutual funds or ETFs—one of the lowest bars in the business. Schwab also offers robo ETF accounts, free of charge, with only a $5,000 minimum. Merrill and TD lack robo services and steer clients into managed accounts that charge at least 1% annually, depending on portfolio size (plus the fees of underlying funds in fund-based accounts).

For its part, Vanguard doesn’t provide a robo service or managed accounts holding individual stocks or bonds. But customers with at least $50,000 in assets can tap into the firm’s Personal Advisor Services, which let you slide into a managed account that charges just 0.3% in annual fees. The accounts hold only Vanguard funds that mainly track market indexes. But that’s not a bad thing; clients can get Admiral share class funds, with expense ratios of less than 0.07% for U.S. stock and bond funds. With most active managers failing to beat their benchmarks, sticking with broad-market index funds can be a good way to pocket more money in the long run.

Remember when the cost of a stock trade could run into the hundreds or even thousands of dollars? That was when the wirehouses charged commissions based on the volume and price of shares traded. If you remember that, then you remember when an upstart named Charles Schwab came along and told investors his firm could handle all of the stock trades they wanted for a mere $150 per trade. With that move, he may have put some stockbrokers out of business, but he did all investors a favor by helping them realize there is very little cost difference between putting $10,000 and $1 million in the market.

The discount brokers of today have simply taken that concept a step further. How many investors would pay a flat $150 per stock trade now knowing they could pay a discount broker just $7 a trade?

The cost of financial advice has taken a similar path. Since 2008, when the veil was lifted on the shady dealings of Wall Street product manufacturers, the assets under management (AUM) fee compensation model, which charges clients a flat percentage (typically around 1%) of AUM, has spread rapidly. It's thought to be fair, fully transparent and conflict-free, especially when operated by fiduciary-bound, independent advisers. But is it?

Problems With the AUM Fee Model

While it is more transparent, questions have been raised as to its fairness and its immunity to conflict. Let's go back to the Charles Schwab example. If the cost differential between a $5 million trade and a $5,000 trade is negligible, is it fair for the larger investor to pay a higher commission than the smaller investor? The same question has been posed for assets under management. If it doesn’t cost any more to manage a $5 million portfolio than it does to manage a $1 million portfolio, why should the larger investor pay five times more? While it is true that someone with a $5 million portfolio may have more complex issues than someone with a $1 million portfolio, is it five times as complicated?

Thanks to a relentless bull market, many investors, especially those who utilize a passive investment strategy, have seen the value of their portfolio double in the last seven years. The $5 million investor who paid his adviser an annual fee of $50,000 in 2009 may now be paying him $100,000 annually. Has the value of that adviser’s service doubled in that time? Chances are he is providing the same level of service now as he did in 2009. Why then is he earning twice as much (or slightly less if a graduated fee schedule is used)?

The AUM-fee model is also coming under criticism for potential conflicts-of-interest issues. An adviser who is paid primarily for managing assets has little incentive to offer advice in areas that could reduce AUM, such as using assets to pay off a mortgage or invest in a business. Investing in an income annuity might be the right strategy if you want to ensure lifetime income sufficiency, but an AUM-fee-only adviser would not be compensated for the investment. Most adviser-fiduciaries strive to be conflict-free in dispensing advice, but the method of compensation may at times influence that advice.

Plus, through technology and competition, investment management has largely become commoditized. As a way to add value, many advisers are shifting more of their focus towards holistic planning by delivering more financial planning services. Yet they are still using AUM-centric pricing model, which tends to keep your focus on your portfolio rather than your planning needs.

The Flat Fee: A Completely Client-Centric Alternative

In recognition of these potential conflicts-of-interest, as well as the issue of fair pricing, the advice-pricing model continues to evolve. In recent years, the advisory landscape has been experiencing a shift towards a flat-fee-for-advice or retainer-fee model that removes all potential conflicts of interest and is based solely on the level of services provided.

With a flat-fee model, you simply pay for unbiased advice, rather than an investment product. It provides the most complete transparency and fairness in that it aligns the pricing of services directly with the cost of delivering those services.

More importantly, an annual flat retainer completely changes the client-advisory relationship, with the emphasis placed on the holistic nature of financial planning. Although portfolio management should remain an integral part of the relationship, it is more aligned with all the elements of your financial life, including retirement planning, estate planning, income tax planning, risk management and cash flow planning, as well any investments the adviser is not managing. Under a flat-fee arrangement, all elements receive the appropriate attention based on their priority at any given time.

The amount charged under a flat-fee arrangement is typically based on how much input the adviser gives you, not the amount of assets you bring him, regardless of the direction of the market. So you can rest assured that you will receive the same level of service and attention in good and bad markets. Most advisory firms that charge flat fees will price them according to multiple levels of services they provide, allowing you to select the one that is appropriate for your needs.

While AUM-based fees may not completely go the way of commissions and other product-centric forms of compensation, investors today are leading the charge for more transparency, fewer conflicts-of-interest and fairness in their advisory relationships. One day, we will be asking, “Why would anyone pay 1% on AUM knowing they can pay a simple flat fee for advice?”

Pete Woodring is founding partner of San Francisco Bay area Cypress Partners, a fee-only wealth consulting practice that provides personalized, comprehensive services that help retirees and busy professionals to enjoy life free of financial concern.

Craig Slayen, a new partner with Cypress Partners, contributed to this article.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

My son is working as an umpire for youth baseball games and is earning money for the first time. Can he contribute to a Roth IRA even though he’s only 15 years old? Which companies offer good Roth IRAs for kids?

There’s no minimum age requirement to open a Roth IRA, so your son can open one as long as he has earned income from a job (investment income doesn’t count). He can contribute up to the amount he earned from working this year, with a maximum of $5,500 for 2016. You’re allowed to give him the money to make the contribution.

