Brokerage Account

By — Published September 18, 2017

Brokerage Account

Like many other finance terms, the term Brokerage Account seems like something rather complicated. Or maybe something that only wealthy people and/or successful people have a relation with.

How does a brokerage account work:

A brokerage account is an account many people open with a stock brokerage agency or firm in order to invest in stocks or other investments. There firm or agency that connects you to the investments takes their cut or fee from your investments. When opening a brokerage account, one must be sure to do it with a reputable, licensed firm. The investments made by the account holder are called assets and are taxable. In case you made money from your investments, the gains are called - Capital Gains. The delta between your initial investment and the increase in value of the investments is considered ‘profit’ or ‘capital gain’.

What type of investments can be made with a Brokerage Account?

There are many different types of investments that can made with a brokerage account. Its important to make sure you read and understand what you invest in before doing so.

  • Annuities - This is an arrangement or a contract between the investor and an insurance company. The insurance company makes payments back to the investor depending on the deal made.

  • Bank Products - Many banks and credit institutions are known to create a stable and safe environment to accumulate savings. Some are better than others with rates and plans.

  • Bonds - Bonds are some of the oldest investments of our time. With a bond, you loan money to an organization for interest payments made back to you over time. Some examples of Bond investments are: Corporate bonds, tax-free municipal bonds, and U.S Treasury Bills

  • Stocks - Probably the most popular investment. When you invest in a company’s stock you own a piece, or more accurately a sure of the company, depending on the numbers of stocks/share you invest/buy. Stocks vary and come in many different forms.

  • Preferred Stock - This is a particular stock many people like to invest in since it pays a fixed dividend. Preferred stock is an investment in a company that has high assets and high earnings. The dividends on pr

  • Mutual Fund - Sounds a lot like its name. A mutual fund is an investment made up of a number of funds collected from multiple investors for the same purpose. This purpose is to invest in things such as stocks, bonds, or other related investments. The nice thing about a mutual fund is that it gives a sole, small time investor the opportunity to be part of a bigger investments.

  • Insurance - Another popular investment is life insurance related products investments.

There are other type of investments that can be discussed. The above is just a highlight of the main ones.

Why do many people take the time and effort to open a brokerage account?

Over time, when you find the right brokerage firm; a brokerage account will yield higher returns than most savings accounts. For that fact, many people take the time to invest in a brokerage account. Some people actually enjoy investing and learning with their brokerage account.

How does one go about selecting a brokerage account?

If you are a beginner investor and this is your first time broker account, you should start with an online broker. Many online brokers offer an easy-to-use trading platform. This can be a great an easy way to learn about investing with a small time investment.

What is the minimum deposit required to open a brokerage account?

The amount of money brokerage firms would require you to deposit in order to start investing and trading varies. These amounts can range from $100 to $5,000.


Related Articles