Quote:
Originally Posted by ThaVirus
Ok, cool, I figured. So the whole “don’t invest money you’re saving for something” in regards to a brokerage account is advised more so because it’s risky and a portion of the investment could be lost?
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Correct. I personally think of stocks and bonds through a broker as being liquid with some caveats. There are rarely situations where you'd need to be pulling out 10s of thousands of dollars on the spot, so you could sell what you have and transfer it when you need it. That said:
- This doesn't apply to retirement accounts - just taxable brokerage accounts. Unless you want to deal with pretty large penalties, those are a one-way street until you are truly nearing retirement.
- There's no guarantee that you'd get the price you want at the time you are forced to sell. And often times emergencies come up when the stock market sucks, like getting laid off or having your home value tank when you need expensive repairs.
- Short-term capital gains taxes are pretty high, so it's not a good strategy to invest everything you have with a plan of pulling it out in a few months. Ideally, you shouldn't be selling anything that's been invested less than a year.
- This all assumes that we're talking about publicly-traded stocks. I have a situation where I can buy stock in my own company, but we're still privately held. If I wanted to sell those stocks, I'd have to find a buyer, which would definitely not be a 2-3-day process.