Difference Between Management Account and Investment Portfolio

Understanding the choices available in your investment account helps build your cash.

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When you open an investment account with a broker, you actually get two accounts. Your portfolio holds stocks, bonds and other equity investments, while your cash management account holds cash. The two accounts are connected so that when you buy stocks, for example, the funds you want to spend are automatically pulled from your cash account and used to buy the stocks and other investment vehicles. Knowing how your management and investment accounts interact can make you money.

Cash Management Account

You can elect to have your cash in your management account placed in a money market account, a money market mutual fund, an interest-bearing checking account or a certificate of deposit. The money market account is the most liquid, meaning you can get your cash the moment you're ready to invest. Mutual funds take three days to "settle," which leaves you waiting for your cash. A checking account is extremely liquid, but you might be tempted to spend your investment cash on luxuries. A certificate of deposit is the least liquid, tying up your money until it matures at three months, six months, one year or even longer, depending on the type of CD you choose.

Investment Portfolio Settlement

If you sell a stock, you receive cash for the dollar value of the shares at the time of the sale. The cash may take up to three days to settle, and when it does, you will see it in your cash management account. However, some brokers let you have access to the cash without waiting, essentially loaning you the money until your sale settles. The broker will put cash into your cash management account equal to the amount you have coming from the sale. This allows you to sell a stock and use the cash to buy another one on the same day. The loan has no interest because the broker will make money on the commission when you buy your next stock.

Watching Your Portfolio

Your portfolio gives you online access so you can track your investments. You can see the individual stocks you own and the share price for each stock, often in real time. Many portfolios offer stock charts for each stock you own, as well as breaking news about the companies behind your stocks, upcoming dividend pay-out dates, and a graph showing your earnings and losses. You should know that any dollar amounts listed, such as the value of a particular stock, are tentative. If you sell the stock, you may get a different price than the current one, and the amount of cash that goes into your cash management account will reflect the change in the stock's price.


Many brokers offer a sweep function. This works two ways. If you have any cash from dividends in your portfolio, it will be swept into your cash management account at the close of business. Conversely, if you have cash left over in your checking account, the sweep function will grab that cash and put it into an interest-bearing account, such as a money market account. You have to request specifically that your checking account be tied to the cash management account to take advantage of the sweep feature.