Once you have set up an emergency fund, and started funding a retirement account then you might consider opening a brokerage account as a place to invest after-tax dollars. Make sure to have an adequate emergency fund. Before saving in a taxable brokerage account, it's important to consider where saving adds the most value to your unique financial situation. Who should consider opening a brokerage account?Ī taxable brokerage account can be a good fit for anyone and everyone. Lots of different brokerage accounts will provide you with different things, so it's a matter of specifically what it is that's important to you. So the disadvantage is you have to be aware of what you're looking for. Savings accounts or checking accounts just do not have those features. The advantage of opening a brokerage account is - if you're interested in investing in stocks or bonds, or mutual funds or ETFs, as examples, a brokerage is a great way to do it. The recent rise of social media blogs surrounding investing may increase the interest but be cautious about investing as any investment comes with risk. When you go into a brokerage account it is daunting to know where to start. Most retirement plans offer a curated list of choices which have been well vetted by consultants and investment experts. The multitude of options can also be a disadvantage. This is where you can purchase stocks, bonds, ETFs, mutual funds, options and almost the entire inventory of the open markets. The advantages include access to stock exchanges to buy almost endless options of investments. For example, if qualified, HSAs provide tax-deductions, tax-free growth, and tax-free distributions if used for qualified medical expenses retirement accounts may provide tax deductions, tax-deferred or tax-free investment growth, and potentially tax-free distributions.Įducation accounts may provide tax deductions and/or tax-free distributions if used for qualified educational expenses. They offer transparency and freedom when considering costs and investment options.ĭepending on a household's financial situation, other account types may add more value and/or tax-efficiency. What are the advantages or disadvantages of opening a brokerage account?Ī taxable brokerage account offers the flexibility to have funds available when needed and without a tax penalty. Kaysian Gordon, MBA, CFP, CDFA, CPA, wealth manager at Clarus Group.Charlotte Geletka, CFP, CRPC, managing partner at Silver Penny Financial Planning.Brian Fry, CFP, founder at Safe Landing Financial.We interviewed the following investing experts to see what they had to say about online brokerages:
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