Author Topic: Radical simplicity with just one Fidelity account?  (Read 659 times)

protostache

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Radical simplicity with just one Fidelity account?
« on: August 02, 2018, 09:35:27 AM »
My wife and I have had our investments at Fidelity for the past three years. Recently we opened a Cash Management Account there to take over as our primary cash (checking and savings) account. I've really liked how easy it is to handle our finances from that account, as opposed to our PNC accounts that were sort of annoying.

The CMA is an ordinary taxable brokerage account with three differences. First, the core position is FDIC insured. It pays a little interest but not much so I haven't kept a balance in the core. Second, you can't enable margin or options. Third, it gives you access to their Cash Manager tool for keeping balances in check and over drafting from another account, etc.

Something occurred to me the other day. What if we just moved all of our taxable investments into the CMA? We don't use the debit cards so I'm not concerned about fraud. We don't plan on using margin or options, and if we want to we could always transfer stuff back into our standard brokerage account.

The primary advantages would be: no need to do transfers between accounts (even though they're instant, it's still annoying to have to do them) and automatic investing would just work, because it would draw from the FDIC core position.

Does anyone else do this? Is it crazy for some reason that I can't think of?

jlcnuke

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Re: Radical simplicity with just one Fidelity account?
« Reply #1 on: August 02, 2018, 10:06:13 AM »
I'm a big proponent of having investments in a margin account, even when not planning to use margin, so I wouldn't. It's hardly any work to have a separate taxable investment account so I wouldn't get rid of the margin account to save a login or a couple clicks of the mouse every once in a while.

protostache

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Re: Radical simplicity with just one Fidelity account?
« Reply #2 on: August 02, 2018, 10:13:00 AM »
I'm a big proponent of having investments in a margin account, even when not planning to use margin, so I wouldn't.

Interesting. Why is that?

jlcnuke

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Re: Radical simplicity with just one Fidelity account?
« Reply #3 on: August 02, 2018, 10:26:57 AM »
I'm a big proponent of having investments in a margin account, even when not planning to use margin, so I wouldn't.

Interesting. Why is that?

No T+3 rule to worry about.
Can immediately sell assets and have that money available to withdraw if desired/needed.
Can utilize margin as a low-interest short term loan if absolutely necessary (not preferred, and I probably wouldn't use it, but can work for some).
Can perform trades that aren't allowed in cash accounts at most brokerages (short selling, some options strategies, etc).
No T+3 rule to worry about.
No T+3 rule to worry about.
No T+3 rule to worry about.

In a word: flexibility. If you don't use the margin itself, there are literally no downsides to having a margin account but plenty of upsides. I emphasize the T+3 rule because if you decide to switch funds (say you use a 3-fund portfolio and decide you want to move your funds from iShares funds to Vanguard's new zero fee funds) you can sell the old and immediately buy the new. With a cash account, your money is sitting on the sidelines for days waiting to clear before you can get back in. That may not seem important, but missing just 10 days in the market can be a huge difference in your overall returns.

SpareChange

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Re: Radical simplicity with just one Fidelity account?
« Reply #4 on: August 03, 2018, 11:34:36 AM »
My taxable account at TDA is also my checking account. I have margin enabled, mostly as overdraft coverage as I keep very little in cash. It's convenient for sure. I also have an IRA and HSA there, and linked up with the main account.