Hey viewers, welcome back to FLC blogs. In this article, we will discuss opening a Brokerage Account!
What is a brokerage account? Investment accounts used to buy and sell stocks, bonds, mutual funds, ETFs, and other securities are called brokerage accounts. Plenty of licensed firms offer accounts, full-service accounts on the pricier side, and online discount brokers are some cheaper options.
Brokerage accounts are sometimes called “taxable accounts” as they can be taxed as capital gains, which have different tax rules than retirement accounts, like IRAs. There are tax advantages to brokerage accounts, but only if you are a long-term investor. Long-term investing will lead to better investments and a more favorable tax bracket in the long run. As Delyanne Barros, founder of Delyanne the Money Coach, the key to taking advantage of brokerage account is to ignore day-to-day market ups and downs and stay invested.
Brokerage account basics:
Many online brokerage accounts allow you to open an account quickly and cheaply online, with few even requiring an initial deposit. After the account is set up, you can transfer money from a separate account. The money in the account is yours, and is always yours, as you can buy and sell at any time. The broker acts as a “middleman” between you and investments.
Choosing a brokerage account:
Online brokers and robo-advisors are two types of accounts that sufficiently meet investors needs. If you want to manage your own investment portfolio, online brokers would be a good choice. Robo-advisors use computer algorithms to choose and manage investments based on your choices about time and goals. In short, online brokerage account are good for hands-on investing, and robo-advisors are a good choice for hands-off investing.
Step by Step Opening the brokerage account:
Complete online application (usually takes less than 15 minutes)
Transfer funds from another bank or brokerage account (can also be done online)
Some brokers may have you verify, where they deposit a few cents into your bank account, and you must confirm the amount.
Once the transfer of funds and verification is complete, you can start investing.
Some brokers may ask if you want to open a cash or margin account, where a margin account lets you borrow money from the broker to invest but paying interest and high risk on top of your investments may make you want to stick to a cash account, at least at first.
Also, most brokerage accounts require the minimum age to be 18, but for minors, a Custodial account can be set up. Check out our article on custodial accounts.