Not all IRA administrators offer Roth IRAs for minors, but many do. Look for a firm with low investment minimums and low or no administrative fees. TD Ameritrade and Fidelity have no investing minimums or annual fees for their custodial IRAs. Charles Schwab requires $100 to open a custodial Roth IRA but charges no annual or maintenance fees. These brokerage firms offer the same mutual funds, stocks and other investments in their custodial Roth IRAs as they do in their regular IRAs.

Most firms require two names to be on a custodial Roth IRA account: the minor and an adult, who doesn’t have to be a parent or grandparent. The adult generally receives the account statements and controls the account as long as the child is a minor (until age 18 or 21, depending on the state).

Opening a Roth IRA is a great way to jump-start your son’s savings. If he needs money before retirement, perhaps for a down payment on a house or college costs or to supplement an emergency fund, he can withdraw the contributions tax-free and penalty-free at any time. Longer term, he can accumulate a significant balance and, after age 59½, withdraw the earnings without penalties or taxes.

A 15-year-old who contributes $3,000 today will have more than $34,000 by age 65 just from that initial contribution, assuming his investments earn 5% per year. If he continues to contribute $3,000 every year and his investments earn 5% per year, his account will be worth more than $650,000 by the time he turns 65.

Your credit score is an important indicator of how you’re managing money, but it reflects only a slice of your overall financial health. Now you can generate a score that takes in the big picture.

TOOL: Build a Better Budget

Start by asking whether your bank provides a free financial health score to its customers. For example, USAA offers members a Financial Readiness Score. Just log in at USAA.com and answer a series of questions about your income and expenses, insurance coverage, savings, investing risk tolerance, and estate plan. You’ll receive a score on a scale of 1 to 100, plus advice on how to strengthen weak areas.

Charles Schwab has a free-to-all Financial Fitness Quiz. You’ll be asked to answer 18 questions about insurance, money management, investments and estate planning, and you’ll receive your score on a 100-point scale. You’ll also see a comparison of your score with the scores of other people in your age range and get advice based on your replies.

Among the suite of tools from HelloWallet, a developer of personal finance software, is the Financial Wellness Score. Also calculated on a 100-point scale, it derives from information you enter as well as a data feed from financial links you provide, such as bank, credit and retirement accounts. Recommendations for improvement and a comparison of how you stack up against your peers also come with the score.

HelloWallet has partnered with KeyBank to provide its tools to the bank’s customers. They are also offered as an employee benefit at companies such as Geico, T. Rowe Price, United Technologies and Vanguard.

CALCULATOR: How Much Do You Need to Retire?

Energy stocks may be the biggest losers of the past year. But the market’s slide since early December has pulled down everything from banks to chemical companies. Some of the worst-performing sectors lately have been financials, health care and industrials—each tumbling more than the 5.1% decline in Standard & Poor’s 500-stock index in January. Overall, about one-third of companies in the index trade 30% or more below their 52-week highs, according to Citibank.

Stocks in areas such as athletic wear, finance and technology now look considerably cheaper, despite little or no change in their long-term outlooks. Analysts have actually raised their profit forecasts on some of these stocks. And although they could fall with the rest of the market, buying them at today’s prices should produce solid returns over the next year or two.

Check out five S&P 500 stocks that have become too cheap to ignore.

All prices and yields are as of February 3. Price-earnings ratios are based on estimated earnings for the next 12 months.

• Price-earnings ratio: 18Dividend yield: 1.0%Amount below 52-week high: 31%
  

Discount broker Schwab (SCHW, $24.38), which oversees more than $2.5 trillion in client assets, is expected to generate $7.4 billion in revenues this year. Yet Schwab’s business faces some pressures. A falling stock market has dampened its trading revenue and pressured other parts of the business. And the shares have slumped because of concerns that interest rates may not climb as quickly as anticipated. (Higher rates would boost Schwab’s profits from money market funds, loans and other financial products.)

Even without higher rates, the stock looks compelling. Schwab took in $135 billion more in client assets in 2015 than it lost. That’s up 8% from 2014 and the fourth year in a row the company attracted more than $100 billion in net new assets. Its exchange-traded fund business and new robo-advisory service are thriving. And Schwab is expanding its base of customers who pay fees to have Schwab manage their money. Such “private client” assets hit a record $75.4 billion in the fourth quarter of 2015, up 4% from the same period a year earlier.

Wall Street sees profits climbing by 36% this year, to $1.32 per share. With Schwab making strides in many parts of its business, the stock could hit $32 over the next 12 months, says Credit Suisse analyst Christian Bolu, who recently raised his earnings estimates for each of the next three years.

• Price-earnings ratio: 6Dividend yield: 5.1%Amount below 52-week high: 43%
  
• SEE ALSO: 5 Best Tech Stocks for Dividends, No FANGs Required

Tech giant Hewlett-Packard now consists of two companies. HP (HPQ, $9.65) focuses on printers, personal computers and mobile devices. The old HP’s other businesses—including corporate computing, software and services—are now part of a separate company, Hewlett-Packard Enterprises (HPE).

For deep-value investors, HP’s stock looks like a solid bet. Since the businesses split in November, HP’s shares have tumbled about 20%, giving the stock a ridiculously low P/E ratio of 6.

As bears see it, HP’s printer and PC businesses will never generate healthy profit or sales growth because of ongoing PC price wars in a largely saturated market. HP hasn’t helped its cause. Sales tumbled 8.3% and profits 8.5% in the 12-month period that ended in October.

Analysts don’t expect HP’s revenues to climb this year or next. But that doesn’t mean the stock can’t inch its way back up, says Larry Pitkowsky, comanager of the GoodHaven Fund (GOODX). HP remains the world’s second-largest PC maker (after Lenovo), and sales should revive as more businesses and consumers gradually upgrade to the Windows 10 operating system, which launched last summer. HP’s printer division, meanwhile, remains highly profitable, generating plenty of cash to help support other parts of the business.

With a dividend yield of about 5%, the stock price would only have to rise 5% to deliver a double-digit annual total return. And HP generates more than enough cash to buy back shares, cover its dividend and hike payments in the future. Over the next year or two, says Pitkowsky, HP “could sell at twice the current price.”

