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Do you want to know your options for investing to reach your long-term goals? Remember that investing is only appropriate if your living expenses are covered, your debt is under control, and you have built an emergency fund. After that it may be time to consider long-term investing.

This blog covers two of the major types of “stores” that specialize in investments – brokerage firms and investment (mutual fund) companies.

If you’d like to learn more about Saving for Short-Term Goals, check out my blog on the topic.

Brokerage Firms

The widest selection of investments is available through a broker-dealer, or brokerage firm, a company in the business of buying and selling investment products. A broker-dealer may be a person, a company, or another organization. They may sell their own products, and then they are called a dealer; they may sell products from outside sources, and then they are called a broker.

Fees or charges associated with a brokerage account vary widely. Some firms do not charge a transaction fee to buy or sell a stock or exchange-traded fund and some do, but then it may be on a scale.

Some firms charge for ongoing management of your account. If you choose to work with an advisor that is independent of a brokerage firm, a Registered Investment Advisor (RIA), they will open an account for purchasing securities at a brokerage firm. (Madoff brought this necessity to the attention of the public).

In any case, it is important to get a clear picture of all fees and/or expenses when you interview a prospective broker or advisor and make sure they act as a fiduciary. (My blog, Should I Hire a Financial Advisor, has more on this topic.)

Some investment products can only be purchased or sold through a broker-dealer – stock or ETFs for example – because membership on an exchange is required, which is costly. The largest U.S. broker-dealer firms are names that you recognize: Fidelity Investments, Charles Schwab, or Edward Jones, for example. They are not the only players in the broker-dealer world, however.

Independent broker-dealer firms were created for financial advisors who hold securities’ licenses but want support for only a limited number of services, such as compliance and trade execution. Independent broker-dealers usually allow their brokers more freedom in how they do business.

If a broker has a strong client base that generates enough steady income to cover the brokers’ individual marketing and overhead expenses, then this business model might be attractive to the broker. The largest independent broker-dealer in the U.S. is LPL Financial. Others are Ameriprise Financial Services, Raymond James Financial Services, Commonwealth Financial Network, Northwestern Mutual Investment Services, and MML Investors Services.

Investment Companies

A totally different type of entity for investing is an investment company. Several types of investment companies exist, but the most common one for investors is an open-end mutual fund company. Each investment company typically creates a wide variety of mutual funds, but some specialize in certain types of investments.

PIMCO initially specialized in bond mutual funds, for example, but has expanded its offering to stocks, commodities, real estate, etc. An investment company creates mutual funds.

You can usually buy mutual funds directly from the creator investment company, but not always. Some mutual funds are only offered via a broker-dealer, and then the brokerage company may charge a transaction fee. In addition, some mutual funds may charge the investor a fee called a “load” when buying or selling certain types of mutual funds.

Loads may be charged when you buy a fund (front-end), when you sell a fund (back-end) or over the duration of ownership (level). The purpose of a load is to pay a broker or advisor for their services. You can avoid this fee by purchasing a no-load fund or by buying directly from a mutual fund company.

However, even if you buy directly from a fund company, they may charge a “12b-1 fee.” This fee pays for the mutual fund company’s own marketing and promotion expenses. The fee will be deducted as part of the total mutual fund expenses before the fund’s net asset value is computed. It is an ongoing expense. Please be aware that any sales charges, fees, or expenses reduce the return of your investment so pay attention to them and avoid them when you can.

Some of the largest domestic investment companies creating mutual funds are BlackRock Funds, Vanguard Group, Charles Schwab, Fidelity Investments, State Street Global Advisors, PIMCO/Allianz, J.P. Morgan Asset Management, and Capital Group Companies. Some may be familiar because they have related broker-dealers. Many also create exchange-traded funds.

It is possible to construct an entire investment portfolio with purchases of mutual funds from one investment company. Sooner or later, however, you will probably want more diversity. Choices are good. The easiest way to buy mutual funds from many, many different investment companies is via a brokerage account at a broker-dealer. If the performance is similar, choose a no-load, no transaction fee mutual fund.

Confusing Relationships

Are you confused? You may have noted that some of the broker-dealers listed earlier are also on the list of investment companies creating mutual funds. Fidelity, for example, creates mutual funds which can be purchased via a Fidelity brokerage account. Those two functions, however, must be kept entirely separate. They have different requirements, rules, and regulations.

Places to saveand invest can also be related; for example, Bank of America (a bank) and Merrill (a broker-dealer). Bank of America and Merrill are separate entities or subsidiaries of the same corporation. Again, the functions must be kept separate and have different requirements, rules, and regulations.

Word of Caution

One cautionary word about saving and investing providers. When you go to a store to shop for a new pair of jeans, what else do you see? Stores are good at strategically placing items to entice you to buy what you do not need. That is one of the goals of marketing: to try to convert a want into a need.

