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6 Best Investment Accounts To Handle Uninvested Cash

ByTheMost

Feb 10, 2024
6 Best Investment Accounts To Handle Uninvested Cash6 Best Investment Accounts To Handle Uninvested Cash

6 Best Investment Accounts To Handle Uninvested Cash

When you have uninvested funds in your brokerage account, it is not earning a return in the market. This can seem like a missed opportunity, especially since banks are paying some of the highest interest rates in almost a decade.

Fortunately, several investment platforms offer tools that allow you to earn income on your uninvested capital. The broker itself does not pay interest. Instead, it transfers idle cash from investors to an FDIC-insured bank account. This strategy, known as a cash sweep program, allows you to earn a reasonable interest rate while keeping your money available for investment. A sweep software should be convenient, free of fees, and require only a minimal account setup. These are the best investment accounts to consider if you intend to keep uninvested cash.

Best Investment Platforms for Handling Uninvested Cash

 Platform  Account Minimum Annual Percentage Yield Monthly Maintenance Fee
Betterment $0, $10 minimum to start investing 4.75% $0
Interactive Brokers $0 4.83% for IBKR Pro customers with AUM of $100,000, 3.83% for IBKR Lite customers $0
Wealthfront $500 for the robo-advisor, $1 for stocks 5.00% (5.50% when you refer a friend) $0
Empower $100,000 for wealth management, $0 for individual investment accounts 4.70% $0
Fidelity $0 4.99% brokerage account, 2.72% cash management account $0
Robinhood $0 5.0% for Gold customers, 1.5% for regular customers $5 for Gold customers, $0 for regular customers

1. Betterment

Account minimum: $0; $10 minimum to begin investing.

Fees: 0.25% (annual) for investing plan accounts with at least $20,000 or at least $250 per month in recurring account deposits ($4/month for smaller balances); an optional 0.15% (annual) fee on accounts with at least $100,000 in assets in investment and cryptocurrency accounts unlocks premium with unlimited access to certified financial planners.

Overview

If you need help with your portfolio, Betterment is a robo-advisor that makes investing decisions for you. Simply select a type of portfolio plan, and Betterment’s robo-advisor will create a portfolio of stocks, bonds, and other assets to achieve your goals. In exchange, it charges a flat cost of $4 per month or 0.25% of accounts worth at least $20,000.

This is significantly lower than the 1% or higher annual fee a human advisor charges.

In addition to its robo-advisor, Betterment provides a high-yield cash account known as Cash Reserve. As of December 2023, the Cash Reserve account yields a relatively high annual percentage yield (APY) of 4.75% on all holdings. There is no minimum balance required to earn interest, and the rate applies to all accounts. Your balance is FDIC insured up to $2 million.

You can transfer the funds to your Betterment portfolio when you’re ready to invest. Alternatively, Betterment provides a no-fee checking account.

You could deposit cash into this account and use it to make debit card purchases or ATM withdrawals. However, it does not yield interest, unlike the Cash Reserve account.

Pros

  • Pays a great cash interest rate.
  • There is no account minimum to earn interest.
  • Robo-advisors automatically manage investments.
  • Good selection of investing portfolios.
  • Easy-to-use accounts

    Cons

  • There are no investment alternatives beyond the robo-advisor.
  • portfolios solely utilize ETFs as investments.
  • Does not accept margin trading.
  • There is no weekend live customer service.

2. Interactive Brokers

Account Minimum: $0.

Fees: $0 commissions for equities/ETFs available on IBKR’s TWS Lite, or low costs scaled by volume for active traders who want access to advanced functionality such as order routing; $0.65 per contract for options on TWS Light; $0.65 base rate for TWS Pro users, with scaled rates based on volume; $0.85 per contract for futures.

Overview

Interactive Brokers is one of the top choices for serious traders and investors. Its platform provides a diverse set of investment tools, extensive analysis, and access to more than 150 markets. Interactive Brokers’ IBKR Lite service provides commission-free trading for equities and ETFs. It does charge modest commissions for its more complex IBKR Pro platform, which provides additional trading possibilities and better order execution.

Interactive Brokers has a scheme for uninvested capital that should appeal to serious investors. As of December 2023, it offers an interest rate of 3.83% for IBKR Lite accounts and 4.83% for IBKR Pro accounts on balances above $10,000.

As interest rates change over time, IBKR Lite accounts earn one percentage point less than IBKR Pro. You do not have to opt in to earn interest. However, you can join an extra sweep program to gain greater FDIC insurance on your cash balance. $2.5 million of coverage on top of the standard SIPC coverage of $250,000.

The disadvantage of Interactive Brokers is that you need a substantial account balance to obtain the best rate. If your entire brokerage account balance exceeds $100,000, you will earn interest on all uninvested cash. However, if your account is less than $100,000, Interactive Brokers will not pay interest on the first $10,000 of uninvested funds. On a cash balance of $11,000, just $1,000 would receive interest.

Pros

  • The high-interest rate on uninvested cash.
  • Powerful and configurable brokerage platform.
  • Superior order execution.
  • A wide range of markets and investment options
  • Low margin rates.

