You’ll just need to deposit money before you can start investing.
Depending on the brokerage, you choose, you may be able to open an account with a low minimum deposit or no money at all. If you don’t have an online brokerage account yet, opening one is fairly easy. The same goes for sweep accounts at brokerages. If not, then you’d need to shop around at both traditional and online banks to find one that offers sweep accounts for new customers. If you’d like to open a sweep account at a bank, you can first check to see if they’re offered by your current bank. But having a sweep account on standby may be reassuring if you generally have a lower risk tolerance when it comes to choosing stocks or other investments.įather teaching son about money management Of course, timing the market isn’t an exact science and it’s possible that you could get it wrong. The money will continue earning interest while you decide what move you’d like to make next. You may consider selling some of your higher-risk investments and transferring the funds to safer investments in your sweep account. Say you’re concerned about a potential downturn but you don’t want to pull your money out of the market completely. So if you’re an active trader and you want to make a move on buying or selling a particular stock quickly, you don’t have to wait days for a transfer from your bank.Ī sweep account can also be a tool for managing risk with your investments. Sweep accounts allow for quick and easy transfers to and from your brokerage account. That could mean missing out on an investment opportunity. Ordinarily, you may have to wait several days for a transfer from a bank account to process. Sweep accounts can be a ready source of cash for investing. There’s also another benefit of having a sweep account inside an online brokerage account. But they can offer a safe and reliable way to keep growing your money. True, sweep accounts may not produce the same returns that you’d get by investing money directly into stocks, ETFs, mutual funds or other investments. Sweep accounts help to solve that problem.īy moving money into higher-paying accounts or investment options automatically, you can get the benefit of growth without having to think too much about it. It’s possible that you may have money in a bank account or brokerage account that’s earning zero interest. This allows you to keep your money in the market but in the safest way possible and potentially with lower expense ratios compared to traditional mutual funds. Some robo advisors that offer sweep accounts may even sweep funds into low-risk exchange-traded funds (ETFs). Proceeds from the sale of securities in your portfolioįunds in excess of a target brokerage account balance New deposits you aren’t ready to invest yetĭividend payouts that you choose not to reinvest Depending on the brokerage, you may be able to use a sweep account to hold: The goal is the same: helping you earn more interest on money you’re not actively investing. For example, instead of a money market deposit account, your uninvested cash may be swept to a money market mutual fund or a cash management account. For example, your sweep account may push unused cash into a money market mutual fund or money market deposit account.īrokerage sweep accounts operate along the same lines, though they can differ from bank sweep accounts in terms of where funds are transferred to. These accounts are designed to maximize funds that may be sitting idly by transferring or “sweeping” them into a higher yield investment option automatically. Consult with a financial advisor to make sure you’re squeezing maximum value out of every investment dollar you have.Ī sweep account is a special type of account that can be linked to a bank account or brokerage account.
If you have an opportunity to leverage a sweep account as part of your financial strategy, it’s helpful to understand how they work. These accounts work by transferring unused funds into a high-yield savings or investment option at the end of each business day.
Sweep accounts allow you to earn interest on money that you’re not actively saving or investing. Setting up a sweep account at your bank or online brokerage is one way to do it. When managing your personal finances, it’s important to make the best use of every dollar.
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