If learning how to invest by yourself as a to-do list in 2018, then opening a brokerage account is one of the first things you need to check off your list. While you need handy cash in the time of an emergency, once you’ve spent about 6 months of living expenses in your savings account, it’s time for you to think about achieving long-term financial goals. That means shifting from simply saving to investing, and one of the simplest ways of doing so is to first open a brokerage account.
A brokerage account is as liquid as a savings account, meaning you can withdraw funds anytime (this would mean selling investments). You can even link it up to your personal account and set up automatic transfers. However, there’s one big difference between the two, while your savings account is insured, your brokerage account is not insured in a similar way. This means, if your investments tank, you end up losing a lot of hard earned money. That said, stuffing some money into your savings account is of hardly any use, in fact you’re losing money when you consider inflation. Investing the same amount through a brokerage account would help you grow your wealth which would be greater than inflation over the long term.
How to open a Brokerage Account?
Before opening an account, an individual need to first shortlist the kind of investments they want to own. If they want to purchase stocks and exchange traded funds, they would need brokerage account. Online brokerage accounts have made it easier for many new investors to begin. Mostly, these accounts offer low costs, lots of educational holdings and very little hand-holding. If an investor plans to trade frequently, they should opt for firms that allow low trading commissions. Post that, you need to scrutinize if you’d need an access to a physical branch location or an online access would suffice the need. While considering these two options, you also need to consider the different types of fees associated with opening a brokerage account –
- Account maintenance fees
- Trading fees
- Broker-Assisted orders
- Margin interest
- Transfer fees/Withdrawal fees
After the process of opening an account is completed, it’s tempting to notice your account through the online dashboard. Maybe you’d want to purchase a few stocks, but virtually, the best investment strategy is to invests consistently, to let it grow and leave it alone so that the compound interest does its work for you. Brokerage accounts let you decide on your investments in just about anything anytime.
Opening a brokerage account isn’t as complicated, it is just similar to opening a bank account, but it takes its due share of research. By taking the time out to ensure that a particular broker is right for you, you’ll be walking through a great future portfolio by doing this.