Here's How Your Brokerage Account Could Help You Become a Millionaire

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KEY POINTS

  • Investing in a brokerage account from a young age and loading up on stocks could make you a millionaire.
  • If you want to accumulate a lot of money in your brokerage account, resist the urge to cash out investments as you go.

When I first opened my brokerage account, my goal was to make some money to enjoy on a near-term basis. I figured I was steadily funding a retirement plan, so I could use my brokerage account to meet shorter-term objectives. And I wasn't really putting a ton of money into my brokerage account because I was focused on maxing out my retirement plan contributions instead. 

But as my income increased, I was able to pump more money into my brokerage account. And at that point, I decided that account would not just be for near-term fulfillment. 

Rather, I decided I wanted to invest for the long haul in my brokerage account to build more wealth for retirement. I also wanted (and still want) my brokerage account to serve as a back-up retirement plan of sorts.

At this point, I have an IRA and 401(k) for retirement. But I can't touch either without penalty until age 59 1/2. 

I have no idea if I'll want to retire sooner than that. But it would be a shame to have enough money to retire at 57 and not be able to do so simply because my funds are restricted. A brokerage account eliminates that worry. 

If you've begun investing in a brokerage account, you might initially assume it's just to make a little money here and there. After all, that was the attitude I took at first. But you may be surprised at how much wealth you're able to accrue through the years. 

When you have time and strong returns on your side

If you invest $200 a year in your brokerage account, it's probably not going to make you a millionaire. But investing $200 a month over time is a different story. 

Over the past 50 years, the stock market has averaged an annual 10% return before inflation, as measured by the performance of the S&P 500. If you load up your brokerage account with stocks, you might enjoy a similar return if you invest over a long period of time. 

In fact, investing $200 a month over 40 years will leave you with $1.06 million if you're getting 10% on your money. At that point, your brokerage account balance isn't just "fun money" to play around with as you choose. It's a lot of money, and a sum that could really be a life-changer down the line. 

Don't just take the investment gains and run

When I first opened my brokerage account, I really thought it would be a way to drum up extra cash I could use as I pleased. I knew there would be taxes on gains, but I figured hey, I'll deal with them, the same way I dealt with taxes on my side hustle income at the time.

But I quickly realized that leaving my brokerage account to grow would serve me much better over time. So if you want to become a millionaire, resist the urge to cash out investments at a profit year after year. 

You might want the money for a vacation or to upgrade electronics in your home -- I know I did. But if you leave your brokerage account alone and let it work for you through the years, you're apt to reap a much bigger reward that does a lot more for you.

Our Research Expert

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