Should You Keep Multiple Investment Accounts?

by Lee Distad

In the past, when we’ve talked about diversifying your investments to manage risk and preserve wealth, it’s been in relation to multiple asset classes or industry sectors for equities.

But what about the equally obvious strategy of spreading your investments around, and maintaining separate accounts at different institutions?

Amongst high net worth individuals, it’s commonplace to divvy up investment money amongst several different managers at different investment firms. That makes sense: One way of hedging against the monkey-with-a-dartboard approach is to diversify by using more than one monkey.

I kid, I kid.

The practical reason is that as investment sums get larger, outperforming the indexes becomes more difficult. An investor with tens or hundreds of millions thrown at any one market sector is a mini-index in his own right.

Splitting up principal capital and broadly diversifying is one way to seek above-average returns.

Why It’s Worth Having Multiple Accounts

But even for the small investor, there are advantages to be gained from holding multiple investment and savings accounts at different institutions.

If your net worth reaches the point where you have to consider it, keep a balance of principal capital in any given account only up to what is federally insured by law (in the U.S., the FDIC insures up to $250,000).

Additionally, since some retirement accounts are taxed upon withdrawal, it’s possible that by withdrawing smaller amounts from multiple accounts rather than one lump sum you can realize a small tax savings.

I have retired acquaintances that play that way, but do your own math and see if it makes sense.

In order to benefit from having multiple accounts, you need to have enough assets to justify it. Putting small amounts of your money in several accounts means that fees will devour your loot.

Nobody wants that to happen. If you’re starting small, stick to a single account or institution. But as your wealth grows, investigate options for diversifying your holdings into separate accounts.

Do your own homework, take responsibility for your finances, and find solutions that are right for you.

About the author: Lee Distad consults with CE integration firms on design, installation and project management processes and Best Practices, and offers provides professional copy writing services for websites, brochures, and marketing initiatives. Visit him at

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