One huge piece of advice I would give anyone just starting out investing would be to tell the person to ALWAYS contribute to as many retirement accounts as possible. Max out your contributions every year.
Obviously the tax advantages are a majority of the reason to contribute to retirement accounts, but I also make sure to do so because it makes my tracking/accounting needs virtually non-existant should I do any trading or sell to lock in any gains, as you don’t have to report individual trades from retirement accounts on your yearly taxes.
At my current stage in life, I am much more of a long term investor; hence the subject of this blog. I used to trade more (but not to the level of day trading) and at the end of the year I might have anywhere from 10-30 trades that, if traded in a regular non-retirement account, would need to be reported on my 1040 when doing my taxes the following April. Because I was building my retirement accounts, many of those trades took place within my retirement accounts and my gains/losses from individual trades didn’t need to be reported on my yearly taxes.
So not only are retirement accounts a tax shelter, they are an accounting shelter as well! And this either saves you time or money on your taxes, depending on whether you do them yourself or pay someone to do them. Currently I have an accountant do my taxes, and I was able to negotiate a lower rate because I have done things like this to simplify them.
It has been over 10 years since I started contributing to my retirement accounts (mostly ROTH and SEP accounts), and I now have enough capital in them that virtually all of my stock purchases take place within those accounts. I am well diversified, in that I have free cash for life’s emergencies, physical property and stocks.
If you find my advice helpful, please join my email newsletter or follow me on twitter to keep updated. At some point I intend to open up a membership section to help my followers more wisely invest their money.