|Verfasst am: 12. Sep 2022 07:00 Titel: What Is a Brokerage Account and How Do I Open One?
What Is a Brokerage Account and How Do I Open One?
A brokerage account is an investment account used to buy and sell securities such as stocks, bonds, mutual funds and ETFs. You can set up a brokerage account at a range of licensed brokerage firms — from pricier full-service stockbrokers to low-fee online discount brokers.To get more news about trading account, you can visit wikifx.com official website.
You can transfer money into and out of your account much like a bank account, but unlike banks, brokerage accounts give you access to the stock market and other investments.
You’ll also see brokerage accounts referred to as taxable accounts, because investment income within a brokerage account is subject to capital gains taxes. This is compared with retirement accounts (such as IRAs) that have a different set of tax and withdrawal rules, and may be better for retirement savings and investing.
"A lot of people think that brokerage accounts are 'non-tax advantaged,' but there are tax advantages," said Delyanne Barros, founder of Delyanne The Money Coach.
"The benefit of the brokerage account is leveraging the long-term capital gains tax," she said in an email interview. "In order to do that you must be a long- term investor. That means you have to hold your investments for over a year. Not only will this help you capture the most favorable tax bracket, but it will likely result in better returns."
How do brokerage accounts work?
Many brokers allow you to open a brokerage account quickly online, and you generally do not need a lot of money to do so — in fact, many brokerage firms allow you to open an account with no initial deposit. However, you will need to fund the account before you purchase investments. You can do that by transferring money from your checking or savings account, or from another brokerage account.
You own the money and investments in your brokerage account, and you can sell investments at any time. The broker holds your account and acts as an intermediary between you and the investments you want to purchase.
There is no limit on the number of brokerage accounts you can have, or the amount of money you can deposit into a taxable brokerage account each year. There should be no fee to open a brokerage account.
How to choose a brokerage account provider
There are two main options that meet the needs of most investors: online brokers and robo-advisors. Both offer retirement accounts and taxable brokerage accounts.
"You want to be careful with which company you open your brokerage accounts with," says Wendy Moyers, a certified financial planner at Chevy Chase Trust in Bethesda, Maryland. "And you should be walking in with an awareness of what you’re going to be investing in. You want to do a little research."
Online brokerage account
If you want to purchase and manage your own investments, a brokerage account at an online broker is for you.An investment account with an online brokerage company enables you to buy and sell investments through the broker’s website. Discount brokers offer a range of investments, including stocks, mutual funds and bonds.
Managed brokerage account
A managed brokerage account comes with investment management, either from a human investment advisor or a robo-advisor. A robo-advisor provides a low-cost alternative to hiring a human investment manager: These companies use sophisticated computer algorithms to choose and manage your investments for you, based on your goals and investing timeline.
Robo-advisors are likely a good fit for you if you’d like to be largely hands-off when it comes to your investments. We have a full list of the best robo-advisors.
Note: We don’t recommend investing money you need within the next five years. If you’re saving for a short-term goal, skip the brokerage or investment account and consider these options for short-term investments.
How to open a brokerage account
Setting up a brokerage account is a simple process — you can typically complete an application online in under 15 minutes. (In most states, you’ll need to be 18 to open your own account, but here’s how parents can set up a brokerage account for their kids.)
Once you've opened the investment account, you’ll need to initiate a deposit or funds transfer. That sounds complicated, but these days, it’s a pretty simple process to link your bank account with a brokerage account, and can be done online.
Some brokers may require you to verify a transaction. If that’s the case, you’ll have to wait until the broker deposits a small sum in your bank account — typically a few cents — and you’ll confirm the transaction by letting the brokerage know the exact amount that was deposited. If you have any questions, the broker can walk you through the process. After the transfer is complete and your brokerage account is funded, you can begin investing.
You might be asked if you want a cash account or a margin account. A margin account allows you to borrow money from the broker in order to make trades, but you'll pay interest and it's risky. Generally, it's best to stick with a cash account at first.