The benefit of putting money into a brokerage account, as opposed to just leaving it in a savings account, is getting a chance to invest your money in stocks and other assets that have the potential to generate strong returns over time. That could be your ticket to meeting your various goals.
Over the past 50 years, the stock market has averaged an annual 10% return before inflation, as measured by the performance of the S&P 500. Compare that to even the generous 4% interest rate high-yield savings accounts are paying these days (a rate that may not last), and it's clear that investing is a more effective means of growing wealth.
You may be inclined to open a single brokerage account and keep all of your investments there. But could opening more than one brokerage account work to your benefit?
When you're working toward different goals
If you're saving for a single goal, then sticking to one brokerage account could be your best bet. That way, you'll have a handle on all of your money and it will be easy to keep tabs on your investment portfolio. When you have multiple brokerage accounts, you need to go back and forth comparing your holdings to decide which stocks or assets to buy.
But having more than one brokerage account could be a good thing if you're trying to save for different goals and want to keep your money separate. Let's say you're trying to save for retirement as well as your kids' college education. You may decide to open an IRA for retirement savings purposes and reap some tax benefits along the way. And you might then decide to keep your kids' college fund in a taxable brokerage account.
Having these assets separated could work to your benefit. Let's say the time to pay college tuition arrives and you're a little short of meeting your goal. You may be tempted to pull from your retirement savings, but that's a risky move that could leave you short on money later in life. If your retirement savings are being housed in a completely separate brokerage account, you may be more inclined to just leave that money alone and figure out a back-up plan for paying for college.
Make sure to stay organized
The main drawback of having two separate brokerage accounts is having to keep track of those different accounts. But if you're someone who's organized, that shouldn't be a problem.
That said, one thing you may want to do is check all of your brokerage accounts before adding investments to one. It may be that you own shares of a given company in one brokerage account, and you've forgotten that. But you may not want to add those shares when it's a company you're already invested in.
All told, you absolutely can have more than one brokerage account, and it could even be a good idea. But make sure to keep track of your money no matter what.
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FAQs
Multiple Brokerages Help Diversify and Manage Risk
Some investors choose to work with multiple brokerages to mitigate risk and protect their assets. Spreading your assets across different brokerage accounts can help protect you against potential fraud or unauthorized access, Roller says.
Why should no one use brokerage accounts? ›
If the value of your investments drops too far, you might struggle to repay the money you owe the brokerage. Should your account be sent to collections, it could damage your credit score. You can avoid this risk by opening a cash account, which doesn't involve borrowing money.
Is it safe to keep more than 500000 in a brokerage account? ›
They must also have a certain amount of liquidity on hand, thus allowing them to cover funds in these cases. What this means is that even if you have more than $500,000 in one brokerage account, chances are high that you won't lose any of your money even if the broker is forced into liquidation.
Is it better to have multiple trading accounts? ›
For a person who is both a long-term investor and a trader, multiple Demat accounts will surely make it easy for him to keep a track of his transactions with the stock exchange. It is quite convenient for everyone to keep trading securities in one Demat account and other investment instruments in another Demat account.
Is Charles Schwab or Fidelity better? ›
Overall Appeal. Fidelity and Schwab are both excellent choices. These investment firms offer thousands of funds. There are some nuances, such as Fidelity being better for crypto traders and Schwab being more optimal for futures traders.
Should I keep all my money in a brokerage account? ›
If you've got a large chunk of cash, you might secure better returns outside of a brokerage account. You could lose money. If your money is swept into a money market fund, that cash won't be insured by the FDIC or SIPC. It's possible to lose money.
Do millionaires use brokerage accounts? ›
Millionaires use brokerage accounts for low-cost index funds. “Buying and holding index funds in a brokerage account, it's possible to keep and grow wealth over the long term,” according to Business Insider.
How much money is safe to keep in a brokerage account? ›
Holding cash here is appropriate if you plan to spend the money within a few days or would like to quickly place a trade. Assets in your brokerage account are protected up to $500,000 per investor, including a maximum of $250,000 in cash by SIPC in the event a SIPC-member brokerage fails.
What is the downside to a brokerage account? ›
Brokerage accounts don't offer all the services that a traditional bank offers. Brokerages might not offer additional products such as mortgages and other loans. Brokerages may not have weekend or evening hours.
Where do billionaires keep their money? ›
Common types of securities include bonds, stocks and funds (mutual and exchange-traded). Funds and stocks are the bread-and-butter of investment portfolios. Billionaires use these investments to ensure their money grows steadily.
Since you can expect a good return over time if you make informed choices, you can't really have too much money in your brokerage account. After all, you want as much money as possible earning the highest possible returns. This is different from, say, keeping your money in a high-yield savings account.
What are the safest brokerages? ›
Summary: Best Online Brokerage
| Company | Forbes Advisor Rating | Learn more CTA below text |
|---|
| Interactive Brokers | 4.4 | Via InteractiveBrokers' Secure Website |
| TD Ameritrade | 4.4 | Read Our Full Review |
| Fidelity Investments | 4.4 | Read Our Full Review |
| Charles Schwab | 4.3 | Read Our Full Review |
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More accounts means more to manage
″[It] makes it much harder to manage on an ongoing basis, especially with regards to rebalancing and risk reduction,” Westlin says. Rebalancing happens when you want to adjust your portfolio allocations so to better minimize taking on more risk as the market changes.
Is it illegal to have multiple brokerage accounts? ›
All told, you absolutely can have more than one brokerage account, and it could even be a good idea. But make sure to keep track of your money no matter what.
What is better, Robinhood or Fidelity? ›
Robinhood is good for simple trades, while Fidelity's mobile offering is more comprehensive and a better platform when it comes to the complete mobile trade experience.
Is it OK to work with multiple brokers? ›
Working with multiple brokers at the same time can be a strategic move for some investors, traders, or businesses. However, it also comes with some benefits and risks that you need to weigh carefully.
Is there a limit on brokerage accounts? ›
With brokerage accounts there are no contribution limits (as you would have with IRAs), and there are no withdrawal penalties either. But brokerage accounts are taxable, unlike IRAs which are either tax-deferred or tax-free and have rules around contribution and withdrawals.
Should I consolidate brokerage accounts? ›
Consolidating accounts may also improve your financial planning. Being able to track your investments, spending, debt, and net worth all together can help you spot trends, identify potential problems, and change course if necessary.
Can I have multiple brokerage accounts at Fidelity? ›
You can open as many accounts as you like. An additional account may be a good option to keep your business and personal finances separate.
