To be a part of the trading scene, you must approach a broker first. The broker is responsible for providing you with trading opportunities so that you can make it big by investing in the shares you feel like.
The only thing for you to do is have an account under that particular broker. This account is called a brokerage account and is not your average bank account even if you deposit money in it.
The brokerage account is used to carry out transactions for your investments and when you make a profit. This article tells you everything that you need to know about opening one.
You must be wondering if there is a catch here. Well, there is not. The process is pretty simple and many licensed brokers are available and are also very trustworthy which you can find by reading the AxiTrader review.
What is a brokerage account?
Every broker requires you to have a brokerage account under their company. You need to have a minimum deposit in that account before you can start trading. The value of this deposit differs concerning different brokers.
You cannot use the money in your brokerage account for daily purposes as you do in the case of a bank account. You can only use the money in that account to invest in the stock market and buy shares.
When you make a profit, the money is automatically transferred to your brokerage account. You must make sure that it is well-protected to be wary of fraud.
How do such accounts work?
As it has been mentioned earlier, brokers require you to deposit a value of money in your brokerage account before you can start trading with it. But, some brokers allow accounts with zero deposits.
But, you need to transfer money into your brokerage account from your bank account to use that money for making investments and buying shares.
These brokerage accounts can only be operated by you and you are the sole owner of the money in it. The broker is only responsible for making sure it remains protected under their supervision.
Moreover, you can have more than one brokerage account. You can then use them to invest in as many shares, or buy as many stocks as you may please.
How is it different from a retirement account?
If you think having a brokerage account will relieve you from paying taxes, then you are completely wrong. You have to pay the usual tax for whatever money you deposit into your brokerage account.
However, you also have the advantage of taking out any amount of money whenever you want to. This privilege cannot be enjoyed if you are the owner of a retirement account. Let us find out what it is.
Retirement accounts, as the name implies, are for your retirement savings. No taxes are imposed on the money in such accounts. But, there is a restriction on the value of money that can be deposited, as well as withdrawn every year.
Thus, brokerage accounts are very different from retirement ones which is why you should be careful while choosing the kind of account you want to trade under.
Choosing a brokerage account provider
Once we have solved the issue of choosing between a brokerage account and a retirement, we now have to choose our account provider. There are mainly two types of brokerage account providers.
As the name implies, it involves creating a brokerage account under an online broker. In this way, you will be responsible for all the investments you make and nobody gets to have a say in it.
The online broker will provide you with numerous trading opportunities, while also making sure that your accounts remain protected.
While you get to have control over your brokerage accounts under normal circumstances, if you hire an investment advisor, they will be responsible for managing your investments and trading streaks.
This advisor can be a person, as well as a computer algorithm that costs less. They take full control over your account and choose your investments and shares based on your trading history.
The process of opening a brokerage account is very simple because all you have to do is fill out an application and submit it. After which, you will have to link your bank account to transfer money into your brokerage account so that you can start trading.