Login | June 02, 2026
Brokerage Account or 401(k)?
Motely Fool
Published: June 2, 2026
Q. Is it better to invest in individual stocks through a brokerage account or to invest via a 401(k) account? -- L.K., Greensburg, Pennsylvania
A. Both are solid choices. If you have the time, skill and interest to study stocks and choose which ones to buy and sell, that's great. With a 401(k) account, you'll typically only be able to select from a limited menu of investments, most or all of which may be mutual funds. They might not deliver the amazing returns that a strong growth stock could, but they can be less risky, as your money generally will be spread across many securities. Note that 401(k)s offer tax breaks, and if your employer matches part of your contributions, that's free money.
You don't even have to decide between the two options -- consider investing through your 401(k) and also investing in some individual stocks or exchange-traded funds (ETFs) via a good brokerage. (You can read about good brokerages at Fool.com/money.)
Q. Is it sketchy if a brokerage charges $0 in trading commissions? How can they profit from that? -- B.B., Sierra Vista, Arizona
A. It's not sketchy at all, and most major online brokerages are charging little to nothing for most trades these days. They don't have to profit by charging you for trades because they have plenty of other ways to make money, such as investing (and earning interest on) cash in customer accounts. They may also charge fees for paper statements, account maintenance, account inactivity, cryptocurrency trading, retirement planning services and research reports, among other things. And many brokerages collect fractions of pennies per share traded for sending their customers' buy or sell orders to market makers for execution.
Fool's School
Insiders and Institutions
We small investors are not the only ones who invest in stocks. It's common for a stock to have insider or institutional investors, as well -- and it's worth paying attention to these when you're evaluating a stock as a possible investment.
Company insiders include its officers and directors and others (including their relatives) who may be aware of important information regarding the company that hasn't been made public. This potential for inside knowledge is why many investors like to keep up with what insiders buy and sell. Insider ownership is detailed via required filings with the Securities and Exchange Commission. Form DEF 14A, for example, can show the percentage of a company's stock owned by the CEO, the chief financial officer, directors and other top executives. You can also find summaries of insider ownership on stock information pages at sites such as Yahoo! Finance. (At that site, enter a company's ticker symbol and then click on "Holders.")
The amount of insider ownership itself is valuable information: It's promising when insiders own shares in the company, because this aligns their interests with those of small investors. They have an incentive to help the company succeed since they have skin in the game.
Insider trading -- the legal kind -- is also informative. When insiders buy shares, it's hard to see that as anything but a good sign. When they sell, it's not necessarily bad, because many insiders get much of their compensation in the form of stock. So if they sell some shares, they may just be raising some cash.
High institutional ownership can also be auspicious. Institutions such as mutual funds, pension funds, hedge funds and endowment funds will often invest some or much of their sizable assets in stocks. Each stock chosen can be seen as a vote of confidence in the company, as they must have researched it and liked what they saw. But it doesn't necessarily mean that the stock is a bargain or that it will perform well.
My Dumbest Investment
Bought IPO and Lost Money
My most regrettable investment was when I was able to buy a few shares of Facebook (now Meta Platforms) at its initial public offering (IPO). I sold them within a month when they dropped below the IPO price. I never bought the stock again. -- J., online
The Fool responds: Facebook's IPO was not initially a huge success. That serves as a good reminder that often, it's best to give a newly issued stock some time to settle down before investing -- perhaps as much as a year. Some IPOs surge unreasonably high on enthusiasm and speculation in their first months, and others, like Facebook, see their shares sink.
Facebook went public on May 18, 2012, with shares initially priced at $38 per share. They closed at $38.23 on their first day. Within months, the stock dropped by more than 50%, as investors grew skeptical about how Facebook would generate profits from its expansion into the mobile realm. Of course, the company is now hugely successful, with a recent market value of over $1.5 trillion and shares trading at more than 16 times their IPO price. Meta is investing heavily in artificial intelligence now, and many are bullish about it.
(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)
Foolish Trivia
Name That Company
I trace my roots back to 1947, when I was founded as an engineering and construction company after South Korea was liberated. I worked to rebuild the country's infrastructure. My motor company was launched in 1967, and I am now the third-largest automaker (by volume) in the world. My Ulsan plant is the world's largest, able to crank out 1.5 million vehicles annually. I entered the U.S. market in 1986, and I boast more than 820 dealers nationwide. Worldwide, I employ about 250,000 people. Brands under my roof include Kia and Genesis. My name means "modern times." Who am I?
Last Week's Trivia Answer
I trace my roots back to 2007, when two fellows opened their San Francisco apartment to three people who needed a place to stay. They decided to make space-sharing easier for others. Today, with a recent market value of $83 billion, I boast more than 9 million active listings worldwide -- from more than 5 million hosts, in more than 150,000 towns and cities and in more than 220 countries and regions. I have helped house many people displaced due to disasters. I'm now offering experiences, too. I take in more than $12 billion annually. Who am I? (Answer: Airbnb)
The Motley Fool Take
A Steady Dividend Grower
Procter & Gamble (NYSE: PG) recently announced its 70th consecutive annual dividend raise, good for a yield of 2.9% (as of early May). The company has averaged annual dividend hikes of nearly 5% over the past decade.
Procter & Gamble is the largest household and personal products company in the world, and the third-largest U.S. consumer staples company by market value. Its portfolio of leading brands spans many categories. To give just a few examples: diapers (Pampers, Luvs), paper towels (Bounty), toilet paper (Charmin), facial tissues (Puffs), feminine products (Tampax, Always), grooming and hair care (Gillette, Old Spice, Pantene), cleaning products (Dawn, Cascade, Mr. Clean), laundry detergents (Tide, Gain), oral and personal healthcare products (Crest, Oral-B, Pepto-Bismol), and skin and personal care (Olay, Old Spice).
Procter & Gamble is a mature blue-chip stock built for longevity. Its business is recession-resistant, as demand for its products tends to remain consistent across economic cycles.
It's a good idea to have some safer, steadier stocks in your portfolio, especially in recent turbulent market conditions. Plus, a dividend yield of nearly 3% is solid, and it will only get more attractive if interest rates begin to fall. Investors can buy P&G on sale these days, as it's trading with a recent price-to-earnings (P/E) ratio of 21.6, below its five-year average of 25.5.
COPYRIGHT 2026 THE MOTLEY FOOL, DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION, 1130 Walnut, Kansas City, MO 64106; 816-581-7500