Cons

  • Restricts interest payments for accounts under $100,000.
  • Platforms can be overwhelming to learn.
  • Complex charge structure
  • Commissions for IBKR Pro trades
  • SmartRouting is not accessible for IBKR Lite accounts.

3. Wealthfront

Account minimum: $500 for robo-advisor and $1 for stocks.

Fees: 0.25% for most accounts; no trading commissions or fees for withdrawals, minimums, or transfers.

Overview

Wealthfront is another top-rated robo-advisor. Its technology may automatically create a portfolio consisting of US stocks, overseas stocks, bonds, and real estate. You begin by answering a few questions about your financial objectives, after which the robo-advisor works to create an appropriate portfolio for you. Wealthfront also allows you to trade stocks without paying any commissions.

Wealthfront’s Cash Account offers a highly competitive APY of 5.00% as of December 2023 (5.50% if you recommend a friend).

The high-interest rate applies to all of your uninvested funds. There are no minimum or maximum balances. Simply deposit cash and earn interest until you are ready to invest. Your cash receives up to $8 million in FDIC insurance (and $16 million for joint accounts), courtesy of banks. WealthFront collaborates with

There are no account fees or restrictions with the Cash Account. You can move money in and out as frequently as you choose. You also get a debit card to make purchases.

Pros

  • Excellent interest rate on uninvested cash.
  • There are no fees or account requirements for earning interest.
  • A wide selection of robo-advisor investment alternatives.
  • Provides free financial planning tools.
  • Automatic, daily tax loss harvesting.

Cons

  • There are no human advisors available.
  • Limited investments outside of equities and the robo-advisor
  • Limited chat and customer support
  • No cost reduction or additional support for larger accounts.

4. Empower

Account minimums: $100,000 for wealth management and $0 for individual investing accounts.

Fees range from 0.89% to 0.49% for accounts over $1 million.

Overview

Empower blends the technology and convenience of robo-advisors with the expertise of traditional financial advisors. The platform provides continual portfolio allocation advice, rebalancing, tax optimization, and limitless access to a human advisor. To use this service, you must have a minimum account balance of $100,000.

If you invest on your own, Empower’s investing accounts have no beginning balance requirement.

Empower’s Personal Cash account does not have a minimum balance requirement. As of December 2023, the account has a high annual percentage yield (APY) of 4.70%, with no balance limitations or fees.

To earn interest, you must transfer your cash from any Empower investment account to the cash account; this does not happen automatically.

Empower provides aggregate FDIC insurance of up to $5 million on your deposit. While you can transfer money from the cash account as often as you like, Empower has a daily withdrawal restriction of $100,000. To help manage your money, you can utilize Empower’s free financial planning tools, such as its budget planner and net-worth calculator.

Pros

  • High interest rate on cash accounts.
  • There is no account minimum required to earn interest.
  • Combines a robo-advisor and human planners.
  • Excellent selection of investment methods and portfolios.
  • Free online money management tools

Cons

  • Robo-advisors require a $100,000 account minimum.
  • Transfer money to a cash account for interest.
  • Higher costs compared to other robo-advisors.
  • To open an account, you must first phone.
  • The mobile app lacks several desktop functions.

5. Fidelity

Account Minimum: $0.
Fees: $0 for stock/ETF trading, $0.65 per contract for options trades.

Overview

Fidelity is one of the world’s leading investment brokers due to its focus on low-cost investing. It has no minimum account balance, no fees or commissions on stock and ETF trading, and minimal administrative fees.

Its platform is simple to use for beginners, but it also includes a variety of screeners, portfolio analysis tools, and other features for more advanced investors. As a result, it received the highest overall rating in our Best Online Brokers and Trading Platforms assessment.

Fidelity’s uninvested cash program is also easy and attractive, paying 4.99% through a sweep into money market funds.

Fidelity’s cash management service functions much like a bank account, with bill pay, an ATM card, and a mobile check deposit. As of December 2023, the cash management program earns an annual percentage yield of 2.72%.

If you have both types of Fidelity accounts, you can transfer funds back and forth.

Pros

  • Automatically pays a high-interest rate for cash
  • All sized accounts earn interest.
  • Low fees and trading commissions
  • User-friendly and powerful investment platform.
  • High-quality research and educational materials.

Cons

  • Charges fees for international stock and currency trades.
  • There is no commodity or futures trading.
  • High fees for broker-assisted deals.
  • Option fees are higher than normal.

6. Robinhood

Account minimum: $0

Fees: No commissions for stock, ETF, options, or cryptocurrency trading (minimal markup included).

Overview

When it originally debuted, Robinhood became a major sensation in the investment industry. Robinhood’s app made investing exceedingly simple—some may say too easy. The Robinhood trading software allows you to trade stocks, ETFs, options, and cryptocurrencies without paying any commissions. Its investing research facilities are quite limited when compared to big desktop platforms, but they are enough for casual investors.

Robinhood offers a lucrative scheme for uninvested cash, but there is a catch. You must have a Robinhood Gold account to be eligible for the highly promoted rate. Robinhood Gold costs $5 per month and includes premium features such as Morningstar analysis, a greater maximum for fast deposits, and cheaper margin investing fees.

