How to invest your $600 stimulus check if you don't need it right now


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If you received your second $600 stimulus payment, but don't think you need the money at the moment, now might be the perfect time to invest. 

There are several smart ways to build wealth, but you'll first need to determine what type of investor you are. Your options for investing will vary depending on whether you're a DIY-minded trader or someone who prefers professional guidance.

DIY traders and active investors generally conduct investment research and execute securities transactions on their own. Passive investors can make their own investment decisions as well, but these investors typically use buy-and-hold strategies (and professional assistance) to grow wealth over longer periods of time.

And in some cases, investment platforms and/or advisors provide options both for individuals who want to trade on their own and for those seeking help. Keep reading to see how you can get started.

Set up a brokerage account

You'll have a long list of options when it comes to finding an online brokerage. Online brokerages are essentially platforms that let you shop for investments and other financial accounts.

For instance, in addition to investment accounts, brokerages may also offer IRAs and other retirement accounts, education savings accounts, and custodial accounts (investment accounts for minors).

The best brokerages typically offer low account minimums and management fees, commission-free trading on investments, and investment research and tools. And when it comes to investment accounts, some platforms offer both individual accounts and joint accounts for two or more people.

Many brokerages and online advisor services charge you $0 to set up a self-directed, or DIY account. For example, Charles Schwab, Fidelity, SoFi, and Vanguard all have $0 account minimum requirements for their active trading accounts.

So if you're looking to invest a portion, or all, of your $600 check, it may be best to choose a broker with low or nonexistent account minimums.

Passively invest with a robo-advisor

If you're looking for more of a hands-off investment experience, robo-advisors could be right for you. Robo-advisors are investment apps that use algorithms to manage your investment portfolio.

While some companies like Betterment and Wealthfront solely provide robo-advice, you'll also occasionally have access to the best of both worlds, since many brokerages also provide a robo-advisor account.

In most cases, all you'll have to do is pay an account minimum and/or management fee, and the robo-advisor will invest your money in portfolios that align with your savings goals. In addition, many robo-advisors offer tax-advantaged account features that reduce the amount you'll pay in taxes.

Invest with a financial advisor

You can also invest with a traditional financial advisor, but this may be more costly than setting up a self-directed brokerage account or using a robo-advisor. Financial advisors may charge hourly fees, asset based fees, or fixed fees for advice.

For investment management, a financial advisor may charge an asset-based fee — or a percentage of your assets — between 1% and 2% of your portfolio. One-time plans, on the other hand, could cost you between $100 and $300 per hour. And if you're looking for guidance on a regular basis, you could pay between $1,000 and $3,000 in fixed fees.

Many financial advisors also impose minimum account size requirements. Therefore, it's best to ask an advisor about their advisory fees before you agree to a financial plan. 

Stocks: Almost all online brokerages, investment platforms, and financial advisors offer stocks. Stocks are shares of ownership that public companies make available to investors on stock exchanges. The idea behind stock trading is that, as a company's profits and value increase, so do your returns.

Bonds: Bonds are investments that act as collateral between you and governments or corporations. Governments and corporations issue bonds to investors when they need to fund certain projects or raise money. So when you invest in bonds, you take on the role of the lender, while the institution becomes the borrower. You'll get back the face value of your investment on a specific date, along with regular interest payments.

Exchange-traded funds (ETFs): ETFs are investment funds that typically contain a mix of stocks, bonds, and commodities. These investments are very similar to stocks since: (a) both types trade on stock exchanges, and (b) both can lose or gain value.

Mutual funds: Like ETFs, mutual funds act as a bundle of multiple investment types. These funds pool investors' money together to invest in a diversified mix of stocks, bonds and other investments. Regular mutual funds also have managers that oversee the fund's holdings, place investment orders, and monitor performance.

Options: Options are contracts that give you the power to buy or sell an underlying investment (such as a stock, bond, or ETF) on a specific date. Most brokerages charge between $0.50 and $0.65 for options contracts.

Alternative Investments

Real estate: You can also invest in real estate without buying and managing commercial properties yourself. Real estate investment trusts (REITs) are companies that own income-generating real estate properties. Like stocks and ETFs, REITs trade on exchanges, and investment platforms like Fundrise and DiversyFund both offer REITs and automated investment management for as low as $500.

Precious metal: Some investment platforms and advisors let you invest in gold, silver, and other metals through mutual funds and ETFs that invest in companies that produce such metals. For instance, Fidelity currently offers trading for gold, silver, platinum, and palladium.

Cryptocurrency: Cryptocurrencies are highly encrypted digital assets that individuals typically use as forms of payment. Individuals and businesses may also use cryptocurrencies to buy goods and invest. Some of the most popular cryptocurrencies are Bitcoin and Ethereum.

You should only invest your $600 stimulus check if you don't absolutely need the money right away. Investing is a great way to grow your money over time, but it also carries risks. And different investment types — such as stocks, bonds, mutual funds, and options — have varying levels of risk.

Determining how you're going to invest also affects how much you'll spend. You'll want to weigh the costs between investing through online brokerages, robo-advisors, and financial advisor firms.

If you're not looking to spend the majority of your stimulus money on minimum account size requirements, it may be in your best interest to consider investment platforms and advisors that require no minimum investment and/or low management fees.

Rickie Houston is a wealth-building reporter at Personal Finance Insider who covers investing, brokerage, and wealth-building products.