5.  Types of Accounts

a. Types of financial institutions for saving and investing
 

Banks and credit unions – offer basic savings accounts (sometimes called passbook accounts) as well as money market accounts, CDs and other investment tools such as Individual Retirement Accounts (IRAs).

Mutual fund accounts – These accounts, taxable or tax-advantaged, can be opened directly with a mutual fund or indirectly through a broker or financial advisor. One advantage is the ability to build a diversified investment portfolio in one account. In one account, you can invest in many different mutual funds. Although there are many choices of investments, they are all from the same mutual fund company.

Brokerage accounts – These accounts, taxable or tax-advantaged, can be opened directly with a brokerage firm or indirectly through a broker or financial advisor.  One advantage of a mutual fund is the ability to build a diversified investment portfolio without purchasing individual stocks. In one account, people can invest in many different investments, including individual stocks, bonds, commodities, even CD’s. In a mutual fund account, you are simply buying mutual funds. Another important difference between a brokerage and mutual fund account is that a mutual fund account usually draws on funds solely from one mutual fund company. A brokerage account in most cases uses investments available from many different companies.