If you pay for Robinhood Gold, you will earn 5.0% on your uninvested cash. However, if you merely have a free Robinhood account, you will earn 1.5%. The value of the $5 monthly fee is determined by the size of your cash balance and the other Gold perks you choose. To use Robinhood’s service, you must first opt into the cash sweep feature on the app. This allows you to earn interest and boosts the FDIC coverage of your cash amount to $2.25 million. There are no minimum or maximum balance requirements for earning interest.

Pros

  • High-interest rates for Robinhood Gold subscribers.
  • Zero-commission trades
  • The app is incredibly straightforward to use.
  • Fractional share trading is offered.
  • There are no minimum balance requirements.

Cons

  • Robinhood Gold requires a monthly payment of $5 for the maximum APY.
  • Free accounts have a moderate interest rate.
  • Only basic research instruments.
  • Limited asset choices.

The final verdict

All of the brokers on this list provide fantastic programs for uninvested funds, assuming you qualify for the best rates. The best fit is determined by both your investment goals and your predicted account balance. Interactive Brokers makes sense for serious investors seeking the most investment skills, while Fidelity has the highest interest rate and an incredible platform of its own.

If you are looking for a robo-advisor, Betterment and Wealthfront are both good options. They are very similar, and the best match depends on whatever platform you choose. Empower’s cash account is likewise quite impressive. There is no minimum account balance required to use it, and you will have access to free financial planning tools. To invest using Empower’s robo-advisor, you must have at least $100,000. Finally, Robinhood’s program is quite competitive provided you are prepared to spend $5 per month for Robinhood Gold. Otherwise, its rate is comparable to the rest.

How Else Can You Earn Interest on Cash?

Aside from brokerage accounts, the simplest way to earn interest on cash is to deposit it in a high-yield savings or money market account. There are Internet banks that pay much higher interest rates than traditional brick-and-mortar banks. Savings and money market accounts provide you with fast access to your money.

If you’re ready to temporarily lock up your money, consider putting it in a bank certificate of deposit (CD). These can offer a higher interest rate, but you must keep the money for a specified amount of months or years. If you remove it early, you will have to pay a penalty. Bonds are another possibility. They pay interest, but there is a danger of nonpayment, such as if the bond issuer declares bankruptcy. In general, the interest rate rises as the bond risk increases. Rating organizations assign letter grades to firms, governments, and other bond issuers to indicate their level of safety.

What Are Some Risk-Free Areas for Investing Your Cash?

Savings accounts, money market accounts, and CDs are safe ways to invest your money. These accounts are FDIC insured up to $250,000 per depositor per bank. Even if the bank goes bankrupt, the government guarantees you will receive your money back. Cash in a brokerage account is also quite secure, as it is protected by the SIPC up to $250,000.

Because of the country’s stability, US government bonds are likewise thought to be risk-free. The federal government guarantees to make the installments and repay your principal. Treasuries, I-bonds, and Treasury Inflation-Protected Securities (TIPS) are a few options. A fixed annuity is another highly safe option. These contracts provide a fixed interest rate guaranteed by an insurance company. You do commit to maintaining the money in the annuity for a certain period of years, or you will be penalized for canceling.

What Is the Cash Earnings Interest on Robinhood?

As of December 2023, Robinhood’s cash earnings interest rate was 1.5% APY for free accounts and 5% for Robinhood Gold accounts. You will need to pay $5 per month for Robinhood Gold to get the higher rate. Interest rates also fluctuate depending on market conditions.

To begin earning interest on your Robinhood balance, you must first engage in the cash sweep program. The program then automatically invests your uninvested funds in banks to earn the highest interest rate. This program provides you with additional FDIC protection, protecting your amount up to $2.25 million in uninvested cash.

What is the best option for uninvested cash management?

Typical alternatives for your uninvested cash include keeping it in your brokerage account, “sweeping” (automatically transferring) it to a bank deposit account as part of a bank sweep program or sweeping it to a money market mutual fund as part of a money market sweep program.

How do you earn interest on uninvested cash?

You earn interest on your uninvested brokerage cash that is transferred to the program banks. You only begin collecting interest after these banks receive your funds. This is determined by the timing of trades, deposits, and withdrawals.

Where should I hold my cash when it’s not invested?

Savings accounts, money market accounts, and CDs are safe ways to invest your money. These accounts are FDIC insured up to $250,000 per depositor per bank. Even if the bank goes bankrupt, the government guarantees you will receive your money back.

How much does fidelity pay on uninvested cash?

When every dollar counts, it pays to invest your money in a place where it can make more. Any uninvested cash deposited in a Fidelity brokerage account is automatically invested in a money market fund that is now earning 4.98%—just one more way we provide industry-leading value to our customers.

Is Fidelity’s cash management account good?

Unfortunately, Fidelity’s Cash Management Account earns little interest. It’s a good substitute for a regular checking account, but it doesn’t replace a high-yield checking or savings account. Compare your banking requirements to what Fidelity Cash Management Accounts provide to discover if this account is perfect for you.

 

 

 

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