Taking Control of Your Investments: A Guide to Self-Directed Brokerage Accounts

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Most people set up their 401(k) and then occasionally, they glance at how it is performing. What’s worse is that most employees never make any material changes to their 401(k)/403(b) plan. Often, they don’t even use the automatic rebalancing option that is offered within their 401(k) systems. 

What if there was an option to have your 401(k) funds professionally managed?  

In this article, we discuss what self-directed brokerage accounts are, how they work, and some of their benefits and risks.

You can choose and manage your own investment options with self-directed brokerage accounts. These are also known as self-directed investment accounts or brokerage windows.  More and more people are opening these accounts. More and more people are opening these accounts because they are willing to take on more risk and want more control over their investment decisions.

What are self-directed brokerage accounts?

Self-directed brokerage accounts are a type of investment account offered by some employers as part of their 401(k) retirement plans. These accounts allow employees to invest in a wider range of investment options. These options can include stocks, bonds, mutual funds, exchange-traded funds (ETFs), and other types of securities.

These accounts give you more control, allowing you to choose the investments you believe will perform best. However, you must also be willing to take on the added responsibility of managing your investments. And this can include assuming any associated risks.

How do self-directed brokerage accounts work?

Self-directed brokerage accounts work similarly to traditional 401(k) accounts. An employee can choose to allocate a portion of their 401(k) contributions to the self-directed brokerage account. They can then use the funds to purchase the investments of their choice.

Investors must first open a self-directed brokerage account with a brokerage firm that has a partnership with their employer. Often, a brokerage firm will provide you with access to a trading platform and research tools. These tools can assist you in making educated decisions regarding investments. 

Benefits of self-directed brokerage accounts

Greater investment flexibility: Self-directed brokerage accounts offer investors access to a wider range of investment options than traditional 401(k) plans.

More control over investment decisions: Self-directed brokerage accounts allow you to choose the investments you believe will perform best.

Potential for lower fees: Some self-directed brokerage accounts may offer lower fees than traditional 401(k) plans.

Risks of self-directed brokerage accounts

Lack of investment expertise: Self-directed brokerage accounts requires you to have a certain level of investment knowledge and expertise. Investors who are not comfortable making their own investment decisions may be better off with a traditional 401(k) plan.

Potential for higher fees: While some self-directed brokerage accounts may offer lower fees than traditional 401(k) plans, others may charge higher fees for trading and other services. You should carefully review the fee structure of any self-directed brokerage account before opening one.

Increased risk: Self-directed brokerage accounts give you more control over your investments. But at the same time, can also increase the level of risk associated with those investments.


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