Deeper Ways to Be a Better ETF Investor in 2015

In last week’s issue, I offered you 10 suggestions on how to be a better ETF investor in 2015. This week, I want to elaborate on the first three of those suggestions, as I think each deserves a little deeper analysis. Let’s take a closer look now.

1) Find more money to invest in ETFs. This may seem a bit confusing, but it’s really not. When I say find more money to invest in ETFs, I am not suggesting that you go out and get a new job so you can earn more money (although there’s nothing wrong with that). What I am suggesting is that you alter your current asset mix so that you can rotate out of higher-cost, higher-risk assets such as mutual funds and/or individual stocks and rotate into lower-cost, and often lower-risk, exchange-traded funds.

Also, if you have money tied up in, say, a savings account that’s paying you virtually zero interest (returns here actually are negative when you factor in inflation), then it’s time you consider moving that money into your brokerage firm and buying low-risk ETFs. Finally, if you have money tied up in an old 401(k)-type account from a former employer, you need to do an IRA rollover so you can get out of restrictive fund choices and move money into much-more-flexible ETFs.

2) Consolidate your accounts at one brokerage. Believe it or not, this is one of the biggest problems I see when analyzing investor portfolios. In fact, many prospective clients of my advisory firm, Fabian Wealth Strategies, tell me they have relationships with half a dozen or more brokerage and financial firms.

The way I see it, there is no good reason to have more than one brokerage account. Quality firms such as Fidelity, Schwab, TD Ameritrade or Vanguard aren’t going anywhere, and you only need one to take good care of your hard-earned capital. The only real byproduct of having multiple accounts at multiple financial institutions is a negative one, and that is confusion. More paperwork, more passwords, more phone numbers and more and more self-inflicted problems, and, well, just more of what you don’t need in your life. I recommend moving your assets to one brokerage firm, making life a whole lot easier in 2015.

3) Start a Roth IRA. If you qualify for a Roth IRA, and if you don’t have one, then you are only hurting yourself and your overall investment returns. Why? Well, because a Roth IRA is a tax-free savings account. The key word here is FREE.

When you have a Roth IRA, there are no taxes on withdrawals of your contributions at any time, nor are there any taxes on earnings in retirement. There are also no required minimum distributions with a Roth. You can contribute $5,000 per year ($6,000 if you’re over 50), and while this may not be a lot of money to you, the tax-free aspect of a Roth IRA automatically gives you a better return on your investment dollars than you would get with a standard IRA, or with a regular investment account. So, if you don’t have a Roth IRA and you qualify, then now is the time to open one up.

Next week, we’ll take a deeper look at three more ways to be a better ETF investor in 2015.

NOTE: Fabian Wealth Strategies is a Securities and Exchange Commission-registered investment adviser, and is not affiliated with Eagle Financial Publications.