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 If you want to do more than just earn interest on unused cash, you may consider a cash management account in lieu of a sweep account. A cash management account may earn interest on deposits and if offered by an online brokerage or robo advisor, come with fewer fees than traditional bank accounts. Cash management accounts essentially combine features of checking accounts with savings accounts, in that you can use them to pay bills, transfer funds and make purchases or ATM withdrawals if they come with a debit card. Sweep accounts shouldn’t be confused with cash management accounts, which are also available at brokerages and robo advisors. You may be able to specify what target balance you’d like to maintain and when sweeps should occur. Transfers may be triggered when funds in your main account are above or below a certain threshold. For example, your sweep account may push unused cash into a money market mutual fund or money market deposit account. 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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