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Should you have multiple investment accounts?

Article last updated: November 28, 2023

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In the dynamic world of investing, the choice of a brokerage account strategy is pivotal for maximizing returns and managing risks. Investors often grapple with the decision of whether to maintain a single brokerage account or diversify across multiple platforms. This article delves into the benefits and drawbacks of both approaches to empower investors in making informed decisions.

What’s the benefit of having multiple brokerage accounts?

Diversification becomes a critical advantage when considering multiple brokerage accounts. By spreading funds across different platforms, you establish a layer of protection in case one brokerage faces bankruptcy or financial instability. Additionally, varied fee structures for different trades or asset classes at different brokerages enable you to optimize cost-efficiency, tailoring their portfolios to capitalize on the most financially advantageous options. Moreover, multiple accounts also make it easier for us to organize our investments toward different goals or investment strategies.

How many brokerage accounts can you have?

Legally you can have as many investment accounts as you want. Having multiple accounts even helps you organize your investment better too. However, on the other hand, having too many may lead to more effort and time spent in managing all of them instead of one for example managing assets allocation, tax forms, etc.

Is there a downside to having multiple brokerage accounts?

The primary challenge associated with maintaining multiple brokerage accounts lies in the difficulty of tracking overall performance. You may find it cumbersome and high effort to manage and consolidate performance data from various accounts to have an overview look at the total portfolio. Or you might have to use online portfolio trackers, with tools like Portseido, to keep your investments organized within one place. In addition to tracking performance, having to deal with multiple tax forms separately can be quite painful. Lastly, having to manage multiple log-in and credentials can also be troublesome.

Should I keep all my money in a brokerage account?

The decision depends on factors like the platform's returns and how often you trade. If a platform consistently delivers good returns and aligns with your strategy, consolidating funds could be a good idea. Brokerages often offer insurance coverage for added safety. For instance, SIPC member brokerages in the US extend coverage up to $250,000 for cash and $500,000 for total assets.

In the end, whether to have one or multiple brokerage accounts depends on your risk tolerance, goals, and preference for simplicity or diversification. Balancing these factors will help you make decisions that align with your financial objectives.

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