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.
Alert: our top-rated cash back card now has 0% intro APR until 2025
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.
FAQs
Just as diversifying your investment portfolio across different asset classes mitigates risk, having accounts at multiple brokerage firms can provide a form of diversification. It ensures that your assets are not concentrated in one place, reducing the impact of potential issues with a single broker.
How much money should I keep in one brokerage? ›
Determining how much money to put into a brokerage account largely depends on how much income you have available and what short-term and long-term goals you have. A good rule of thumb to follow is not to put any money in your brokerage account that you'll need within the next two to five years.
Is it safe to keep more than $500,000 in one brokerage account? ›
Investors with multiple accounts at the same broker
If you have multiple accounts at the same brokerage, each separate type of account will be insured up to the $500,000 amount, including $250,000 in cash.
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.
Should I split my money between brokerage accounts? ›
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. If one broker has a breach, then you can still trade with another investment firm.
Should I keep all my money in a brokerage account? ›
As a general rule, unless you can leave the money invested for around two to five years, it should be in savings instead of a brokerage account. Otherwise, the risk is too high that you'll end up buying and selling at a bad time before you make enough profits to break even.
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.
What is a good amount to have in a brokerage account? ›
“Ideally, you'll invest somewhere around 15%–25% of your post-tax income,” says Mark Henry, founder and CEO at Alloy Wealth Management. “If you need to start smaller and work your way up to that goal, that's fine.
How much is too much in a brokerage account? ›
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.
Where do billionaires keep their money? ›
Stocks. Not surprisingly, owning stocks is one of the main categories where millionaires and billionaires prefer to keep their money. The survey shows that 23% of wealthy people's money was in stocks. Interestingly, HNWI have retreated from stocks slightly over the past year.
In 1968, academics John Evans and Stephen Archer determined said holding just 15 stocks gave you no more risk than investing in the whole market. Just a few years later, two more academics said you needed closer to 30 to get the benefits of diversification and limit risks.
Is it safe to have millions in a brokerage account? ›
A high level of protection
Yes, to the highest degree possible. It is protected by regulations that segregate brokerage accounts from investor accounts. It is further protected by SIPC insurance and other SIPC functions. And finally, it is covered by supplemental insurance running well into the millions of dollars.
Is there a downside to having multiple brokerage accounts? ›
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.
What is better than a brokerage account? ›
IRAs are seen as long-term investment vehicles while a brokerage account allows for short-term investment opportunities and withdrawals.
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.
Is it legal to have multiple trading 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.
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 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.
