Things To Consider When Deciding On A Brokerage Account 

You have decided it’s time to look into investing some of your funds.  Most people use the services of a stock broker for buying and selling in the stock market.   

You will need to explore some information regarding brokerage accounts before you can make an informed decision about which broker is right for you.  To be better prepared to make this decision you should determine approximately how many trades you anticipate making in a year and all other ancillary services you will use. 

First you need to determine what type broker will be best for your needs.  There are several different types of stock brokers.  There is the full-service broker who offers a variety of ways for the client to meet his investment needs.  Often this type broker has access to large research departments that analyze market trends and predict stock movements.  Then the broker can give advice about which stocks to buy or sell.  Full service brokers charge the highest commission rates in the industry.  They may be the best choice for the novice investor. 

Discount brokers are often used by investors who want to save on commission fees.  These brokers don’t offer advice or analysis, but they do charge much lower commissions.  The discount broker is used by people who prefer to make their own trading decisions.  Discount brokers are also used to make transactions for investors who trade often. 

The least expensive way to use a broker to trade stocks is using the online broker.  Although some full-service brokers and discount brokers may sometimes offer discounts, the broker who operates exclusively online offers the best rates of all. 

 

After you decide what type broker you prefer then you will need to open a brokerage account.  Some brokers have minimum investment balances and usually these range from $500 to $1,000.  Be sure to read all the fine print before entering into any arrangement.  Some brokers charge an annual maintenance fee and others charge fees whenever your account balance falls below the minimum. 

There are two basic types of brokerage accounts.  These types are the cash account or the margin account.  With the cash account, there is no credit.  When you buy you pay the full stock price.  With a margin account, you can buy the stock on margin which means the broker will carry some of the cost.  The amount of margin varies with each broker, but the margin must be covered by the value of the client’s portfolio. Margin accounts involve greater risks than the cash accounts and are not recommended for inexperienced traders. 

Before you make the choice of a broker you should carefully consider your needs as an investor.  Do you want or need advice about which stocks to buy or sell?  If so, you probably will benefit from the services of a full-service broker.  If you have the confidence and knowledge to make your own trading decisions then a discount broker or an online discount broker may be right for you. 

When you have decided which type broker is suited for your needs, then do some comparison shopping.  There can be significant cost differences between various brokerage accounts. Doing your research will help you make an educated decision about the broker you want for your future investing needs.