Should you add a Brokerage Account to your Portfolio?
But first you need to understand that there are 2 types of Brokerage Accounts:
- Full Service
For this post, we’re highlighting the Discount Brokerage Account. This type account favors those investors who prefer a “do it yourself” approach to investing.
So where can I open a Discount Brokerage Account?
Firms like Charles Schwab, Scottrade, E*Trade, Vanguard, and Fidelity offer fewer services in exchange for the lower fees.
In particular, Brokerage Accounts should be used as companion accounts to your Retirement Accounts like Roth IRAs and Traditional IRAs. Retirement accounts are tax advantaged unlike a Brokerage Account. Money contributed to a Brokerage Account doesn’t provide a taxable benefit like Retirement Accounts do.
So who benefits from Brokerage Accounts?
Early Retirees. Here’s why:
> You can pull your money out at any time, for any reason, and
> Invest as much as you’d like.
> Use as a “future home purchase” account
> Use as “future birth of a child fund”
> Save money for any big purchase instead of borrowing on a line of credit
Most Retirement Accounts limit your contributions & have strict rules & penalties for withdrawals. Brokerage Accounts can be a great companion to those accounts.
Do you have one?