Investment account | SEB (2024)

FAQs

What is an investment account? ›

Investment accounts are those that hold stocks, bonds, funds and other securities, as well as cash. A key difference between an investment account and a bank account is that the value of assets in an investment account fluctuates and can, in fact, decline.

High-yield savings accounts, money market accounts and certificates of deposit have recently started offering yields above 5% annually. Bonds may provide slightly higher yields than savings accounts. Stocks are the most risky investments, but they can provide higher returns over the long term.

A cash account is appropriate for the majority of investors. It allows you to buy investments with money you deposit into the account. A margin account is for investors who want to borrow money from the broker to buy investments.

Investing products such as stocks can have much higher returns than savings accounts and CDs. Over time, the Standard & Poor's 500 stock index (S&P 500), has returned about 10 percent annually, though the return can fluctuate greatly in any given year. Investing products are generally very liquid.

You can withdraw funds from your investing account at any time without tax penalty. Any investment gains and dividends in your investing account may be subject to taxes.

Most brokers don't require an account minimum to get started. So if that's a concern for you, look for a broker that doesn't have one — there are plenty of great options out there that don't require a minimum.

Safe assets such as U.S. Treasury securities, high-yield savings accounts, money market funds, and certain types of bonds and annuities offer a lower risk investment option for those prioritizing capital preservation and steady, albeit generally lower, returns.

“Unlike savings or checking accounts, which are your everyday bank accounts that pay a steady but small amount of interest, investment accounts can help you generate significant wealth over time if you invest in a prudent manner,” says Blackwell Donahue.

Investment accounts may charge penalties or taxes, or both, for withdrawing investment gains early. Good for short-term needs. A savings account is the ideal spot for an emergency fund or cash you need within the next three to five years.

How do I open an investment account? ›

Fill out the new account application

You can apply to open a new account online, and this is generally a quick and painless process with online brokers. You'll need some identifying information, such as your Social Security number and driver's license.

A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.

Investing only $50 a month adds up

Contributing $50 a month to an investment account can help create impressive savings, even at a moderate 5% annual growth. It's a common myth that you need a few thousand dollars to begin investing.

Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.

A savings account is the ideal spot for an emergency fund or cash you need within the next three to five years. Good for long-term goals. Investing can help you grow money over the long term, making it a strong option for funding expensive future goals, like retirement.

Investing means taking some risk and buying assets that will ideally increase in value and provide you with more money than you put in, over the long term. And while saving offers a guaranteed return (that is, interest on your balance), investing includes the potential to lose money.

Your investments can make money in 1 of 2 ways. The first is through payments—such as interest or dividends. The second is through investment appreciation, aka, capital gains. When your investment appreciates, it increases in value.

A 401(k) plan is an investment account offered by your employer that allows you to save for retirement. If your company offers a 401(k) plan, it will have certain eligibility requirements.