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Plotkin Financial Advisors

5 Things to Know Before Investing

Table of Contents

When it comes to investing, there are several things you need to be aware of before diving in. While investing your money is one of the best ways to increase your wealth, knowing what you are doing is the only way to be successful in investing. Keep reading to learn five things to know before investing your hard-earned money.

1. Understanding the Nature of Risk

Ever heard of investment risk? If not, investment risk is real. As the stock market tends to fluctuate and is volatile, it is imperative to decide whether or not you want to invest short-term or long-term. 
The reason for this is because due to the stock market’s uncertainty, especially right now in the midst of this pandemic, investing short term might result in a larger return on an investment. However, with investing short term or long term, investors need to be aware of the inevitable fluctuation of the stock market.

Short-term vs Long-term Investment

Short-term Investment:

  • Potential for quick returns
  • Flexibility to move investments
  • Higher volatility
  • Requires active management 
Ideal For: Investors looking for quick profits and who can actively monitor their investments.

Long-term Investment:

  • Potential for substantial returns over time
  • Lower impact of short-term volatility
  • Capital is tied up for a longer period
  • Requires patience
Ideal For: Investors looking for growth over time and who can withstand market fluctuations.

Risk Mitigation Strategies

Diversification: Spread investments across various assets to reduce risk.
Education: Stay informed about market trends and investment strategies.
Professional Advice: Consider seeking help from financial advisors.

2. What Type of Account Do You Want to Open?

Exploring Account Types

When investing, you have several types of accounts to choose from and eventually open. For starters, there are standard brokerage accounts, retirement accounts, education accounts, and even accounts for kids.

These types of investment accounts rely on the status of the stock market, as most accounts do. It is crucial to do your research on each type of account and which you want to invest in. We would be happy to help you research and explore your options for investing.

Standard Brokerage Accounts:

  • Quick access to trading
  • No contribution limits
  • Taxed as capital gains

Retirement Accounts:

  • Tax advantages
  • Designed for long-term growth
  • Early withdrawal penalties

Education Accounts:

  • Tax-free growth if used for educational expenses
  • Contribution limits apply
  • Variety of investment options

Accounts for Kids:

  • Long-term growth
  • Can be used for education or other expenses
  • Tax advantages

Choosing the Right Account

Assess Your Goals:
Determine your financial objectives, risk tolerance, and investment horizon.

Compare Features:
Look at the benefits, restrictions, and tax implications of each account type.

Seek Professional Advice:
Consult with a financial advisor for personalized recommendations.

3. Options for Your Accounts

Opening an Account

Do you know where you want to begin opening an account? Most investors opt for opening an investment account via a brokerage. However, you can also open investment accounts through banks. How you want to invest and where you want to invest will help guide you in finding the best place to open an account and begin investing.
The process and options for opening an investment account can vary. Here’s a breakdown of common platforms:


  • Offer a wide range of investment options
  • Provide tools and resources for investors
  • Charge fees and commissions


  • Convenient for existing bank customers
  • Limited investment options
  • May offer lower fees for account holders

Considerations for Choosing a Platform

Compare the fee structures of different platforms.

Investment Options:
Ensure the platform supports the assets you’re interested in.

Customer Service:
Consider the quality of support and services provided.

4. Research Taxes on Stocks

Understanding Tax Implications

Taxes tend to give most people worry, but when it comes to stocks, they are not too big of a deal. In fact, the tax implications of investing in stocks can vary greatly depending on the type of account and the investor’s tax bracket.
If taxes are a concern for you when making the decision of whether or not to invest, your best bet is to talk to a financial professional to see how taxes will look for you should you open an investment account.

Common Tax Considerations

  • Capital Gains Tax: Applicable to profits from the sale of stocks.
  • Dividend Tax: Taxes on dividends received from stocks.
  • Tax-Advantaged Accounts: Retirement and education accounts often offer tax benefits.

Strategies to Minimize Tax

  • Hold Investments Longer: Long-term gains are often taxed at a lower rate.
  • Tax-Loss Harvesting: Offset gains with losses to reduce taxable income.
  • Consult a Tax Professional: Get personalized advice based on your financial situation.

5. Times Have Changed

The Rise of Investment Apps

Investing in general does not have to be hard, as long as you are in the correct mindset. The internet is a wonderful resource for information; however, we highly recommend you speak with a financial professional to go over what’s best for YOU personally. 
Modern technology has made investing more accessible. Apps like Acorn and Robinhood have simplified the process, allowing users to invest from their smartphones.

Key Features of Investment Apps

  • User-Friendly: Designed for ease of use, even for beginners.
  • Low Fees: Many apps offer low-cost trading options.
  • Educational Resources: Provide information to help users make informed decisions.

Precautions and Research

  • Understand the Risks: Evaluate the investment options and associated risks.
  • Read Reviews and Ratings: Consider the experiences of other users.
  • Consider Security: Ensure the app has robust security measures to protect your information and investments.

Get Personalized Guidance

Investing in general does not have to be hard, as long as you are in the correct mindset.

The internet is a wonderful resource for information; however, we highly recommend you speak with a financial professional to go over what’s best for YOU personally. 

Ready to get started?
Give us a call: 301-907-9790


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