Investing 101: The Brokerage Account

Opening a brokerage account is the first step to take before you can get involved in the financial markets. There are many different options that you could potentially look at when considering opening a brokerage account. Here are the basics of the brokerage account.

The Brokerage Account

A brokerage account is a financial account that you can open with any financial broker. This type of account will be necessary before you can purchase stocks, mutual funds, money market instruments and other investments.

Types of Brokers

There are many different brokers out there for you to choose from. All of them have some good and bad things about them that you will need to take into consideration. You will be able to choose between a discount brokerage and a traditional brokerage. With a traditional brokerage, you will be working face-to-face with a financial broker. He is going to be very educated in the financial markets and able to offer you customized advice based on your needs. With a discount brokerage, you will most likely have to handle many things yourself. Discount brokers typically operate online, and you will be able to access them from your computer. These brokerages also employ knowledgeable brokers that you will be able to access through e-mail or over the phone. With a discount brokerage, you can expect to pay somewhere between $5 and $30 per transaction. With a traditional broker, you will spend somewhere between $30 and a few hundred dollars per transaction. With a traditional broker, you should expect a lot more individual attention and advice. Therefore, if you do not need help, it would be to your advantage to go with a discount brokerage and save some money.

How to Get Started

The process of setting up a brokerage account is typically very simple. You will need to contact the brokerage and let them know that you want to open an account. If you are working with an online broker, you will be able to access the application directly from the website. If you are working with a traditional broker, he will have a form for you to fill out. You will need to provide basic personal information as well as information about your financial situation. The brokerage will want to know information about your liquid capital and your experience in investing as well as other important information.

Payments

You will be able to fund your account in a variety of ways. You could write a check, use a credit or debit card or set up an automatic transfer from your bank account.

Risk Considerations

When you set up your account, you will most likely have to complete a questionnaire or survey. This will be designed to help determine what your risk tolerance is. Depending on how risky you like to be, the broker will recommend certain investments for you.

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