Mastering a Brokerage Account
401(k)s, IRAs, and HSAs = Retirement Money.
Savings Accounts = Short-Term Savings.
What do we do with everything else?
Like money we want to spend in 5, 10, 20, 25-years?
You want to buy a house one-day, buy cars down the line, send your kids to college, have a nest egg to take care of your family, etc.
That ‘one-day money’ is where the Brokerage Account shines.
Today you’re going to learn how to master it.
At its core, Brokerage Accounts are investment accounts.
You can buy and sell stocks, bonds, REITs, Index Funds, ETFs, and even crypto.
They don’t have major tax benefits like retirement accounts, BUT they make up for it by letting you access your money whenever you want. No restrictions, like retirement age, required.
So how should you use it? 2 Easy Steps:
First, set an hour with a financial advisor
Every large brokerage firm (Fidelity, Schwab, Vanguard, etc.) has licensed professionals ready to chat, for free, about your goals.
A call with them will help you plan out time-horizons for various investments.
For example, you may decide you want to save for both a:
- Home Down Payment
- A Wedding
The home is 5-10 years away and the wedding is 1-3 years away.
The investments you select will need to reflect those different time horizons.
Equity index funds (equities = stocks) are often used for long time horizons. They historically yield positive returns in the long-run.
But they are bumpy in the short run (as 2025 thus far has shown).
So, for the wedding in 18 months you're focused on preserving your money and are less concerned with maximum growth.
Money to be preserved will likely go to a bond index fund.
The idea of picking funds stressing you out?
That's why we talk to someone.
Don’t want to talk to someone? Check out a robo-advisor like Fidelity Go or Schwab Intelligent Portfolios.
Simply take a survey about your goals and they’ll handle the investing for a very low fee (0.3% or less).
Either way, you do not need to become a “Premium” client for basic investment conversations with these firms.
Avoid a 1% fee unless you are getting holistic financial planning that includes investments, budgeting, tax planning, estate planning, etc.
Once you have your goals, Automate Your Contributions.
Investing consistently is the best strategy for long-term success.
Automating will force that consistency. As I tell students in my classes:
We are emotional and irrational creatures. Automating prevents us from acting out and missing contributions.
Every major firm will let you set up automatic transfers from your checking to your brokerage account.
And that’s it!
That's the 1-2 Punch you need to be successful with a brokerage account!
For my nerds advanced readers, let’s talk tax implications.
Brokerage Accounts are subject to Capital Gains taxes.
There are two types:
- Short-Term Capital Gains (<12 Months) are taxed as ordinary income (likely 22-35% depending on your income)
- Long-Term Capital Gains (>12 Months) are taxed between 15%-18% assuming you earn less than $530,000 per year
Net: Hold your investments for at least a year and you'll save a lot on taxes.
One final tax note, you are ONLY taxed on the GAINS in your portfolio.
So, if I buy $100 of an index fund and it grows to $150 over 4 years, when I sell, I will pay Long-Term Capital Gains of 15% on the $50 (so, $7.50) NOT 15% on the entire $150.
Investing of any kind involves risk.
But when it's done thoughtfully and over the long-term, it can be a great way to achieve your financial goals.
The brokerage account is the vehicle you use to get there!