• Price-earnings ratio: 16Yield: 2.4%Amount below 52-week high: 29%
  

Strong agriculture production in recent years has depressed crop prices and demand for genetically modified seeds and herbicide made by Monsanto (MON, $89.50). Aiming to lift sales, the firm tried to buy pesticide maker Syngenta. But the Swiss firm rebuffed Monsanto’s offer and just agreed to a $43 billion takeover by a Chinese company. Meanwhile, Dow Chemical (DOW) and DuPont (DD) recently announced plans to merge and then combine their agriculture divisions into a separate company. For Monsanto, the upshot of all this could be a much tougher competitive landscape.

Yet Monsanto remains a top-tier player in agriculture, with an array of products in development and plenty of opportunities to expand globally. As the world’s population climbs, farmers will need to squeeze more crops out of every acre they plant. Monsanto’s seeds and herbicide products (which farmers use in tandem) help boost crop yields. Its Dekalb brand corn, for example, produces seven to 10 more bushels per acre than the national average. Mosanto is also rolling out a new generation of soybean seeds, and it has launched digital agriculture tools to help farmers lift production and profits.

Earnings are dipping because of the strength of the dollar against Latin American currencies such as the Brazilian real and Argentinian peso (which makes profits earned in those currencies worth less when converted to greenbacks). But analysts see earnings per share jumping 21% in the August 2017 fiscal year. With Monsanto’s strong lineup of products and “expanding competitive advantage,” the stock looks compelling, says Deutsche Bank analyst David Begleiter, who recently hiked his 12-month price target by $6, to $110 a share.

• Price-earnings ratio: 62Yield: 0%Amount below 52-week high: 22%
  

Athletic wear maker Under Armour (UA, $80.90), one of our top picks for 2016, recently traded in the upper $60s, well below its all-time peak of $104.10, reached last September 17. The stock jumped 23% on January 28, after Under Armour reported quarterly earnings that exceeded Wall Street estimates. Even in the low $80s, the stock still has plenty of upside, says Barclays analyst Matthew McClintock.

Over the next five years, the company should boost revenues at an annual clip of 26%, he estimates. Under Armour aims to achieve that goal by expanding aggressively abroad, hiking sales directly to consumers and opening more stores with partner companies. In the product arena, the company has branched out well beyond shirts and shorts for guys to categories such as women’s apparel, kids’ clothing and footwear. It has also invested heavily in “connected fitness” apps and products. The firm expects to generate more than $200 million in revenues from this business alone in 2018, up from $53 million in 2015. Given Under Armour’s rapid growth, its stock has never been cheap. Even with the stock off 22% from its high, it trades at a rich 62 times estimated 2016 earnings. But earnings are depressed in part because Under Armour plows almost all of the cash it generates into expanding the business. Yet the firm’s long-term growth trajectory should validate the stock’s valuation, says McClintock. He thinks the stock could reach $110 over the next 12 months.

• Price-earnings ratio: 17Yield: 1.9%Amount below 52-week high: 50%
  
• SEE ALSO: How to Invest for the Coming Bear Market

With many grocers now selling organic and natural foods, Whole Foods (WFM, $28.64) has lost some of its competitive edge. The grocery chain’s net profit has slid for three years in a row, slumping to $536 million in the fiscal year that ended last September. Year-over-year sales growth at stores open at least a year—a key measure of performance in retailing—fell to 2.5%, from 8.8% in the 2012 fiscal year. In the quarter that ended in September, Whole Foods’ same-store sales turned negative.

The case for the stock is that business and profits have bottomed and should start to pick up. Aiming to capture sales from more price-conscious shoppers, the company is rolling out a new chain of stores that focuses on its less expensive, in-house brand, 365 Everyday Value.

Altogether, the firm plans to open about 30 stores in its current fiscal year, bringing the total to more than 460. To help boost profit margins, the company plans to slash $300 million in annual operating costs, and it aims to boost sales with new ad campaigns, online strategies and in-store marketing efforts. If all goes well, the firm says, same-store sales should stabilize in the next few months and turn positive over the summer. Even with the stock’s plunge in the past year, Whole Foods isn’t super-cheap, trading at 17 times estimated earnings. But that’s about half its five-year average P/E of 33. The stock should start to rebound if the grocer shows even modest progress in its revival plans.

I am self-employed and want to open a solo 401(k), but most of the firms I’ve investigated charge hundreds of dollars in setup fees and a yearly fee of 1% to 2% or higher. Can you help me find a company where I can get this set up more economically?

The first generation of administrators offering solo 401(k)s -- back in the early 2000s -- tended to charge high fees for the accounts. But you now have many less-expensive options from a variety of brokerage firms and mutual fund companies.

Fidelity, Charles Schwab and TD Ameritrade, for example, have no setup or annual fees for solo 401(k)s and let you invest in anything available to their IRA and brokerage customers, including many no-transaction-fee mutual funds and commission-free exchange-traded funds. Contact the brokerage firms and mutual fund companies where you have other accounts to see if they offer low-fee solo 401(k)s.

Self-employed people may be able to save more in a solo 401(k) than they can in a Simplified Employee Pension (SEP). Solo 401(k)s let you make both employee and employer contributions, meaning you can contribute up to $18,000 for 2015 (or $24,000 if you're 50 or older) as an employee, even if that is 100% of your self-employed earnings for the year, and you can also contribute 20% of your net self-employment income. Your total contributions can't exceed your self-employment income for the year, up to a total of $53,000 for both types of contributions (or $59,000 if age 50 or older).

SEP contributions for sole proprietors, on the other hand, are limited to 20% of your net self-employment income (business income minus half of your self-employment tax), up to a maximum contribution of $53,000 for 2015.

"For a lot of small-business owners who are looking for ways to maximize their retirement savings, this is a great way to accelerate their savings," says Brian Hogan, director of small-business retirement products for Fidelity. Self-employed people can calculate the amount they can contribute to a solo 401(k) or a SEP with Fidelity's Self-Employed Plan Contribution Calculator.

