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Opening A Brokerage Account

There are several things you want to look for before you open an account. There are two different types of brokers, including traditional and discount.

If you open decide to open one with a traditional brokerage firm, you will work one-on-one with a personal stock broker. He or she will offer investment ideas, prepare reports about your portfolio, and give you a run-down of how well your investments are doing.

They are also generally available with a single phone call or email to buy or sell stocks, bonds, mutual funds, or other investments. In addition, traditional financial planners offer a variety of different research sources to their customers.

In exchange for this one-on-one service and guidance, you will be charged a significantly higher commission. Discount brokers, on the other hand, are geared toward the do-it-yourself investor.

Generally, they will not offer investment advice. They will simply execute orders once you’ve decided to buy or sell an investment.

Instead of working with the same stock broker, you will do most of your trading online, or if you decide to call in your order, with the first available financial planner. Recently, discount firms have been offering research that is on par with those offered at the traditional brokerage firms.

In exchange for giving up personal contact with a regular broker, investors will be charged a significantly lower commission. Although the largest difference in between traditional and discount brokers is the cost of each transaction, differences in commission prices between two firms of the same kind can be tremendous.

One discount broker may charge $30 per trade, whereas another may charge no more than $8. In some cases, the higher price means higher service, faster execution, and more perks.

For example your buy and sell orders are carried out in a shorter period of time; but this is not always the case. That is why it is important to look around and compare brokerage firms before you open an account.

Each financial planner has a minimum opening balance requirement. Some are as low as $500, most are around $1,000, and several are higher.

The general rule of thumb is you should have at least $1,000 when you go to open an account. Be careful though; some brokerage firms may have a low opening balance but will charge you a maintenance fee if your balance falls below a certain amount.

Although the fee may be as little as five to fifteen dollars per quarter, it can significantly eat up your investment returns if you are just starting out. For example $60 per year in fees on $1,000 balance is equal to 6% interest.

No financial planner offers the exact same set of tools, research, and perks to their customers. Some will allow you to instantly log in to your account via the Internet and print out an analysis of your portfolio, view the balance for the past six months, check your realized and unrealized gains, and view dividend records for the past few years.

Others may be slim on features such as this, but offer amazing research that you can’t get elsewhere. If execution time is important to you, check out the firm’s policies.

One online discount broker promises to execute your trade in 60 seconds or less, or you will not be charged a commission. Lately, a lot of brokerages have begun offering Visa Check Cards which work exactly like a credit card.

The difference is the money you spend is taken directly out of your brokerage account. This way, you have the combined functionality of a checking/savings/money market account with a stocks/bonds investment.

It is tremendously convenient and can help simplify your finances. If you are looking for an all-in-one solution, an asset management account may be a more attractive alternative.

Before you open an account, you should fire up your favorite Internet browser and visit the web page of each of the brokerage firms you are considering. If you plan on doing a lot of your research or trading online, the feel of the site is going to be almost as important as the other benefits and services offered.

About the Author:
Ronald Pedactor is a former stock broker and has worked as a stock trading trainer for the last 19 years helping individuals determine the best daily stock picks. He has been a financial trainer and a guest lecturer for over 11 years.

Contact Info:
Ronald Pedactor

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