Where Should You Create A Brokerage Account?
If you’re wondering what a brokerage account is, it’s actually the first thing you should make if you want to make money trading stocks. A brokerage account is an agreement between you as an investor and a licensed brokerage firm. Through your account, you can trade stocks for quick profits or build your portfolio as part of your retirement plan.
There are two types of brokerage firms: Full-service brokerage companies and specialty brokerage companies. Full-service brokers give you access to stocks, options, bonds, futures, ETFs, and other investment vehicles. Specialty brokers only offer only stocks plus two or three related investments.
In the United States, there are actually fifty brokers that are licensed to give you access to the different financial markets. In return you pay them fees for every transaction you make. Depending on the company, transaction fees could be as low as $5 or as high as $100. Minimum investments also vary, from $500 to $1,000.
In choosing a company to open your brokerage account with, it’s important to take note of several factors: trading tools, learning resources and mobile access. Out of the 50 US-based brokerage firms, the ones that consistently get high ratings are TD Ameritrade, Scottrade and E-Trade financial. All three charge relatively low commissions of $8 to $30 and they all have great online trading platforms. You can easily buy mutual funds just as easily as stocks with them.
If you’re wondering what mutual funds are, they are a collection of different stocks and bonds managed by fund managers. Mutual funds are best for people who want to invest in an industry but don’t know which stocks are the best. For example, if you want to invest in real estate but are not sure about which company stocks to buy, just buy mutual fund units.
Anyway, as we said earlier, TD Ameritrade, Scottrade and E-trade are the top-rated brokerage companies in the US. You can open a brokerage account with any of them and start earning money by trading (buying and selling at certain prices) or building your 401k portfolio. They do offer automatic transfers from your bank account to your brokerage account so saving and investing money is easy.
If you plan on trading stocks rather than holding on to them for the long term, we suggest that you have a trading plan to minimize risk. It’s no secret that stock trading has been likened in the past to gambling, where the chances of winning big and losing big are equally high.
However, you can increase your chances of winning by having a plan and sticking to it. For example, decide at what prices you’re going to buy stocks and at what prices you’re going to sell them. The idea is to snatch small but guaranteed profits instead of waiting for a hyperbolic increase in price before selling. Learn all that you can because really, as trite as it may sound, information is power. Brokerage firms do have learning resources for all levels of investors.