If you already have a solo 401(k) that has high fees or limited investment options, you can transfer your account to a different administrator; the new company can provide the forms to make the tax-free transfer.

If you don't already have a solo 401(k), you need to open the account by December 31 to count for 2015, but then you have until the tax-filing deadline (April 18, 2016) to make your contributions for 2015.

For more information about your options, see the IRS's Retirement Plans for Self-Employed People.

Investors can glean good advice everywhere from old-school newsletters to new-age Twitter feeds. Sources we like best are chock full of market data and history to buttress market opinion, but are engaging and accessible to ordinary investors at the same time.

Best Stock Market Letter

InvesTech Research (four-issue trial, $39), which promises "safety-first profits," has bested the overall stock market over the long haul with less risk. Publisher James Stack analyzes economic, monetary and market data (some going back more than 100 years) to make market calls and recommend allocations.

Economist and strategist Ed Yardeni, head of Yardeni Research, provides sophisticated yet accessible analysis of unfolding economic, political and market-related developments in Dr. Ed's Blog. Subjects range from company earnings to the Federal Reserve to analysis of stock, bond and other markets.

Bespoke Investment Group, a research and money management firm, helps investors sift through the market morass by sending out tweets stuffed with charts, graphs and tables that give plenty of context for the day’s market and economic news.

For conservative investors: Schwab Intelligent Portfolios offer advice that will appeal to the risk-averse. In our test of online advisers, Schwab prescribed a relatively modest 65% allocation to stocks for a 25-year-old investor with an average tolerance for risk. The minimum investment is $5,000, and Schwab doesn’t charge a management fee (see Is a Robo Adviser Right for You?).

For investors just starting out: Betterment and Wealthfront have low minimum requirements. On assets of less than $10,000, Betterment charges 0.35% per year; Wealthfront is free.

For investors with more-complex finances: Vanguard's Personal Advisory Services has a $50,000 minimum, but you get access to a certified financial planner who not only manages your portfolio but also offers comprehensive financial-planning advice. The service costs 0.30% of assets under management.

I understand that a donor-advised fund will give me more control over my charitable giving. How much money do I need to open one? Can I contribute stock to it, or do I have to write a check?

A donor-advised fund is a great way to get a charitable tax deduction now and have an unlimited amount of time to decide which charities to support. Several mutual fund companies, brokerage firms and community foundations offer donor-advised funds. The amount of money you need to open an account varies; it’s $5,000 at Fidelity and Schwab, $10,000 with T. Rowe Price and $25,000 with Vanguard. Many community foundations require $10,000 to open a donor-advised fund, but some have lower thresholds (you can find community foundations by using the Community Foundation Locator).

You can contribute all kinds of assets to the donor-advised fund, including cash, mutual funds and stock. Some donor-advised funds even let you contribute real estate or shares of privately held companies. The donor-advised fund usually gives you a choice of several mutual funds or investment pools in which to invest the money until you select the charities to support. You can make grants of as little as $50 or as much as your total balance to almost any qualified charity.

A donor-advised fund can be a good way to donate appreciated stock or mutual funds and benefit from the tax break. You can transfer the stock quickly to the donor-advised fund when it reaches a target price, and you’ll get to take a charitable deduction based on the stock’s value when you make the transfer (and avoid having to pay capital gains taxes on the increase in value since you bought it). But you’ll have an unlimited amount of time to decide which charities to support. Some families build up money in the fund over a few years, then work together with their children and grandchildren to choose the charities.

When choosing a donor-advised fund, compare the requirements to open an account as well as the fees. Most charge an annual administrative fee (0.60% of assets is typical) in addition to fees for the mutual funds or investing pools. Also compare the investing choices. You may be able to choose from several diversified asset-allocation pools, or you may be able to put together a portfolio of investing pools based on certain indexes or asset classes (such as U.S. equities, international equities and fixed income). The administrator may also provide access to resources to help you choose the charities, such as the GuideStar database and research reports, or a community foundation’s specialized resources for local charities.

Years ago, parents used passbook savings accounts to teach their children about the magic of compound interest. Unless your goal is to teach your son what happens when the Fed lowers interest rates to zero, you’ll want to find other ways to invest the money.

First, though, you’ll need to set up a custodial account under the Uniform Transfers to Minors Act (UTMA) or the Uniform Gifts to Minors Act (UGMA). Brokerage firms and mutual fund companies can provide you with the forms you need. An adult must be appointed custodian, a role that you or your spouse can assume. Once your child reaches the age of majority, usually 18 or 21, he will get full control of the account. If he decides to cash it out and buy a Harley, there’s nothing you can do about it.

You can invest an UTMA/UGMA in just about anything—stocks, mutual funds, exchange-traded funds—as long as you meet the financial institution’s investment minimum. Consider a total stock market index fund, which invests in virtually all publicly traded U.S. companies, suggests Rose Swanger, a certified financial planner in Knoxville, Tenn. TD Ameritrade offers custodial accounts with no investment minimum and hundreds of no-transaction-fee funds. Online stock trades cost just $9.99. Charles Schwab’s custodial account has an investment minimum of $100, and Schwab charges $8.95 to buy and sell stocks online. It also offers a large slate of no-transaction-fee funds.

Watch out for taxes. If your child proves to be an adept investor (or receives a lot more gift money), you could end up paying the “kiddie tax.” Under kiddie-tax rules, the first $1,050 of interest, dividends and capital gains from the account is tax-free; the next $1,050 is taxed at the child’s rate. Earnings above $2,100 are taxed at the parents’ rate. Consider this an opportunity to teach your child about the impact of taxes on investment returns—and the importance of tax-efficient investing. You can minimize the kiddie tax, for example, by avoiding short-term gains, which are taxed at your ordinary income rate. Hold investments for more than a year and you’ll pay long-term capital gains rates—typically 0% to 15%.

