What is a taxable brokerage account?

A taxable brokerage account is a type of investment account that allows investors to use after-tax dollars to buy various securities, such as stocks, bonds, mutual funds and ETFs. Because you buy investments with after-tax dollars in these accounts, they don’t receive the same benefits as tax-advantaged accounts like a 401 (k) or IRA.

Should you invest in a taxable brokerage account?

By investing in tax-advantaged investments, investors can minimize the amount of taxes owed on their investments. Another strategy for maximizing the benefits of a taxable brokerage account is tax-loss harvesting. This involves selling investments that have lost value to offset gains from other securities and reduce your tax bill.

Are taxable brokerage accounts better than 401(k)s?

Taxable accounts can have a wider range of investment options compared to mutual funds in a 401 (k). While tax-advantaged accounts like IRAs and 401 (k)s are commonly used for long-term retirement savings, there are several situations where a taxable brokerage account may be the better choice.