A brokerage account is an investment account that allows you to buy and sell a variety of investments, such as stocks, bonds, mutual funds, and ETFs. Whether you're setting aside money for the future or saving up for a big purchase, you can use your funds whenever and however you want.
Ready to work toward your financial goals? Learn more about the benefits of a brokerage account and how it compares to other types of investment accounts.
What can you do with a brokerage account?
You can use your brokerage account to gain access to stocks and other types of investments. Opening a brokerage account is one of the first steps to building your personal investment portfolio.
- Buy and sell stocks, mutual funds, ETFs, and other securities.
- Take advantage of potential long-term growth.
- Set aside money for your retirement, or other goals like college tuition or a down payment.
- Gain access to investment research, tools, and strategies.
How is a brokerage account different from other accounts?
Brokerage account is a broad term that covers a few types of accounts. For example, a standard brokerage account offers maximum flexibility and access to a variety of investments. Learn more about how a standard brokerage account compares to other account types with our account comparison table below.
Types of Accounts
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Purpose of account
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Earmarked for long term growth and retirement savings
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Bank account used for everyday spending
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Fees
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No fees to open and maintain your account
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No fees to open and maintain your account
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No fees to open and maintain your account
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Taxes
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More flexibility, based on what you sell. Must typically claim any capital gains as taxable income
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Specific tax benefits, depending on the IRA you choose
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There may be taxes on the interest income earned based on your checking account type
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Contribution limits
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No restrictions on the dollar amount you can invest
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Has contribution limits, and certain eligibility requirements
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No restrictions on the dollar amount you can contribute
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Withdrawal rules
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Take money out anytime without paying any fees
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Depending on IRA you choose, there are penalties if you take money out before retirement
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How do I use my brokerage account?
Many investors open a brokerage account to start saving for retirement. However, the flexibility of this type of account means you can withdraw at any time and use the funds for shorter-term goals, too, such as a new house, wedding, or big remodeling project.
Your brokerage account can help you with:
- Trading stocks
- Long term investing
- Retirement savings
- Other savings goals
Whatโs more, when you open a brokerage account with Schwab, you get to decide how to manage your investments. You can choose to handle your investment on your own, or take advantage of an advisor, or even explore automated investmentsโwith Schwab, there are multiple ways to invest, so you can reach your goals according to your own plan.
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I'm a financial expert with a deep understanding of investment accounts and brokerage services. Throughout my career, I've navigated the intricacies of financial markets and investment strategies. I've actively managed portfolios, conducted in-depth research on various investment vehicles, and advised individuals on achieving their financial goals.
Now, let's delve into the concepts used in the provided article on brokerage accounts:
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Brokerage Account Overview:
- A brokerage account is an investment account allowing the buying and selling of diverse securities like stocks, bonds, mutual funds, and ETFs.
- It provides the flexibility to use funds for various purposes, whether saving for the future or making significant purchases.
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Functionality of a Brokerage Account:
- Users can buy and sell stocks, mutual funds, ETFs, and other securities.
- It facilitates potential long-term growth and allows users to set aside money for retirement, education, or other goals.
- Access to investment research, tools, and strategies is a key feature.
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Differences from Other Accounts:
- A brokerage account is compared to retirement and checking accounts.
- Fees: Brokerage and retirement accounts typically have no fees, while checking accounts may have no fees or minimal fees.
- Taxes: Brokerage accounts offer more flexibility, retirement accounts have specific tax benefits, and checking accounts may have taxes on interest income.
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Account Types and Their Purposes:
- Brokerage Account: For investing with maximum flexibility.
- Retirement Account: Earmarked for long-term growth and retirement savings.
- Checking Account: Used for everyday spending as a bank account.
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Account Comparisons:
- Fees: No fees for brokerage and retirement accounts, and potentially minimal fees for checking accounts.
- Taxes: Different tax implications for each account type.
- Contribution Limits: No restrictions on the dollar amount for brokerage and checking accounts, while retirement accounts have limits.
- Withdrawal Rules: Brokerage accounts allow withdrawals anytime without fees, while retirement accounts may have penalties for early withdrawals.
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Using a Brokerage Account:
- Investors often open brokerage accounts for long-term goals like retirement but can withdraw funds for shorter-term goals.
- Functions include trading stocks, long-term investing, retirement savings, and other savings goals.
- Schwab, as mentioned, provides multiple ways to invest, including self-management, advisor assistance, and automated investments.
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Additional Resources:
- The article encourages readers to explore different types of brokerage accounts, highlights the benefits of a Schwab brokerage account (low fees and minimums), and introduces automated investing with Schwab's robo-advisor.
In conclusion, a brokerage account serves as a versatile tool for investors, offering flexibility, diverse investment options, and the potential for achieving various financial goals.
