These accounts allow you to purchase stocks, bonds, mutual funds, and other investments by paying professionals to buy or sell the items you tell them to. The fee you pay them is called a “commission”. One can choose between either a discount or traditional broker. Traditional brokerages provide a wider range of services, and have the price tag to match. They serve along the lines of professional money managers and can offer advice as to what investments might be right for you.
In opening a new account, the minimum investment can vary. Most offer the option of either having an application form sent to you, or allowing you to fill them out online, print them, and mail them in with a check. The process is easy and can be done fairly quickly at almost all financial institutions.
Kinds of brokerage accounts.
There are three kinds of brokerage accounts. The most basic kind is a cash management account, into which investors place money in order to make trades. There must be enough money in the account to cover the trade at the time of its execution.
A second, more sophisticated kind of brokerage account is a margin account, which allows an investor to buy securities with money borrowed from the broker.
A third kind of brokerage account is a discretionary account, which permits the broker to buy and sell shares for the investor without first contacting the investor for approval.
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