A brokerage account is an investment account that helps you to buy investments like stocks, bonds and mutual funds. When you are investing your money you need to be very cautious about choosing a right brokerage account. Here is the quick guide on how to open a brokerage account by FinanceShed.
Identify Your needs
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You should identify what exactly are your investment objectives? If you simply want to invest for short duration and don’t necessarily want your money tied up until you retire, a traditional brokerage account is the way to go. These accounts do not come with tax benefit but you have flexibility of withdrawing your money at any point of time. If cash account is chosen by you, your broker will likely ask if you want margin privileges. You will have to pay interest on your borrowed money and there are risks involved with margin used.
Compare Costs and Services Offered
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It’s also important to review the brokers’ full pricing schedule, particularly if you plan on trading anything other than stocks (options, funds, bonds, etc.), as these often come with their own costs. You have to also choose the kind of account you want to open which includes basically two types of accounts – Cash and Margin accounts. There are many services offered by different brokers such as Foreign Trading, Different trading platforms etc. You have to choose the best brokerage account based on your needs of trading.
Open the Account
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After selecting the perfect brokerage account for you, you can apply to open a new account online. You will need to give certain identity proofs and may have to sign certain additional forms. Broker may ask you for your net worth and employment status. A Social Security Number is necessary if you’re creating a joint account, you’ll also need the Social Security Number of the person you’re setting up the account with for tax reporting purpose.
Fund the Account
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Once you have opened the account the next crucial step to your new brokerage will probably give you a few options to move money into your account. Before funding the account you need to be sure about the risk you want to take. Various fund transfer options available to the investor are Electronic funds transfer, Wire Transfer, Cheque, Asset Transfer, and Stock Certificates etc. When funding your new account, be sure to keep your broker’s minimums in mind.
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Now you can start investing according to your security preferences.There are also best free checking accounts available. Before you invest it is important to spend some time learning the basics of how to responsibly choose stocks, bonds, and/or funds, as well as how to create a well-diversified portfolio.
On a last note, choosing a wrong broker will cost you a big deal of money. You have to choose the brokerage account wisely and also try to invest by having calculated risks.