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If you’re wondering if you can handle more than one brokerage account at the same time, the short answer is yes! You can have more than two if that works better for your investment plan. In fact, having more than one account could be good for many investors, depending on their investment style and financial goals.
I’ve been exploring this topic extensively, and I’m excited to share what I’ve discovered about the advantages of maintaining multiple brokerage accounts, when it makes sense, and how to manage them effectively.
Why You Might Want Multiple Brokerage Accounts
When I first started investing, I thought one account would be enough. Boy, was I wrong! Here are some compelling reasons you might want to open more than one brokerage account:
1. Separating Investment Goals
One of the best things about having more than one brokerage account is that it lets you set up your investments based on your different financial goals. Chelsea Ransom-Cooper, a certified financial planner from Zenith Wealth Advisors, says, “If you want to open more than one brokerage account, it really depends on your time frame and goals.” “.
Some common investment goals you might want to separate include:
- Retirement savings (using IRAs or other tax-advantaged accounts)
- Building a house down payment (shorter-term horizon)
- Saving for a big expense like a wedding or dream vacation
- Funding a child’s education
- Active stock trading as a hobby
- Passive investing to supplement other savings
Putting these goals in different accounts will help you keep track of your progress toward each one without getting lost or tempted to use money that was set aside for something else.
2. Tax Diversification Benefits
Another smart reason to maintain multiple brokerage accounts is for tax diversification. Scott Sturgeon, a certified financial planner and founder of Oread Wealth Partners, points out that mixing tax-advantaged accounts with taxable accounts gives you more flexibility.
For example
- A taxable brokerage account for your active trading (where you’ll pay taxes on capital gains and dividends annually)
- A tax-advantaged account like an IRA, HSA, or 401(k) for long-term investments
This method can help you get the best tax deal now and in the future. “The tax ramifications of different accounts” can set you up for success “both in the near term and over a much longer time frame,” says Sturgeon. “.
3. Taking Advantage of Special Features
Different brokerages offer unique features and specialties that might appeal to different aspects of your investing style:
- Micro-investing apps like Acorns and Stash offer round-up features that let you invest spare change
- Robo-advisors provide automated rebalancing and tax optimization for hands-off investors
- Full-service brokerages might offer personalized financial advice
- Specialized trading platforms cater to active traders with advanced tools
By using multiple platforms, you can cherry-pick the best features from each one rather than settling for a single brokerage that might excel in some areas but fall short in others.
How to Decide If Multiple Accounts Are Right for You
Before opening several brokerage accounts, ask yourself these three key questions suggested by Scott Sturgeon:
- What’s the purpose of the account?
- What are my goals?
- What’s my time horizon?
These questions will help guide your decision about whether multiple accounts make sense for your situation.
A Smart Strategy for Multiple Accounts
If you’re considering having multiple accounts, here’s a strategy that Sturgeon has seen work well:
- Set up automatic contributions to a retirement account with diversified index funds based on your retirement goals.
- Use whatever is left over each month (after expenses and building cash reserves) as your “play money” for active trading.
This approach lets you ensure your long-term financial security while still having the freedom to experiment with more active investing strategies.
Sturgeon notes, “I don’t see a downside or a detriment to someone having a fun money account,” as long as it’s funded with leftover dollars after taking care of your primary financial responsibilities and keeping the riskier investments to “a certain portion of your investable assets.”
Potential Drawbacks of Having Multiple Brokerage Accounts
While there are many benefits to having multiple accounts, there are some challenges to be aware of:
1. Account Management Complexity
The more accounts you have, the harder they can be to keep track of. Ransom-Cooper warns that “it’s easier than you think to forget about the funds in one account,” and tracking overall performance becomes more difficult as your number of accounts grows.
2. Asset Allocation Challenges
Sturgeon points out that it can be “very difficult to track asset allocation across multiple platforms,” which might lead to overconcentration in certain investments or unintentional overlap between funds.
3. Administrative Headaches
More accounts means more tax forms, more passwords to remember, more apps to check, and generally more administrative overhead in your financial life.
