How Having a Brokerage Account Can Benefit Everyone
Brokerage accounts have historically been thought of as on option only available to the wealthy, and, a few generations back, that was true. However, with the advent of modern discount brokerages, such as Schwab, Fidelity, and E*Trade, brokerage accounts are now accessible to just about everyone.
In this video, I outline many of the benefits of these accounts, relative to a typical bank account:
They have no minimum balance and no fees for keeping money there
There are fewer fees and fewer limits on moving money; all but the wealthiest people will likely not run into the limits, unlike a traditional bank account where it is easy to run up against the limit.
Transactions tend to clear faster.
You can invest in money market mutual funds which earn as much interest as the best savings accounts, but have fewer limits on taking the money out.
You can shop around for the best rates on CD's, buying one from a wide array of different banks.
If you need to cash out of a CD early, instead of paying the bank's penalty fee, you can sell the CD on the open market, and typically recover a much greater portion of the money than you would if you paid the bank's penalty. Under certain circumstances, such as if interest rates have fallen, you might even make money by selling the CD for more than you bought it for.
And of course, there is the biggest benefit of all, the ability to invest in stocks and mutual funds, yielding a much higher rate of return and helping you to build wealth and generate investment income, at the cost of risk. But even if you don't ever invest in the stock market, you can still get a lot of financial benefits from a brokerage account through the points mentioned above, at minimal risk.