Impact on financial aid. When it is time to apply for college, an UTMA/UGMA account will reduce your child’s eligibility for financial aid. The federal financial aid formula counts 20% of a child’s assets (and that includes custodial accounts) when considering how much a family can afford to contribute toward college costs, versus a maximum of 5.64% of parents’ assets.

To avoid that problem, you could invest the money in a custodial 529 college-savings plan. Custodial 529 plans are considered a parental asset under the financial aid formula. If you already have an UTMA/ UGMA, you can convert it to a custodial 529 plan. Because 529 plans accept only cash, you’ll have to sell the investments in the account first. If you have a lot of investment gains, you can lower the tax hit by stretching the conversion over several years, says Joe Hurley, founder of SavingforCollege.com. Once the money is in the 529 plan, gains are tax-free, as long as the money is used for qualified educational expenses.

One possible sticking point: Parents can change beneficiaries in their own 529 plans, but a custodial 529 plan must remain in your child’s name. When your child reaches the age of majority, he will gain control of the account.

"Robo advisers" are making low-cost, computer-generated advice easily accessible to investors. But can automated advice address the complex needs of investors in or near retirement?

Traditional financial-services firms such as Charles Schwab and Vanguard Group, as well as newer players such as Wealthfront and Betterment, are competing to attract small investors wary of paying the 1% or more of assets that a typical human adviser charges. After assessing an investor's risk tolerance and goals through an online questionnaire, robo-advisers typically build each client a diversified portfolio of low-cost index funds, often for a fee of 0.25% or less.

The services are proving popular among retirees and near-retirees. For example, about half of the clients of Schwab Intelligent Portfolios are baby boomers and older seniors, says Naureen Hassan, an executive vice-president at Schwab.

But older investors comparing robo-advisers with their human competitors will encounter some trade-offs. While some robo-advisers will help you manage existing investments, others will only build new portfolios from cash. Some services will help retirees develop a portfolio drawdown strategy, while others can't even handle IRA required minimum distributions.

Given the availability of target-date funds and other do-it-yourself investment options, "the first question is not so much which robo-adviser to choose, but do I want a robo-adviser?" says FactSet director of exchange-traded fund research Elisabeth Kashner, who has studied robo-advisers' portfolio recommendations.

Although robo-advisers and other automated investment tools offer some clear benefits, "it is important to understand their risks and limitations before using them," the Securities and Exchange Commission noted in an investor alert released in May.

Robo portfolios. If you're thinking of working with a robo-adviser, consider how your overall portfolio might look after making the switch.

One key question: Will you have to sell off some of your current holdings in order to invest with the robo-adviser -- potentially incurring taxable capital gains in the process? Firms such as Wealthfront and Schwab are focused on building portfolios of ETFs, so people who don't have cash they want to invest would need to sell off other holdings. Firms such as FutureAdvisor and Vanguard, however, can help clients manage existing investments while also recommending mutual funds or ETFs to round out their portfolios.

Also consider the range of investments that each firm will recommend. Vanguard Personal Advisor Services, for example, only recommends Vanguard funds. Many other robo-advisers recommend funds from multiple fund firms, but investors should review the investment mix. FutureAdvisor doesn't include any municipal bond funds -- an omission that may trouble investors in higher tax brackets.

Fees. While all robo-advisers look cheap compared to the typical human adviser, some cost considerably more than others. On the cheaper end of the spectrum, Wealthfront customers pay no commissions, no advisory fee on the first $10,000 under management and 0.25% on amounts of more than $10,000. FutureAdvisor, however, charges 0.5% of assets, and investors must also pay some trading commissions.

If no advisory fee is charged, find out how the firm is making money. At Schwab, for example, investors pay no advisory fees and no commissions. But the recommended portfolios include cash allocations of 6% to 30%. That cash is swept over to deposit accounts at Schwab Bank -- generating income for Schwab.

Although it's a good idea to maintain an emergency fund so you don't have to sell off investments if you suddenly need cash, the Schwab cash allocation doesn't fill this need. If an investor withdraws cash, the service automatically rebalances the portfolio to bring cash back to the targeted percentage. "We believe that cash is the best defensive asset class," Hassan says.

Bells and whistles. Consider how a robo-adviser stacks up against a human adviser or a do-it-yourself approach in terms of tax efficiency, retirement drawdown advice and other ancillary benefits.

Robo-advisers often trumpet tax-loss harvesting as a return-boosting benefit for customers. They will scan customers' portfolios daily, looking for investments to sell at a loss. The proceeds are reinvested in similar holdings, allowing the investor to maintain market exposure while generating losses that can offset taxable gains. But all that trading involves risks, including the risk of switching into a "second-best" ETF that doesn't provide the same market exposure or performance as the original holding, Kashner says. And tax-loss harvesting doesn't benefit everyone. People in the 15% bracket, for example, have a 0% tax rate on long-term capital gains.

Retirees seeking drawdown advice will find big differences among robo-advisers. Vanguard's service offers a customized drawdown strategy for customers approaching retirement, and Betterment aims to help retirees maximize income while maintaining a fairly consistent level of spending from year to year.

FutureAdvisor, however, doesn't offer such services. Nor can it handle older investors in tax-deferred accounts, "because we're not yet prepared to help them with the mandatory withdrawals," says Chris Nicholson, the firm's head of communications.

Security. Before handing any money to a robo-adviser, find out which firm will actually have custody of your assets and how long that firm has been in business. At FutureAdvisor, for example, client assets are held at Fidelity or TD Ameritrade. "They see everything we do," Nicholson says. "It's a built-in check and balance."

Robo-advisers are largely untested in extremely volatile markets. "What happens if we go through another downturn?" asks Christopher Lengle, chief strategy officer at robo-adviser Invessence. Recognizing the role of human advisers in such situations, Invessence last year switched from providing robo-advice directly to investors to building automated investment management technology for financial advisers, Lengle says.

Consider whether a robo-adviser offers easy access to a human adviser. Schwab clients can talk to human advisers by phone, e-mail or online chat, but they are not assigned a dedicated adviser. At Vanguard, customers investing $50,000 to $500,000 work with a team of advisers, while those investing $500,000 or more are given a dedicated adviser.

