Should I Store Cash in a Brokerage Account? - Experian (2024)

In this article:

  • What Is a Brokerage Account?
  • What Happens to Uninvested Cash in a Brokerage Account?
  • How to Store Cash in a Brokerage Account
  • Pros and Cons of Keeping Cash in a Brokerage Account
  • Alternate Places to Store Your Cash

Interest-bearing accounts come in all shapes and sizes—from savings accounts to certificates of deposit (CDs) to money market accounts. If you invest through a brokerage account, chances are you can also earn interest on uninvested cash as well. Doing so comes with pros and cons, however. If you have cash just sitting in a brokerage account, you may be able to earn some interest on it, but it's wise to first explore your other options. Let's talk about how.

What Is a Brokerage Account?

A brokerage account is an investment account that gives you access to the stock market. It allows you to make trades and invest in stocks, bonds, mutual funds and exchange-traded funds (ETFs). Unlike retirement accounts such as 401(k)s and traditional IRAs, you can tap your funds without penalty, though you'll likely be taxed on investment gains. You can use a brokerage account to save for short- and long-term financial goals.

What Happens to Uninvested Cash in a Brokerage Account?

At any given time, you might have cash in your brokerage account that you haven't yet invested or withdrawn. Many brokerage firms will automatically "sweep" this money into an interest-earning account or toward other investments. Options vary from one brokerage account to the next, and interest rates and risk levels can fluctuate.

How to Store Cash in a Brokerage Account

There are multiple ways to hold cash in a brokerage account. Just keep in mind that they work a little differently from similar accounts you might find at your bank. That's because they're provided through brokerage firms and robo-advisors, not financial institutions.

Cash Management Accounts

Uninvested funds in a brokerage account might be swept into a cash management account (CMA). This type of account has the combined features of a checking and savings account. Account holders can transfer funds and pay bills, and some have a linked debit card that allows for everyday transactions. CMAs typically have lower fees when compared to traditional bank accounts. At the time of this writing, some have annual percentage yields (APYs) that top 4%.

Money in a brokerage account is insured by the Securities Investor Protection Corp. (SIPC) for up to $500,000. Brokerages and robo-advisors typically partner with FDIC-insured banks to provide CMAs—so when uninvested cash is swept into a CMA, it's typically covered for up to $250,000 per depositor, per financial institution. For larger amounts of money, some brokerages will spread your funds across multiple accounts so that more of your cash stays insured.

Money Market Funds

A money market fund is a type of mutual fund that invests in short-term, low-risk assets. That typically includes CDs and government bonds. They're considered safer investments that can provide income via regular dividend payments. They're particularly attractive when interest rates are on the rise because dividend payments are linked to short-term interest rates.

Higher-than-average APYs are a big draw. Some money market funds have yields that currently exceed 5%. One drawback is that money market funds are not insured by the FDIC or SIPC. While risk is on the lower side, it's always possible to lose money.

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Pros and Cons of Keeping Cash in a Brokerage Account


  • CMAs are linked to your brokerage account. Money in a cash management account can earn interest and be used to purchase more securities through your brokerage account. That allows you to easily reinvest your earnings.
  • Some cash management accounts have extra perks. That might include no account fees and cash back opportunities. That's on top of the APY.


  • You may find better APYs elsewhere. Some high-yield savings accounts currently have yields that are greater than 5%. If you've got a large chunk of cash, you might secure better returns outside of a brokerage account.
  • You could lose money. If your money is swept into a money market fund, that cash won't be insured by the FDIC or SIPC. It's possible to lose money.

Alternate Places to Store Your Cash

  • High-yield savings accounts: As the name implies, these accounts offer higher interest rate yields than you'd get from traditional savings accounts. That can help grow your money at a faster clip. Money in high-yield savings accounts will remain easily accessible, making them a great place to store your emergency fund or other cash savings.
  • CDs: With a CD, your money is locked up for the length of the CD term. That can range anywhere from one month to 10 years. You'll likely be penalized for withdrawing your funds before then, but holding out could be worth it. Some CD rates are currently as high as 5.48%.
  • Money market accounts: In some ways, a money market account is sort of like a cash management account. Both earn interest and allow you to withdraw funds with a debit card or checkbook. However, some money market accounts are limited to six electronic withdrawals and transfers per month. But right now, it's possible to secure APYs above 5%.

