Introduction to Brokerage Accounts
What is a brokerage account, and how can it benefit me?
In many cases, the first step to building an investment portfolio is going to be to open up a brokerage account. The purpose of a brokerage account is to allow you to make purchases of investment vehicles such as mutual funds, stocks, bonds and other types of investments. How you do this is by paying a professional to make the purchases or sales as you tell them to.
Brokers charge commissions which can range from $5 per transaction to several $100’s of dollars per investment depending on the type of broker or brokerage that you are working with.
So what causes the difference in price from one brokerage to another?
The difference in price comes up depending on what type of brokerage you are working with. There are traditional brokers and there are discount brokers, and the difference lays in the services that they offer you. For example, a traditional brokerage is going to offer a much wider selection of services, but the price you pay for this increase in services is going to be higher as a result. These are like professional money management firms, and they are capable of offering you a great deal of investing advice to make sure that you choose the right investment vehicles for your needs.
Discount brokers on the other hand are companies that specifically aim to tailor to investors that are more self directed. They do not offer the same advice about where you should put your money, meaning that you are responsible for making your own personal financial decisions. As a result, because they are not providing you with any advice, their commissions are much smaller than what the traditional brokers charge.
There are a number of brokerage firms that are set up to offer both types of services. What this means is that you can start out with a traditional brokerage service, getting the investment advice that you need, and then eventually you can graduate into a cheaper service by making your own investment decisions and only having the broker make the trades. This is great if you are learning how to invest on your own and only need a little bit of help.
If you are looking for a discount broker, you might try Ameritrade, E-Trade, TD Waterhouse and other similar companies. Charles Schwab is an example of a brokerage company that offers both traditional and discount services, so this is also worthwhile to check out. These services all make it possible to invest in a wide variety of different types of investments including mutual funds, common stocks, IRA accounts and more. This makes it easy to manage your financial accounts however you like because you are not limited to a small number of investment vehicles. Once you open an account with one of these brokerage companies, you can begin to invest your money how you like.
Photo Credits: JohnHallAssociates
-
Credit Karma — Free No Strings Credit Scoring Never before have Americans been so interested in their credit scores, and as such, numerous sites have cropped up offering to sell them. It can get pretty expensive if you want to keep checking your score with these sites and many people discover hidden monthly fees that rack up quickly……. -
Making Extra Money With P2P Lending Peer to Peer lending is quickly becoming one of the hottest new ways to create multiple streams of income. While there is risk involved, there are various methods that can reduce the risks that individual investors face and provide protection against non-payments. If you’re looking for an potential way to…… -
Fixed Term Investment Characteristics The government only represents approximately 30 percent of our retirement income allotment. The companies that we work for and their retirement pension plan is only going to amount to another 30 percent or so, and most people do not even have these types of retirement plans. In other words, it…… -
Introduction to the IRA The IRA is an Individual Retirement Account that was originally created by the United States Congress as a means of providing retirement savings with tax advantages to workers that were not already being covered under an employer-sponsored retirement plan. Unlike the standard 401(k) plan, the purpose of an IRA is…… - Index Funds 101 The most significant invention in the 20th century as far as investing goes is mutual funds, at least if you are a small individual investor with modest means. Thanks to mutual funds, the benefits associated with large scale international capital markets are now capable of being taken advantage by more……
Online Stores