My family is thinking about setting up a donor-advised fund so all three generations can work together to decide which charities to support. How much money do we need to open up this kind of fund, and do we get a tax break for our contributions?

See Our Slide Show: 15 Surprising Tax Deductions

Many brokerage firms, mutual fund companies and community foundations let you open a donor-advised fund, which allows you to pool your money in one place and decide where to donate it later. The amount you need to open the fund varies by provider. Charles Schwab and Fidelity let you open a donor-advised fund with $5,000; T. Rowe Price requires $10,000. You may be able to open an account at a local community foundation for less.

As long as you itemize deductions on your income tax return, you can write off the amount you contribute to the fund as a charitable contribution for the year you make the donation. But you have almost unlimited time to decide which charities to support. In the meantime, the money grows in the account, either in mutual funds or investment pools. You can give cash, stocks, mutual funds or other assets, and some donor-advised funds even accept shares of privately held companies, real estate and other complicated assets. If you plan to sell stock or funds that have increased in value and use that money to give to charity, it’s a good idea to give the appreciated shares to the donor-advised fund rather than selling them first. When you transfer the shares, you avoid paying capital gains taxes on the increase in value since you purchased them; you can deduct the value of the shares on the day you give them away.

Many families use these funds to work together toward charitable goals, without the cost and administrative complexity of setting up a family foundation. Some families, for example, have members of all ages research charities during the year, then get together during the holidays to decide which charities to support. You have pretty much unlimited time to decide which grants to make (you may be required to give a minimum amount every few years from the fund), and you can generally give the money to any 501(c)(3) organization in good standing. The size of the grants varies by administrator but can be as little as $50. The average grant made by Fidelity Charitable funds in 2013 was just over $4,000.

For more information, see Donor-Advised Funds: Contribute Now, Donate Later.

If you think it's hard to start investing with just $100, you're mostly right. Sure, you could buy a share or two of some of the World's 10 Best Stocks, but that hardly makes for a well-diversified portfolio. Mutual funds, which might hold hundreds of stocks, are a more affordable way to diversify. But many require an initial investment of at least $2,500.

Cash-strapped investors looking for funds with low expenses, no sales loads and small initial minimums should start at Charles Schwab. The company offers 50 Schwab mutual funds, plus nine Laudus funds, all requiring a minimum initial investment of just $100 to open a regular account—no strings attached. Schwab is willing to absorb the costs of administering such small accounts early on because it hopes a long-term relationship will eventually blossom. "We want to make it easy for people to get started in investing," says John Sturiale, senior vice-president of product management at Charles Schwab. "And although it might cost Schwab a little bit more, at the end we think we're going to keep those clients for a long time."

A standout Schwab fund is Schwab Total Stock Market Index (symbol SWTSX), which can serve as the foundation for a budding portfolio. The index fund aims to keep pace with its benchmark, the Dow Jones U.S. Total Stock Market index, which includes about 3,600 stocks of companies of all sizes. So, as its name implies, the no-load fund allows you to diversify and get into all corners of the U.S. stock market with a single $100 investment. And that broad diversification comes at the very low price of just 0.09% in annual expenses.

Investors who have stuck with Schwab Total Stock Market Index have been rewarded over the long haul. Through September 25, the fund has outperformed 86% of its rivals in the large-company blend category over the past five years and 84% over the past 10 years. (The category, as defined by Morningstar, is made up of funds that invest in both growth-oriented and value-focused stocks.) On an annualized basis it has also topped the returns of Standard & Poor's 500-stock index over the past five- and 10-year periods.

Schwab's target-date funds are another option for someone with just $100 to invest. Because they're built to be diversified portfolios that adjust to your goals over time, such funds make sense for people looking to plunk all their money into a single investment. You can pick the fund named for the year in which you want to reach your investing goal, commonly retirement, and the managers ensure your asset allocation suits that timeline.

For example, a 24-year-old planning to retire at age 65 could select Schwab Target 2055 (SWORX). With so many years to go, the fund holds mostly stocks: two-thirds of its portfolio is in U.S. stocks, 27.4% is in foreign stocks, and the rest is mostly in cash and bonds. The aggressive stance has been successful over the past 12 months; the fund rode the bull market up 12.1%. That puts the fund in the top 20% of the 150 target-date funds pegged to the year 2051 or later that are tracked by Morningstar. Annual expenses are 0.73%.

But the fund, launched in January 2013, won't always be all about stocks. Each year, manager Zifan Tang will adjust the investments as necessary until the fund reaches an allocation of 40% stocks, 54% bonds and 6% cash in 2055—which Sturiale estimates to be a bit more conservative than similar target-date funds. Schwab Target 2055 is designed to operate another 20 years beyond its target date, reaching its final allocation of 25% stocks, 66% bonds and 9% cash in 2075.

$100 Funds With Strings Attached

You can find a few additional no-load mutual funds with an entry fee of just $100 outside the Schwab family, but they come with certain provisos. Some fund companies, such as Buffalo Funds and Guinness Atkinson Funds, lower the initial minimums for their funds to $100 if you're willing to commit to regular contributions through an automatic investment plan, or AIP. The USAA First Start Growth Fund (UFSGX) will even permit you to open an account with no money up front as long as you agree to invest $50 per month through an AIP. However, if you cancel the automatic contributions from your bank account before you reach a certain threshold, a company might close your account and liquidate your shares.

Some funds also are willing to let you get started with just $100 if you open an IRA. A great mutual fund that permits new investors to buy in for just $100 in either manner is FPA Crescent (FPACX). Typically, you'd need at least $1,500 to get started, but within a retirement account the minimum drops to $100. You just have to commit to raising your account balance to at least $1,500 within a year. Plus, you pay a $15 annual fee, in addition to the fund's regular annual expenses of 1.14%. You can also start investing in FPA Crescent with just $100 through an automatic investment plan, but you must agree to contribute another $100 every month. If you fail to meet these requirements, you may be forced to close your account and liquidate.

