A flexible brokerage account is a taxable brokerage account, which means that earnings from dividends and capital gains are taxed. Funds invested into this type of account can be withdrawn whenever and without penalty (unlike retirement accounts and some mutual funds). Flexible (taxable) brokerage accounts do not have maximum contribution limits.
The main differences between a Traditional IRA and Roth IRA are the eligibility requirements and the tax treatment. With a Traditional IRA, you can deposit pre-tax dollars and pay the tax upon withdrawal. With a Roth IRA, post-tax dollars are deposited into the account and the funds are not taxed during a withdrawal.
Many younger individuals select to open a Roth IRA since contributions are taxed at a time when their tax bracket is often lower and the withdrawals for retirement can be made when they are likely to be in a higher tax bracket.
Alternatively, if you’re already earning a substantial income, there may be benefits from getting a tax deduction now by using a Traditional IRA. Be sure to check with a tax advisor for your specific situation.
What’s the difference between SRI (Sustainable, Responsible, and Impact Investing), ethical investing, ESG (Environmental, Social and Governance) and Impact Investing?
Sustainable, Responsible and Impact Investing (SRI) is a term that encompasses the socially responsible investing industry as a whole, while ethical investing, ESG (Environmental, Social and Governance), and impact investing are particular types of SRI.
Ethical Investing filters out harmful companies involved in industries like tobacco or gambling.
ESG investing pushes for general social good by further screening companies for various environment, social and corporate governance policies.
Impact Investing is a more focused strategy based on a particular social initiative, such as disease eradication.
Swell is considered a form of impact investing that falls under SRI investing.
A fractional share is a partial share of an equity security equal to or less than one full share. Trading on an exchange can only happen in whole shares, which is why many investment platforms only allow you to trade in whole shares. However, unlike many other investment services, Swell uses fractional shares to make sure that all of the money that you’ve allocated for investment is actually invested.
When you invest with Swell, you set the dollar amount that you wish to invest. Our platform then allocates the number of shares to you, even if they’re less than whole shares of stock. The full investment of every dollar according to your desired asset allocation means that your money is getting absolutely the most value possible out of investing. In addition, this means that our service is equal to all investors. An investor with a $4,000 account receives the same diversification benefit as one with a $4 million account.
"S&P 500" is an abbreviation for the Standard & Poor's 500 Total Return Index, a market-value weighted index of 500 stocks chosen to reflect the risk/return characteristics of the large cap universe and one of the common benchmarks for the US stock market. Any comparison to the S&P 500, or to any other benchmark, is shown for illustrative purposes only. Swell’s portfolios differ from the S&P 500 in that, among other factors, Swell’s portfolios are managed, primarily focused on small and mid-cap stocks, undiversified, bear fees and may vary materially in volatility.
“Cap” refers to market capitalization of a company. To calculate a company's market capitalization, multiply the total number of a company's outstanding shares by the current price to share.
Swell uses the same market cap thresholds as the Russell Indexes: "Small-cap" is approximately $132.9 million to $2.9 billion, "Mid-cap" is approximately $2.9 billion to $26.3 billion, "Large-cap" is approximately $26.3 billion to $549 billion.
An IRA, or Individual Retirement Arrangement, is basically a savings account with big tax breaks, which makes it an ideal vehicle for saving toward your retirement.
IRAs are not set up by employers like 401(k) plans are – instead they can be set up by an individual and allow the owner flexibility and control over the management of funds. There are many types of IRA accounts, all with different rules and eligibility requirements. You can find more information on the types of retirement accounts here.
Long-term capital gains are taxed at a different (and lower!) rate. Here is Investopedia’s description of long-term capital gains tax rate -- we really like their definition as it’s straight-forward and relatively jargon-free.
The IRS taxes long-term capital gains at a substantially reduced rate to encourage individuals and businesses to keep their investments. The difference between the long-term capital gains rate, generally referred to as simply the capital gains rate, and the ordinary income tax rate, which applies to short-term gains, can be almost as much as 20%.