What is a brokerage account?

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 you can do with a brokerage account

  • 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.

 

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How a brokerage account is different from other accounts

A brokerage account is a great option if you want to start investing in the stock market, and it comes with many advantages. Get an overview of what a brokerage account entails, and how it compares to other account types. 

Types of Accounts

  • Brokerage account

    • No withdrawal limitations or penalties—take money out anytime without paying any fees.
    • No restrictions on the dollar amount you can invest.
    • Must typically claim any capital gains as taxable income.
    • More flexibility with when you pay taxes, based on when you sell.
    • Can earn a tax break from a capital loss on a losing stock.
  • Retirement account

    • A brokerage account earmarked for long-term growth and retirement savings.
    • Has specific tax benefits, depending on the IRA you choose.
    • Has early withdrawal penalties (fees and taxes for taking money out before retirement), depending on the IRA you choose.
    • Has contribution limits and certain eligibility requirements.
    • Traditional IRAs have required minimum distributions after age 70½.
  • Checking account

    • A bank account typically used for everyday spending.
    • No limit to when or how often you can access your money.
    • Funds are easily accessed via debit/ATM card or check.
    • Can incur certain monthly maintenance fees.
  • Cash management account

    • A brokerage account earmarked for everyday spending.
    • Pays interest on your funds.
    • Typically offers free debit/ATM card and unlimited check writing.
    • Allows you to simplify your finances by linking accounts.
    • Funds are often FDIC-insured.

Ways to use your 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. 

What’s 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 investments—with Schwab, there are multiple ways to invest, so you can reach your goals according to your own plan.

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