There are 2 reasons I think you should have a dedicated trading account that is separate from your 401k or any other account.
- You can track its profitability separate from any impacts of company issued stock, dividends from old stocks, or other variables.
- If you use Robinhood, you can avoid getting your profits eaten up by trade fees.
Tracking profitability is important. As discussed in one of my earlier posts, you want to have a goal of at least 7% to make sure that trading is worth your time. In addition to this, if you’re doing something wrong, you want to know what impact that mistake has on your portfolio. If you are using an account that will have money being continuously deposited, it will be hard to track these things because it looks like your account is always increasing, even when you are losing money.
Getting around commissions:
When I first started trading, I would trade in small blocks and the $7+ commission fees drove me absolutely crazy. Since most young professionals are trading with small accounts, $7 can easily add up to over a percentage of precious profits. I recently stumbled upon an app called Robinhood, which allows you to trade commission free. I strongly recommend you check it out here.
I will note that there are two downsides to using this app; You cant access it from your PC and you have a limit to the number of trades you can make in a day. That being said, Main Street Warriors don’t trade frequently enough for that to be an issue.