A few things to know before opening a brokerage account
A brokerage account is an arrangement between a licensed brokerage firm and an investor that allows the former to buy securities for the latter. The account is used to buy and sell stocks, bonds, mutual funds, exchange-traded funds, index funds, options, futures, foreign currencies, real estate investment trusts , among other instruments.
An investor can withdraw money anytime they wish from the account. There are some important things an investor must know:
A new investors can look for the services that are provided by a full-service brokerage firm. Advisors are paid to help their clients in investment plans and execute the transactions accordingly.
Full-service brokerage accounts have two types of fee structures -- on a commission or advisory fee basis.
A commission account generates a fee when a financial instrument is bought or sold.
Advisory fee based accounts have a flat annual fee, ranging from 0.5 per cent to 1.5 per cent on the total account balance and no extra commissions are charged when investments are bought or sold.
Investors looking for the do-it-yourself (DIY) brokerage option can use discount brokerage firms.
These firms charge lower commissions or fees than full-service brokerage firms, but they offer fewer services.
Before zeroing in on a brokerage firm, an investor should compare the deals offering by other brokerages and the packages they provide to their clients.