Investors must take their first step in building their portfolio and open brokerage accounts. A brokerage account is a type of account that allows an investor to purchase stocks, bonds, mutual funds, and other investments by hiring some financial experts and professionals to do the buying and/or selling of the items that an investor instructs or tells them to. The investors need to pay a certain fee for these transactions, and this fee is referred to as a “commission”. Commissions may range from as low as $5 to $10 dollars, and even higher to several hundred dollars. The difference of the price arise depending on which type of broker an investor chooses, either a discount or traditional (full service) broker.
How to Open Brokerage Accounts
Traditional or full service brokerages provide a wider range of services, and have higher price and fees as well. They usually serve through their professional money managers and gives best financial advice as to what types of investment might be ideal for a particular investor. Discount brokers, on the other hand, are companies that serve the more self-directed investors. Discount brokers do not offer advice as to what or which investment type to put the money into, thus the investors must make their own financial decisions. They will simply execute orders once an investor decided to buy or sell an investment. Discount brokers charge their clients much lesser. Finding the cheapest online broker can help save you a good amount of money in unnecessary trading fees! There are some discount firms nowadays, such as TradeKing, E-Trade, TD Ameritrade, and Scottrade, that have been offering research that is more or less similar with those offered at the traditional or full service brokerage firms. There are some brokerage firms that offer both services to their clients, allowing them to choose between the traditional or full service and discount types of brokerage servicing.
Different brokers have different minimum balance requirement which usually ranges from $500 to $1,000. The minimum balance may be even lower for IRAs and other retirement and education accounts. When opening a brokerage account, the investor may have the option of either having an application form sent to him, or fill out these forms online, print them, and mail them in together with a check. This is a very easy process and can be done efficiently without much of a fuss.
There are big differences in commission prices between the traditional or full service brokerage firms and discount brokerage firms. Sometimes, tremendous difference in terms of commissions on the same kind of brokerage firms may occur. One discount broker may charge $30 per trade, while another discount brokerage company just charge $8, more or less. This is mainly the reason why investors are really advised to do some research and shop around for several online brokerage companies and compare their service (as no broker offers the exact same set of tools, research, services, and perks to their customers), their rates, and other fees.
Choosing the one that would best suit the budget and needs of an investor is most absolutely and obviously a very prudent thing to consider. Browse through our online broker list to help you get started in the right direction.