The Bottom Line

Brokerage accounts aren't just for investing in the stock market. They can also put your uninvested cash to work, allowing you to earn even more. APYs and risk can vary depending on your brokerage firm or robo-advisor. In some cases, it might make more sense to store your cash in a high-yield savings account or other low-risk investment vehicle.

Whatever you choose, Experian can help you keep your credit in good shape along the way. Check your credit report and credit score for free anytime.

Should I Store Cash in a Brokerage Account? - Experian (2024)


Should I Store Cash in a Brokerage Account? - Experian? ›

Some high-yield savings accounts currently have yields that are greater than 5%. If you've got a large chunk of cash, you might secure better returns outside of a brokerage account. You could lose money. If your money is swept into a money market fund, that cash won't be insured by the FDIC or SIPC.

Should I keep cash in my brokerage account? ›

Holding cash here is appropriate if you plan to spend the money within a few days or would like to quickly place a trade. Assets in your brokerage account are protected up to $500,000 per investor, including a maximum of $250,000 in cash by SIPC in the event a SIPC-member brokerage fails.

Should you keep all your money in one brokerage account? ›

If you're saving for a single goal, then sticking to one brokerage account could be your best bet. That way, you'll have a handle on all of your money and it will be easy to keep tabs on your investment portfolio.

What is the biggest disadvantage of a brokerage account? ›

Cons of Brokerage Accounts
  • May Charge Fees. You are likely to encounter a variety of fees when you open a brokerage account and purchase investments. ...
  • They're Taxable. ...
  • They Involve Risk. ...
  • May Have Minimum Deposit and Balance Requirements.
Sep 16, 2023

What happens when you put money in 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.

How much cash should I leave in my brokerage account? ›

Cash and cash equivalents can provide liquidity, portfolio stability and emergency funds. Cash equivalent securities include savings, checking and money market accounts, and short-term investments. A general rule of thumb is that cash and cash equivalents should comprise between 2% and 10% of your portfolio.

Where should I hold my cash when it's not invested? ›

1. High-yield savings accounts. High-yield savings accounts and money market accounts are both insured, up to $250,000, by the Federal Deposit Insurance Corporation. These offer the most liquidity this side of carrying cash around in your wallet, and are currently paying rates of around 4.50% to 5%.

Is it safe to keep more than $500000 in a brokerage account? ›

They must also have a certain amount of liquidity on hand, thus allowing them to cover funds in these cases. What this means is that even if you have more than $500,000 in one brokerage account, chances are high that you won't lose any of your money even if the broker is forced into liquidation.

Can I withdraw all my money from brokerage account? ›

Yes, you can pull money out of a brokerage account with a bank account transfer, a wire transfer, or by requesting a check. You can only withdraw cash, so if you want to withdraw more than your cash balance, you'll need to sell investments first.

Is money safer in a bank or brokerage account? ›

While bank balances are insured by the FDIC, investments in a brokerage account are covered by the Securities Investor Protection Corporation (SIPC). It protects investors in the unlikely event that their brokerage firm fails. However, certain rules and conditions apply—and investment earnings are not insured.

Is it better to put money in a 401k or brokerage account? ›

Brokerage accounts are taxable, but provide much greater liquidity and investment flexibility. 401(k) accounts offer significant tax advantages at the cost of tying up funds until retirement. Both types of accounts can be useful for helping you reach your ultimate financial goals, retirement or otherwise.

What is better than a brokerage account? ›

Brokerage vs.

A self-directed IRA or SDIRA offers the added advantage and flexibility of allowing you to invest in real estate (as investment property only). With IRAs, you'll generally have a minimum deposit requirement of $1,000 whereas many brokerage accounts have no minimums to get started.

Should cash be held in FDIC or SIPC? ›

With SIPC and FDIC insurance, one isn't necessarily better than the other since they both protect you in different ways. If you have bank accounts or brokerage accounts, having both types of coverage can help you feel reassured about the safety of your savings or investments. And neither one costs you anything to have.

Should I keep my money in a savings account or brokerage account? ›

Key takeaways. Prioritize savings if you don't have an emergency fund. Consider investing what you can if you're eligible for a 401(k) match. Choose saving over investing if you'll need the cash in the near future.

Is it better to keep cash or invest? ›

Saving your money is less risky than investing it. If you invest your money, you stand to potentially lose your principal, or initial investment. Consider a situation in which you're looking ahead to a longer-term financial goal.

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