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Brokerage Accounts

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Brokerage AccountsA brokerage account is an account at a licensed brokerage firm that you can deposit funds in and then use to place investment orders (i.e. buy and sell securities).  The brokerage firm carries out the transactions on your behalf, but you, the investor, own the assets in the account and must normally pay tax on any earnings generated in the account.

There are several different types of brokers, ranging from full-service brokers who may charge you high fees for the substantial advice they offer, to discount online brokers who only charge very minimal fees in exchange for executing your trades.

Personally, I prefer to pay less in fees and keep more of my money, so I prefer discount brokers.  Discount brokers also tend to have some great educational tools.  Some of the least expensive and best discount brokers out there include:

Some discount brokers will offer some great perks for opening an account.  Make sure you understand all of the terms and conditions associated with your account and any fees that may apply.

Learning how to invest can reduce your need to pay for investment advice and help you hold onto more of your money.  Studies have shown that investors who invest passively in low cost index funds and ETFs tend tend to outperform those that trade often, after factoring in taxes and fees.

If you do want professional advice, I generally prefer other types of financial advisors over a broker, as a broker’s interests are not always as aligned with an investor’s best interest as one would like.

You may also want to strongly consider opening an IRA, as there may be special tax benefits to using an IRA that are not available when using a brokerage account.

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