My brokerage account balance is low, but here’s why I don’t mind
It’s not an ideal situation, but it’s not troubling either.
- The stock market had a rough year and many investors lost money in 2022.
- While that’s not a good thing, if you don’t need that money for emergencies, it might not be such a big deal of stress.
It’s fair to say that 2022 hasn’t been kind to stock market investors. Not only has the market been volatile as a whole, but the tech sector has taken some notable hits this year. And given the popularity of tech stocks, that means a lot of people are seeing losses in their brokerage accounts this year.
I am one of them. At one point earlier this year, my portfolio was down about 30%. Last time I checked it was between 20-25%. Now, I’m not going to tell you how much money that translates to because, well, that’s a little too personal for the internet. But let’s just say it’s not a small amount and leave it at that.
Of course, I’m not thrilled with the losses I see in my brokerage account. But I’m not freaking out either for a big reason.
My brokerage account is not my emergency fund
If my emergency fund somehow lost 30% of its value, I would collapse. After all, it’s hard to say when I might need to dip into my savings to cover a home repair, a car repair, or a series of medical bills.
Additionally, financial pundits have issued warnings of an impending recession – or something even worse. It’s not very comforting. And so I can’t rule out the possibility that my income will be seriously affected in the short term. In this situation, I would need my emergency fund to bail me out by helping me cover my bills.
But luckily, I don’t keep my emergency savings invested; I keep this money in the bank. So my emergency fund amount will not decrease unless I actively initiate a withdrawal.
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My brokerage account is another story. I could put $20,000 into this account only to see my balance shrink to $15,000 overnight due to stock market volatility. But that’s why I’m willing to accept a much lower return on my emergency fund in my savings account — I want that balance protected so I can use it when I need it.
This is also why the losses I see in my brokerage account don’t bother me as much. I have this money earmarked for retirement, which is still far in the future for me. It gives my wallet many years to recover.
Also, the losses I see in my brokerage account are really only hypothetical because I haven’t sold anything this year. And it doesn’t make sense to panic over a hypothetical situation in my mind.
Play it safe with your emergency fund
Trust me when I say I would like to generate a higher return on my emergency fund than what my savings account is giving me. But I also want this money to be protected. And that’s why investing in it is a bad choice.
I agree to invest the funds in my brokerage account because it is not money I expect to need in the short term. And so I’m able to weather this year’s stock market events – although I’m certainly not thrilled with the losses I’m seeing.