FPA Crescent is a member of the Kiplinger 25, a collection of our favorite no-load funds. Veteran manager Steve Romick and newcomers Mark Landecker and Brian Selmo (who joined the management team in 2013) can invest almost anywhere, in a range of different assets. They seek investments they believe to be selling for far less than they're worth—a strategy that has yielded few appealing prospects during the recent stock market rally and pushed up the fund's cash holdings to 46.1% of assets as of the midyear mark. Over the past year, the fund has returned 10.5%, which trails the return of the S&P 500 by 8.0 percentage points. But long-term results are better: FPA Crescent has posted an average annualized return of 10.3% over the past 15 years, beating the index by 5.4 percentage points.

Tax season is just about over. You've trimmed your tax tab by taking as many tax write-offs as you could. Warning: Your job is not over yet.

When it comes to minimizing your tax bill, your annual tax return is just a short-term tactic. You can save more money over the long term if you engage in strategies to boost your after-tax investment returns. "Taxes are the biggest drag on returns," says Rande Spiegelman, vice-president of financial planning at Charles Schwab.

You can't eliminate all investment-related taxes, of course, but studies show that you can extend the life of your retirement nest egg by improving the "tax efficiency" of your investing.

It's a strategy that many investors overlook, says David Blanchett, the head of retirement research at Morningstar. "It's easy for an investor to figure out whether a mutual fund outperformed an index," he says. "But most people don't think about how taxes affect their long-term portfolio." And like limiting investment fees, managing the tax bite is one of the few areas that you can control. "It's almost a free lunch," he says.

The strategy is based on the fact that different kinds of investments are taxed differently. Also, earnings from the same investment are taxed differently depending on whether it is in a taxable brokerage account, tax-deferred IRA or 401(k), or tax-free Roth. The goal is to put the right investments in the right accounts to maximize after-tax returns. The order in which you withdraw from the various accounts also helps or hurts your overall results.

The most basic rule of thumb is to place stocks in a taxable account and bonds in your IRA. (We'll get to the intricacies and the exceptions later.) During retirement, you withdraw from accounts in this order: taxable, traditional IRA and Roth.

To demonstrate the advantage of tax-efficient investing, Blanchett and Morningstar colleague Paul Kaplan created nine hypothetical portfolios, all with an allocation of 40% stocks and 60% bonds—a reasonable allocation for someone approaching or in the early years of retirement. The account balances for a 401(k) and taxable account were equal. At one end of the spectrum, an investor pursued a rule-of thumb strategy—placing the stocks in the taxable account and most of the bonds in the 401(k), and then tapping the taxable account before withdrawing from the 401(k). With an inefficient portfolio, the 401(k) held stocks, and the investor withdrew from the retirement account first. In a "split" portfolio, stocks and bonds were placed equally in both accounts, which were tapped simultaneously.

The tax-efficient portfolio generated 3.23% more in after-tax annual income during retirement than the split portfolio, the researchers found. Blanchett used the split portfolio to compare with the "efficient portfolio" because he assumed that typical investors would more likely spread different types of investments and income across accounts—but not tax efficiently.

A big caveat: You should not worry about tax efficiency if nearly all of your money is in a tax-favored IRA or 401(k). The objective of employing strategies to boost tax-efficiency is to reduce taxes generated in your taxable account. If, say, 90% of your retirement stash is in tax-deferred accounts, place the most-efficient 10% of your assets in the taxable account and don't worry about the rest. And don't skimp on stowing away money into your retirement account in order to play the tax-efficiency game. Place as much money as you're allowed in your IRA or 401(k), where your investments will grow tax deferred for years.

First choose a well-diversified portfolio based on solid investments and your risk tolerance. Then you can play the tax-efficiency card to the extent possible based on your specific situation. "You hear a lot of people saying, 'Never let the tax tail wag the dog,' " says Tom Roseen, head of research services at investment research firm Lipper. That's true, he says, but, "on the flip side, if you're surrendering two percentage points a year to Uncle Sam, keeping a good eye on after-tax returns and on asset location is hugely important."

Even a "seemingly small tax drag" can have a big impact on an investment's long-term growth, Roseen says. To illustrate, he looked at the before- and after-tax performance of taxable fixed-income funds for the ten years that ended December 31, 2012. The before-tax annual performance averaged 5.44% a year.

If $10,000 of fixed-income investments had been placed in an IRA at an annual return averaging 5.44% a year, the investment would have grown to $48,933 after 30 years. If the same investments had been placed in a taxable account, Roseen figures that taxes on capital gains and other distributions would have consumed 1.76 percentage points—for an average after-tax performance of 3.67% a year. After 30 years, the taxable account would have held $29,527.

How much of the IRA's apparent advantage would be lost to taxes upon withdrawal would depend on the investor's marginal tax rate. If the investor's tax rate is 25%, the IRA would still be more than $7,000 ahead after the full $48,933 was withdrawn.

You can get even more flexibility if you open a Roth IRA. You can convert part of your traditional IRA or, if you're still working, funnel money into a Roth 401(k). If you choose the conversion route, take care that the income from the switch does not bump you into a higher tax bracket. And opening a Roth may only make sense if you expect to be in the same or a higher tax bracket down the road.

Location, Location, Location

Once you settle on asset allocation, turn your attention to asset location. To the extent possible, figure out which holdings are most tax-efficient and most tax-inefficient. It's the least-efficient ones that should go into a tax-sheltered account.

Facing new, higher rates on ordinary income and capital gains, wealthier taxpayers have the most to gain by pursuing a tax-efficient investment strategy, says Maria Bruno, a senior investment analyst at Vanguard. "When tax rates rise on individuals with higher income, or when you're in a higher bracket, asset location is all the more important because of how the accounts are taxed," Bruno says.

