Best Investments for Your Brokerage Account
Not all investments belong in every account. This guide explains which assets typically work best inside a taxable brokerage account — including ETFs, index funds, dividend stocks, bonds, REITs, and practical allocation tips for 2025.
Why use a brokerage account?
Brokerage accounts are flexible, taxable accounts that let you buy and sell stocks, ETFs, bonds, mutual funds, options, and other securities. Unlike retirement accounts, they offer no early-withdrawal penalties and full liquidity — but gains are taxed. This flexibility makes brokerage accounts ideal for goals that are outside retirement or where tax-advantaged accounts are unavailable or exhausted.
Best assets to hold inside a brokerage account
1. Broad-market ETFs & Index Funds
Low-cost ETFs and index funds (e.g., total market, S&P 500, international) are the backbone of many portfolios. They provide instant diversification, low fees, and tax-efficient structures (ETF structure reduces capital gains distributions).
2. Dividend-Paying Stocks
High-quality dividend stocks are attractive in brokerage accounts because qualified dividends enjoy preferential tax rates in many countries. Choose companies with sustainable payout ratios and strong cash flow.
3. Bonds & Bond ETFs
Bonds help stabilize portfolios and generate income. Use bond ETFs for liquidity and diversification across maturities. For tax purposes, certain municipal bonds (in some countries) have favorable tax treatment, but evaluate where to hold them.
4. REITs & Real-Estate ETFs
REITs pay regular income and are well-suited for taxable brokerage accounts — but note that REIT dividends can be taxed as ordinary income. Consider tax implications and use tax-loss harvesting when appropriate.
5. Sector & Thematic ETFs (Tactically)
Use sector or thematic ETFs to express tactical views (e.g., clean energy, semiconductors). Keep allocations modest and time horizons clear — these are higher-volatility holdings.
6. Tax-Loss Harvesting Candidates
In a taxable account, holding a few positions that you can sell at a loss to offset gains is a useful strategy. ETFs and liquid stocks work best for this purpose.
7. Cash & Short-Term Instruments
Keep a small cash buffer or short-term T-bills for opportunities, rebalancing, or emergency uses — brokerages make this easy with sweep accounts or money market funds.
Tax considerations & which assets to place where
Because brokerage accounts are taxable, it’s smart to think about asset location — placing tax-inefficient assets in tax-advantaged accounts and leaving tax-efficient assets in brokerage accounts.
- Keep in taxable brokerage: tax-efficient ETFs, index funds, qualified dividend stocks, assets you plan to sell regularly for tax-loss harvesting.
- Prefer tax-advantaged accounts: tax-inefficient assets like REITs (in some jurisdictions), taxable bond interest, and actively managed mutual funds that generate frequent capital gains.
Note: tax rules vary by country. Consult a tax advisor for personalized placement.
Sample allocations by investor profile
Conservative (Income focus)
- 40% Bonds & bond ETFs
- 30% Dividend-paying stocks / REITs
- 20% Broad-market ETFs
- 10% Cash / short-term
Balanced (Growth + Income)
- 50% Broad-market ETFs and index funds
- 20% Dividend stocks
- 20% Bonds or bond ETFs
- 10% Thematic or opportunistic ETFs
Aggressive (Growth)
- 70–85% Equity ETFs & growth stocks
- 10–20% Sector/thematic ETFs
- 5–10% Cash or bonds
Practical tips for using a brokerage account
- Choose a low-cost broker: watch for commissions, ETF fees, and other trading costs.
- Favor tax-efficient vehicles: low-cost ETFs and index funds reduce the tax drag.
- Automate regular investments: dollar-cost averaging reduces market-timing risk.
- Use limit orders for execution clarity: especially in volatile small-cap names.
- Keep a watchlist, not a panic list: track but avoid emotional trading.
FAQ
Can I hold cryptocurrencies in a brokerage account?
Some brokerages offer crypto products or trusts. Understand custody, fees, and tax treatment — crypto taxation can be complex and varies widely by jurisdiction.
Should I use margin to boost returns?
Margin increases risk and potential losses. Use margin only if you fully understand leverage, maintenance calls, and worst-case scenarios.
Is active trading good in a brokerage account?
Frequent trading increases costs and taxable short-term gains. For most investors, a low-cost passive approach outperforms after fees and taxes.