Remember the difference between needs and wants? Some financial “stores” may also try to get you to buy financial products you do not need. That is called cross-selling, it is common, and it is not bad unless you allow it to control your choices – and there are many choices for both saving and investing. The more you understand yourself and are clear about your goals and risk tolerance, the more focused you can be on the type of products that truly fit your needs.

Almost all saving and investing providers have an online presence, but some may not have an office near you. If face-to-face interaction is important to you, consider those with offices nearby. Some will offer products or services not available at others. The larger companies will typically have a wider selection but may not offer the personal level of service that you desire.

Which do you prefer?

Let’s Have a Conversation:

What types of investments do you use – stock, mutual funds, etc.? Which do you prefer? Why?

Sometimes our worries will take us to the worst place. Even though such worries may be based on assumptions that don’t hold up when we look at them closely. I started this discussion in my most recent post, Your Memory Иs Better Than You Think, Part One.

Let’s take a closer look at some of the assumptions that might be affecting your memory and holding you back. Not all memory problems are related to our age.

First, A Reality Check

Memory problems can happen throughout our lives, not just in our later years. Let me give you a common example.

In my career as a health psychologist, 90% of my patients experienced pain on a daily basis. Their chronic or long-term pain usually followed from neck or back injuries, related to car or work accidents. They also experienced high levels of stress, loss and sleep disturbance.

These patients worried about their memory, even though many of them were still in their 20s and 30s. Some even assumed they must be suffering from dementia or Alzheimer’s disease.

I explained to them that their memory and concentration problems were caused by interference, not by any structural problems in their brain. They did not have an injury or disease affecting their brain. Their memory could not work properly because it was being affected by pain, stress, poor sleep and sometimes by the medications they were taking.

My patients understood what I was saying, but I needed a clear illustration for it to really sink in. So I asked them to imagine how well they could concentrate if there was a fire alarm going off near them. They all agreed that their memory and concentration would be poor.

Their pain and stress were acting like fire alarms going on in their body, distracting them and disrupting their brain’s proper functioning – thus interfering with their concentration and memory. If I was able to take away their pain and stress, their memory would work just like it is supposed to. This immediately made sense to them and helped reduce their fear of losing their mind.

Next, Look for the Simplest Explanation

In the above example, interference is a much simpler explanation for your problems with memory. Interference is much easier to do something about than dementia or Alzheimer’s disease. For instance, if pain is causing your memory or concentration problems, maybe a better pain medication may help your pain and your memory.

Multitasking is also a common cause of poor memory. And it is something that you can change or improve upon.

To be able to remember details, especially complex ones, you need to pay enough attention to the task at hand to get the job done properly. If you are doing two things at once, there is only half as much of your attention available for each task. Your performance on each of the two tasks suffers and so does your memory.

When you find a simpler explanation and come up with some strategy to help, your anxiety about your memory will decrease. And this decrease in anxiety will also help your memory.

Your Forgetfulness May Be Perfectly Normal

The National Institute on Aging has some interesting and helpful articles on this matter. The Institute suggests that it is normal to forget things once in a while, as we age (or even at any age). But, for serious memory problems, you may need a medical check-up.

Here are some clues from the Institute to help you decide whether your memory problems are serious and worth getting checked out by your doctor:

• Asking the same questions over and over again.
• Getting lost in places you know well.
• Having trouble following recipes or directions.
• Becoming more confused about time, people, and places.
• Not taking care of yourself – eating poorly, not bathing, or behaving unsafely.

If you do experience these problems, a medical check-up can help determine whether they are serious or not. A medical investigation may also help to rule out other possible causes for memory and cognitive problems, such as medication side effects, drinking too much alcohol, or possibly kidney, thyroid or liver problems, as examples. Here is a link for a more detailed discussion.

5 Simple Strategies to Improve Your Memory

• Add structure to each day by getting up around the same time, planning your activities, even putting your keys, phone and glasses in the same place.
• Challenge yourself by learning new skills, staying involved with your friends and family and volunteering to help others.
• Get at least 7 to 8 hours of sleep each night. It is not true that we need less sleep as we get older.
• Take good care of yourself by drinking less alcohol, getting regular medical check-ups, eating well and exercising regularly.
• Get help if you were feeling depressed, exhausted, or consumed with negativity.

Good memory functioning does not happen on its own. It requires a healthy mind, body and lifestyle.

You’ll be amazed at how much these simple strategies can help. If you’re lucky they will help so much that you stop paying attention to your memory (and your assumptions). You can let it work the way it’s supposed to work – on its own.

Let’s Have a Conversation

Are you worried by problems with your memory? Do you automatically assume it must be because of your age? Are you willing to experiment with a few lifestyle changes to see if your memory improves?