Where to Open a Retirement Account if You Have No Idea What You’re Doing

You don't have to know what you're doing to get started. You just have to be willing to learn.

The old adage "we're our own worst critic" certainly applies to financial planning. We look around and believe everyone (but us) knows what they're doing. We forget that no one starts as an expert. We're all beginners -- at first.

If you're looking to open a retirement account but aren't quite sure what you're doing, you're in the right place. Here, we'll cover where to open a retirement account, what to look for in a good brokerage firm, and how you can build your financial savvy a little at a time.

What is a retirement account?

Simply put, a retirement account is intended to accumulate (and grow) the money you need to meet your financial goals in retirement. The earlier you start, the more time your money has to grow. But if you're late to the game, that's okay. You can still take steps to make your retirement more comfortable.

The importance of diversification

Money in a retirement account is invested in companies of all types via different financial products. Some are riskier than others (stocks), and some are designed to allow your money to grow with little risk (treasury bills). The trick with a retirement account is to diversify your investments. That way, when one investment hits a rough patch, other assets can keep your portfolio afloat. Another argument for diversification is that riskier investments tend to earn more interest over the long term, while safer investments earn less.

Your investments grow due to the power of compound interest. As long as you opt to reinvest your earnings, after a while you're getting paid interest on the interest you've already earned.

Brokerage firms

Let's say you want to buy stock in Allied Flowers. Rather than go directly to the company to purchase stock, a brokerage firm acts as a middleman -- someone to purchase on your behalf. Once you let them know what you want, they buy and sell your investments.

Better yet, some brokerage firms offer an incredible array of educational materials for people just getting started as investors.

Here are a few worth having on your radar:

• TD Ameritrade is known as one of the best for investor education. They offer online learning materials on everything from basic investing to advanced investment strategies so you can increase your knowledge at your own pace.
• Fidelity offers an online platform that's not only easy to use but specifically provides a layout for first-time investors. It's made stock buying a little less scary for beginners by offering fractional shares. This means investors can buy a fraction of a stock share to build their confidence.
• Charles Schwab is renowned for its excellent customer service, a key factor if you're just getting started. You can speak with a licensed professional when you have a question.

Tips for finding the right brokerage firm for you

There is no one-size-fits-all brokerage firm for beginners. That's because we all have different learning styles and preferences for the way we do business. While one investor may want to do everything on their own, another may want to talk to a professional who can answer questions.

The following steps can help you focus in on the best brokerage firm for you:

1. Look through firm websites. Check tabs like "research" or "investor education" to see if they offer educational materials that will make your job easier. Find out how much access you'll have to customer service when you need help. The best brokerage firms allow nearly unlimited access.
2. Check for uncomplicated trading platforms. No matter how much investment experience a person has, busy trading platforms can be intimidating. The better brokerage firms know how to keep it simple so new investors aren't overwhelmed.
3. See who offers fractional shares. As mentioned, buying fractional shares can be a great way to learn how investing works without taking significant risks.
4. Consider your desire for support. Some brokerages offer local branch offices you can visit for help. For example, investors with Merrill Edge can visit more than 2,000 Bank of America locations to get investment guidance. If that interests you, look for a firm that offers this kind of above-and-beyond customer service.

Like learning to swim or drive, learning to invest for retirement seems big and intimidating. The more you wade in, though, the less scary it feels. Once you begin to watch your money grow, the more your confidence grows. After a while, you'll wonder why you were ever nervous about getting started.