With a taxable account, you pay ordinary income tax of up to 39.6% on interest payments and up to 20% on qualified dividends and long-term capital gains. Higher-income investors also now pay a new 3.8% surtax on certain investment income. With a traditional IRA, you pay ordinary income tax on all withdrawals (assuming you've made no nondeductible contributions), while all withdrawals from a Roth are tax free.

A brokerage account is the best place to hold any tax-exempt municipal bonds you own—why waste the tax break in a tax-favored IRA? (And muni-bond interest earned inside an IRA will be fully taxed when it's withdrawn.) Assuming you have room, perhaps your taxable account will include a large-company index fund that you intend to hold for a long time—you pay the tax-favored capital-gains tax on profits and you'll incur most of that only when you sell. Holding stocks in an IRA converts those long-term gains into ordinary income, which is taxed at a higher rate when you withdraw. Stash living-expense money in a bank account, or Bruno suggests, use tax-exempt municipal money-market funds for your short-term needs.

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Place investments that generate the most taxable income in a traditional IRA. This includes real estate investment trusts and most taxable bonds and bond funds, especially high-yield bonds and inflation-protected securities. Interest on these assets—and inflation adjustments in the case of inflation-protected securities—would be taxed at ordinary income-tax rates each year if they were held in a taxable account. "They kick out a lot of annual income," Bruno says. Individual stocks that you intend to hold less than a year also may be better off in an IRA; in a taxable account, you would pay short-term capital-gains taxes, at your ordinary income-tax rate, if you sell within a year. You'll pay ordinary income rates on the money when it comes out of the IRA, too, but you'll enjoy tax-deferred compounding until that time.

The rules of thumb—stocks in taxable accounts and bonds in tax-favored accounts—don't always apply. For mutual funds, you need to consider the "turnover rate." Even if you lose money on a fund, you'll pay long- and short-term capital-gains tax on distributions each year if the fund is held in a taxable account. That occurs when a fund manager sells—or turns over—holdings for more than their purchase price. You also will pay tax on interest on any bonds held in a fund.

Index funds and exchange-traded funds that follow a broad benchmark, such as a fund that tracks Standard & Poor's 500-stock index or a broad international-fund index, have low turnover rates. Trading in these funds is limited so they generate little in capital gains and the dividends tend to be low. The relatively low annual tax liability makes such funds better candidates for a taxable account than a tax shelter. Actively managed funds tend to have higher turnover "so they probably should go to the tax shelter," Roseen says.

But not all index funds cry out to be in a taxable account. Some narrower index funds and ETFs, such as those that follow a sector or an individual country, may have considerable turnover and could be better off in an IRA. Small-company stock index funds also tend to be inefficient because fund managers may need to buy and sell holdings more often. And bond index funds tend to generate taxable distributions.

To check the fund's turnover rate, go to Morningstar.com, plug in the fund's symbol, and click on the "Tax" tab. The Vanguard 500 Index fund, for instance, has 3% turnover, which means it tends to hold stocks indefinitely. Many actively managed funds that invest in large U.S. companies have turnover rates of 50% or more, meaning that half of the stocks are sold and replaced within a year. Compare a fund's turnover rate to those of its peers.

Also look at the fund's performance, particularly its tax-adjusted return. Lipper, which is owned by Thomson Reuters, a business information company, offers two tools to help you judge a fund's after-tax return and its tax efficiency. Go to www.reuters.com, place your cursor on the "Money" tab, and click "Fund Screener" from the menu. At the bottom of the page (at "view overview page for"), plug in the fund's symbol or name.

By clicking on "Lipper Leader Ratings," you can see the fund's tax-efficiency rating—5 is the best. By clicking on the "Performance" tab, take a look at "after-tax preliquidation" and how it compares with the "SEC performance." The difference is the amount of the return you will pay per share in taxes on capital gains, dividends and interest income.

These measures can help you figure out the best home for a particular fund or choose a fund for a taxable account. If you're looking at two funds with the same returns, Roseen says, "but one is more tax efficient than the other, that is the fund I would choose for a taxable account."

The asset's returns also could be as important as the tax rate in deciding where to place an asset. Generally, for example, Roth accounts should hold investments with the potential for the highest return, such as growth stock funds. In a Roth, you don't need to take minimum distributions and investments grow tax free.

Michael Kitces, director of research at Pinnacle Advisory Group, in Columbia, Md., believes location matters more for high-return investments than for low-return assets. The goal of placing assets inside a retirement account "is to take advantage of tax-deferred compounding returns," he says. If returns are low, he says, "there simply isn't much to compound in the first place." That's the case for many bonds, particularly low-yielding government bonds.

Kitces says that with bond interest rates so low it may not matter where you place the bonds if you have other tax-inefficient assets that have higher returns—and you have a small IRA. The idea is to set priorities for placing your most inefficient and efficient assets.

He offers this example: Say you have a $90,000 taxable account and a $10,000 IRA. Your investments are split equally among bonds; cash; a high-turnover, high-return stock fund; and a high-return index fund. The first priority would be to put the most inefficient asset—$10,000 of the stock fund—into the IRA. The bonds would go into the taxable account, Kitces says, "not because we prioritized them there, but because we prioritized something else in the IRA first."

Your priorities would change if you had a $10,000 taxable account and a $90,000 IRA. Your most-efficient asset—$10,000 of the index fund—would go into the taxable account, "where it benefits most," Kitces says. The rest would go into the IRA.

Beyond choosing the best account for each investment, other moves can hold down Uncle Sam's take of your investment profits. If you're about to sell a stock in a taxable account, Spiegelman says, pay attention to the holding period. If you bought it nearly 12 months ago, hold on to it a year and a day, to avoid the short-term capital-gains tax. But if you'd have to wait six months to move into long-term gain territory, go ahead and sell, he says. It's better to pay the taxman than risk a loss in the market.

When you rebalance your portfolio, do as much as possible inside your IRA, where transactions have no tax consequence. For example, if your stock portfolio is now above your target allocation relative to bonds, Spiegelman says, "the first place to go is your tax-advantaged accounts. You can sell some stocks without incurring taxable capital gains."