They offer a lot of flexibility, as there’s no income limit or cap on how much you can invest and no rules about when you can withdraw the funds.
Brokerage accounts give you the ability to buy and sell stocks, mutual funds, and ETFs. If you’re looking to take a more hands-on approach in building your portfolio, a brokerage account is the place to start. Keep in mind that multiple accounts can work together to accomplish a single objective. Select investment vehicle(s)Īfter determining your goal(s), you need to decide which investment vehicles-sometimes referred to as investing accounts-to use. Plus, if you need that cash when the market is facing a downturn, you might end up losing money when you’re forced to sell low. You also don’t want to invest your emergency fund in a brokerage account because it’s not easy to access money if you need it quickly. But you may not want to put all your money earmarked for investing into a 401(k), because you can’t access that money until you turn 59 ½, or you will get hit with penalty fees (with a few exceptions).
Understanding your goals and their timelines will help determine the amount of risk you can afford to take and which investing accounts should be prioritized.įor example, if your goal is to invest your money for retirement, you’ll want to choose a tax-advantaged vehicle like an individual retirement account (IRA) or a 401(k), if your employer offers one.
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