How to Stay Organized with Multiple Brokerage Accounts
If you do decide to use multiple accounts, here are some tips to stay organized:
- Use account aggregation apps like Empower (formerly Personal Capital) to view all your investments in one place
- Consider working with a large brokerage or financial advisor that offers software to consolidate and track performance
- Create a simple spreadsheet to track your overall asset allocation across accounts
- Set calendar reminders to review all your accounts regularly
- Clearly label each account according to its purpose or goal
Real-World Examples of Multiple Brokerage Account Strategies
Here’s how I’ve seen successful investors use multiple brokerage accounts:
Example 1: The Retirement-Focused Investor
- Account 1: 401(k) through employer for automated contributions and matching
- Account 2: Roth IRA at a low-cost broker for tax diversification
- Account 3: Small taxable account for experimenting with individual stocks
Example 2: The Goal-Oriented Saver
- Account 1: Long-term retirement account with diversified ETFs
- Account 2: Medium-term account for house down payment (more conservative allocation)
- Account 3: Short-term account for upcoming wedding expenses (very conservative)
Example 3: The Investment Enthusiast
- Account 1: Core retirement savings in a robo-advisor for hands-off management
- Account 2: Active trading account for stock picking and learning about markets
- Account 3: Micro-investing app for spare change investing as a supplement
Questions to Ask Before Opening a New Brokerage Account
If you’re thinking about adding another account to your portfolio, ask yourself:
- Does this account serve a specific purpose different from my existing accounts?
- Does this brokerage offer features or benefits I can’t get from my current provider?
- Am I prepared to manage another account effectively?
- Will the benefits outweigh the added complexity?
Bottom Line: Multiple Accounts Can Be Beneficial
Having multiple brokerage accounts can be a smart strategy for many investors. By separating your investments based on goals, taking advantage of tax diversification, and leveraging the unique features of different platforms, you can potentially optimize your overall investment strategy.
The key is to make sure you have a clear purpose for each account and a system for staying organized. As Ransom-Cooper advises, consider “What type of investor do you want to be? How involved do you want to be? Let that lead your path.”
So yes, you can absolutely have 2 brokerage accounts—or more! The important thing is that your account structure supports your financial goals and investing style.
FAQs About Having Multiple Brokerage Accounts
Is there a limit to how many brokerage accounts I can have?
No, there’s no legal limit to the number of brokerage accounts you can open.
Will having multiple accounts affect my taxes?
Having multiple accounts doesn’t inherently change your tax situation, but it may make tax preparation more complex as you’ll receive more tax forms. The investments you choose and the types of accounts (taxable vs. tax-advantaged) will impact your taxes.
Do I need to report all my brokerage accounts to the IRS?
Yes, you should report all taxable investment income regardless of how many accounts you have. Brokerages will send you (and the IRS) tax forms for each account.
Can I transfer investments between different brokerage accounts?
Yes, you can typically transfer investments between brokerages through an ACAT (Automated Customer Account Transfer) process, though some restrictions may apply depending on the type of account and investments.
Will opening multiple accounts affect my credit score?
No, opening brokerage accounts does not impact your credit score since brokerages typically don’t run a credit check when you open an account.
Remember, the best account structure is the one that helps you achieve your financial goals while matching your personal investment style and organizational preferences. Whether that means one account or five, what matters most is having a clear strategy behind your choices.
How many brokerage accounts should you have?
One brokerage account may be the best way to organize your taxable investments. But you might get the most out of your portfolio if it’s spread out among a few platforms that each have their own traits. In other words, there’s no “right” number of brokerage accounts for all investors — it depends.
With several accounts, you’d need to track your overall asset allocation, remember all your login credentials, gather tax forms and set your account beneficiaries, among other tasks. More accounts increase the chances that something could slip through the cracks. Having only one brokerage account makes managing your money easier. It can also help you get rich by making investing easier.
Working with multiple brokerage firms could prove beneficial, too, depending on your investing strategy. For example, you may want to hold asset classes or funds that aren’t available from another broker or ensure your brokerage accounts each stay under the $500,000 threshold covered by SIPC insurance.
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- While you can have as many brokerage accounts as you want, having too many can make your finances more difficult.
- If you have more than one brokerage account instead of just one, it might cost less to manage your investments because you will pay less in fees and interest on margin loans.
- If one brokerage firm doesn’t have all the benefits you want, like high interest rates on cash balances, good research tools, or new client bonuses, you can get the best of what each has to offer by having accounts at more than one.
The line between banks and brokerages continues to blur. Mega-banks such as Bank of America and Wells Fargo now offer brokerage services, while traditional brokers such as Charles Schwab, E-Trade and Interactive Brokers provide a range of banking services. Even many robo-advisors such as Wealthfront and Betterment combine the ability to invest with traditional banking functions.
Still, each institution has strengths and weaknesses. One broker may offer low trading commissions but average customer service, while another could have a great trading platform but no discounts for buying and selling mutual funds. Because of these differences, it may make sense for you to have more than one brokerage account.
